Deck 7 Flashcards Preview

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Flashcards in Deck 7 Deck (20):
1

Two components to expense for software costs:

1) Amortization expense; 2) impairment loss, if any

2

When service contracts are sold, the entire proceeds are reported as what kind of revenue?

Deferred revenue

3

How does an increase in accounts receivable using cash basis affect accrual basis net income?

Accrual basis income will be higher

4

How does an increase in accounts payable using cash basis affect accrual basis net income?

Accrual basis income will be lower

5

Sales commission payable =

commission accrual - fixed salary

6

The franchisor should report revenue from initial franchisee fees when:

All material conditions have been "substantially performed"

7

When are revaluation losses recored?

Other comprehensive income

8

Goodwill is recognized in the balance sheet when:

Goodwill has been created in the purchase of a business

9

Gross profit on income statement (installment method) =

cash collections * gross profit rate

10

Deferred gross profit =

gross profit rate * ending installment receivable

11

Installment receivable =

installment sales - amount collected per year

12

gross profit on income statement (cost recovery method)

Cash collections - cost of sales (profit is not recognized until all costs have been recovered)

13

Permanent impairment of securities (other than temporary)

Write down to FV and record as a realize loss in earnings

14

Temporary impairment of securities

Record in OCI

15

Journal entry for the sale of trading security

Dr. Cash; Cr. Trading security and Realized gain on Trading security

16

Trading securities

Securities that will be sold in a year...FV with unrealized gains/losses recorded on income statement

17

Available for sale securities

Securities that don't classify as trading or held to maturity...FV with unrealized gains/losses recorded in OCI

18

Held to maturity securities

Securities that will be held until maturity....amortized cost

19

When do you use the equity method?

20-50% ownership (Significant influence, no control); do not consolidate)

20

When do you use the acquisition method?

>50% ownership )Significant influence and control); consolidate