F1 Flashcards
(40 cards)
What are the 4 enhancing qualitative characteristics?
Timeliness
Understandability
Comparability
Verifiability
In the percentage of completion method - how do you calculate the “completion percentage” per year?
Total actual cost
__________________
Total estimated costs
When a company decides to sell a component/division that qualifies for discontinued operations - what all is included?
Revenue and expenses from the year
Gain or loss resulting of sale
Sum of the above * 1-T = what is shown on the IS
How do you account for an Error correction?
Adjusting Prior Period F/S to correct error
How is the change in estimated useful lives accounted for?
Estimate –> prospectively (no prior pd adjustment)
When will the seller book financing arrangement?
When Repurchase price >= Original SP AND Mkt value
What are the 2 qualitative characteristics
- Relevance
- Faithful representation
What are the 3 components of Relevance?
Predictive value
Confirmatory value
Materiality
What are the 3 components of faithful representation
Completeness
Neutrality
Free From Error
What is the difference between Contract asset and Contract liab
Contract asset = entity performed prior to payment
Contract liability = payment prior to completion of project
What are the 3 indicators of consignment?
- Entity controls product until certain event occurs
- dealer does not have unconditional right to pay
- entity can require return
When is a warranty a separate performance obligation?
When there is a longer coverage pd or if it can be sold separately
How is change in accounting principle reported
Retrospective (restate FS, adj Beg RE)
What type of accounting change is LIFO to FIFO and how is it reported?
Change in principle
Net of tax to beg RE in earliest year presented
Under Completed contract - when is the gross profit recognized
At the end of contract (SP - total costs)
Under Percentage of completion - what are the following entries
Costs incurred per year
Billings in contract
Amount at collection
Revenue and cost per period
DR: CIP
CR: Cash
DR: Contract Receivable
CR: Progress billings
DR: Cash
CR: Contracts receivable
DR: Construction expense
CR: Revenue (GP % * contract price)
DR: CIP (plug)
When there is a new FASB std adopted –> what kind of accounting change is this?
Change in principle –> change Beg RE and CY earnings
What equity transactions are allowed in comprehensive income?
All equity transactions excluding owner investments and distributions to owners
What are 3 indicators of an agent?
- another party (principal) is primarily responsible for fulfilling the contract
- entity does not have inventory risk
- entity does not have ability to establish prices of other party’s goods/services
What is the entry to recognize a call option where the repurch price is greater than the original price?
What is the entry when this option lapses?
DR: Cash
CR: Financial liability
DR: Financial liability
CR: REvenue
How do you calc Gross profit for % of revenue?
- Contract price - Estimated total costs
- Take total costs incurred / total estimated costs
- Step 1 * step 2 = cumulative gross profit
- Subtract out previous rec profit = C profit
What is the calc or AR Turnover?
Sales
___________________________
Avg AR (net of allowance)
What are the two inseparable changes from accounting principle to accounting estimate?
changing inv TO LIFO
Change Depreciation method
Change in principle but handled prospectively
When is the LCM used compared to the LCNRV method?
LCM –> LIFO
LCNRV –> FIFO
