Deck 9 Flashcards Preview

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Flashcards in Deck 9 Deck (20):
1

Difference between freight in and freight out:

Freight in: inventory cost (capitalize); freight out: selling expense (expense)

2

"Maintains a safety stock of 50% of the current year purchases":

Only half of the current years purchases is sold (the other half carries over to next year and is sold first)

3

Gross profit for percentage of completion =

Contract price - estimated total cost

4

Net construction in progress =

Construction in progress - progress billings (shown at year end on balance sheet)

5

Initial francise fees are not revenue until:

All conditions have been "substantially performed"

6

Unrealized profit to be eliminated on inventory =

Intracompany profit on inventory * % of inventory purchased still on hand

7

When a parent issues bonds, does this effect NCI?

No effect on NCI, only effects retained earnings (NCI is effected when the sub issues bonds)

8

Journal entry for the sale of goods (2 entries):

Dr. A/R Cr. Sales; Dr. COGS Cr. Inventory

9

Elimination entry for intracompany sales:

Dr. Intercompany sales - parent, Cr. Intracompany COGS, Cr COGS - sub, Cr. Inventory

10

What accounts are not eliminated in combined financial statements?

Equity accounts because there is not parent company

11

Types of combined financial statements (3 types):

1) Companies under common control; 2) companies under common control; 3) Unconsolidated subsidiaries

12

When is the installment method appropriate?

If the ultimate collectible is indeterminate

13

Refundable deposits is what kind of account?

Monetary asset

14

Holding net monetary assets during inflation will result in:

Loss of purchasing power

15

Holding net monetary liabilities during inflation will result in:

A gain

16

Adjusted cash balance =

Unadjusted cash balance +/- bank errors + credit memos = service charges (debit memo)

17

Definition of factoring receivables:

Process by which a company converts A/R to cash by assigning them to a factor, either with or without recourse

18

Cash equivalent maturity date:

Must be within 3 months to be considered cash equivalent

19

Definition of pledging receivables:

The pledging company will retain title to the receivables and will use the proceeds collected from the receivables to repay the loan ("collateral", only need a footnote)

20

Odd examples of current assets:

Trading securities, cash surrender value of life insurance