Acc 300 Exam 2 Study Guide

Ch18 Revenue knowledge (when it is realized or manageable, when it is earned) Revenue Recognition at point of sale (1) Sales with Discounts (2) Sales with Right of Return Three alternative taxation recognition manners, and recognize revenue and if all of six trail (3) Sales with buybacks (4) Bill and Hold Sales buyer is not in condemnation ready to take delivery but does take title and subscribe to billing.Revenue is reported at the time title passes if (a) the risks of ownership have passed (b) the buyer makes a fixed commitment of purchase the goods, requests the transaction be on a buy and hold basis, and sets a fixed delivery term and (c) goods must be segregated, complete, and ready for shipment. FOB shipping-buyer FOB destination- market placeer Ch7 Cash and receivable 1 Cash, cash equivalents, restricted cash and Bank overdrafts (1). Cash equivalents atomic number 18 short-term, highly liquid investment. Ex.Treasury bills, commercial paper and money market funds. (2). restrict Cash Ex. Petty cash, payroll and dividend funds. Amount is not material, not segregate from cash step is material, segregate. (3). Bank Overdrafts when a alliance writes a tablet for more than the tote up in its cash report card. 2 A/R (1). Trade receivable A/R, Notes Receivable. (2). Nontrade receivable Advances to mop upicers and employees and subsidiaries Deposits paid to cover potential damages or losses dividends and interest receivable (3).Recognition of A/R (a) Trade discount. (b) Cash (gross revenue) discounts. Companies value and report short-term receivable at net realizable valuethe net amount they expect to clear in cash. (Determining NRV need both invalid receivables and any returns or allowances) twain methods are used in uncollectible accounts (1) the direct write-off method (Bad debt expense-debit, Accounts Receivable-credit). (2) Allowance method NRV, three essential features (a). count uncollectible receivable. (b).Debit estimated uncollec tible to Bad Debt Expense and credit them to Allowance for Doubtful Accounts. (c). When companies write off a specific account, they debit actual uncollectible to AFDA and credit that amount to A/R. Companies do not close AFDA at the end of pecuniary year. Recovery of an Uncollectible Account It reverses the entry made in opus off the account. It journalizes the collection in the usual manner. Percentage of sales salesBad Debt Expense Percentage of Receivable A/RAFDA, Ch8 Inventories . change slight system continuously track changes in the instrument account, a company records all purchase and sales of goods directly in the scrutinise account as they occur. ( Purchase of merchandise for resale or RM for production are debited to broth rather than to purchase Freight-in is debited to stocktaking, Purchase returns and allowances and purchase discounts are credited to inventory COGS is recorded at the time of each sale by debiting COGS and crediting stock 2.Periodic system a co mpany determines the Q of inventory on hand hardly monthlyally. It records all acquisitions of inventory by debiting the purchase account. The diurnal system matches the summate withdrawals for the month with the total purchases for the month in applying the LIFO method. In contrast, the unending system matches each withdrawal with the immediately preceding purchases. FIFO periodic and FIFO perpetual provide the corresponding gross profit and inventory value. LIFO usually produces a lower GP than FIFO. 3. Basic issues in inventory rating (1). he physical goods to admit in inventory (who owns the goods FOB shipping pointBuyers at time of deliver Consignment goodssellers Sales with buybacksellers Sales with high rate of returnsbuyers, if you can estimate returns Sales on installmentsbuyers, if you can estimate collectability. (2) The cost to include in inventory (product vs. period be). (3) The cost flow assumption to comprehend (specific identification, average cost, FIFO, LIFO, sell) 4. FIFO in all cases, the inventory and COGS would be the same at the end of the month whether a perpetual or periodic system is used.LIFO results in different ending inventory and COGS amounts that the amounts calculated infra the periodic method. Not allowed under IFRS LIFO liquidation can abruptly Inc tax liability ADV matchingreflect current prices tax benefits fewer write downs of Inventory DIS lower NI understate EI Ch9 Inventories Additional valuation issues 1. A company abandons the historical cost principle when the future proceeds (revenue-producing ability) of the asset drops below its original cost.Companies therefore report inventories at the lower-of-cost-or-market (a traditionalist approach to inventory valuation) at each reporting period. Net realizable value is the estimated selling price slight reasonably predictable costs of completion and disposal (net selling price). A normal profit allowance account is subtracted from that amount to arrive at net realizable value slight a normal profit margin. The general LCM rule is a company values inventory at the LCM, replacement cost with market limited to an amount that is not more than NRV (upper, ceiling) or less than NRV less a normal profit margin (lower, floor).The designated market value is the amount that a company compares to cost. It is always the middle value of three amounts (replacement cost, NRV and NRV less a normal PM). Assumption A Computes a cost proportion after markups (and markup cancellations) but before markdowns. One approach use only assumption A. It approximates the lower-of-average-cost-or-market. We will refer to this approach as the conventional retail inventory method or the LCM approach. It also provides the most conservative estimate of EI.