FAR Module 1 Flashcards
How are Gains reported?
Typically reported using net concept UNLESS if part of ordinary business - then it is continuing operations
How are gains/losses recognized when a fixed asset is sold?
These gains / losses are recognized as income from continuing operations and are reported GROSS
Unusual & Infrequent Events Treatment?
These are not shown net of tax unless it is due to discontinued operations - they are listed on their own line
What is the formula for Gross Profit?
Net Sales LESS COGS
How is Income (Loss) from Operations Reported?
Shown Gross (before taxes)
Do Purchase Discounts and Recovery of Written-Off Accounts increase Revenue?
These do not count towards revenue
Customer Deposits are (asset / liability) ?
Liabilities
How are Commissions Costs treated in terms of Revenue Recognition?
Commissions are only earned as the result of a contract and can therefore be recognized immediately, even if the obligation is not completed.
How to Calculate % of Completion Method
Total Cost to Date / Total Estimated Cost of Contract
How are progress billings used in % of Completion Method?
We use progress billings to determine if we have a current asset or liability at year-end during % of completion. If Progress Billings > Costs + Est. Earnings = liability
If Progress Billings < Costs + Est. Earnings = asset
What are discontinued operations?
If a company completely gets rid of a segment of their business, this is a discontinued operation. Disposal of part of a line is NOT discontinued
When is something considered discontinued?
From the moment it is classified as “held for sale”
If it is too hard to call between a change in accounting principle and a change in estimate, what do we do?
The reporting treatment will go with estimate and we will treat the reporting prospectively
How is the cumulative effect of a change in accounting principle reported?
By making an adjustment to retained earnings (from the earliest stated income statement)
How is LIFO different than other Inventory items in treatment for changes / errors?
When changing TO LIFO, the beginning inventory $ amount is the first LIFO layer and there is NO adjustment needed
