AUG CHAPTER 8

Question 1

Are legal fees and patents cost expensed or capitalized?

Answer 1

capitalized

example would be when we purchase Wayne or raj and the legals fee we will pay to get the property we need to capitalized cost

Question 2

Capitalization of costs incurred to fulfill a contract with a customer?

Answer 2

The costs generate or enhance resources of the entity that will be used in satisfied performance obligations in the future

Question 3

Are Research and development cost expensed and internally developed intagible assets capitalized?

Answer 3

YES

Question 4

Does variable consideration determines the transaction price of a contract with a significant financing component?

Answer 4

yes

Question 5

What might be the reason to test for impairment for intangible assets?

Answer 5

when there is a significant decrease in the market price of the product or service related to the intangible asset

Question 6

How are upfront fee recognized for license and patents?

Answer 6

By recognizing the full revenue

Question 7

A customer uses the accounts receivable allowance method for credit losses on the AR what impact would that have on the Net income and Total Assets?

Answer 7

No effect on either

Question 8

entry to record the write off when the allowance method of recognizing credit losses on AR is used?

Answer 8

Decreases both the AR and the allowance for credit losses

Question 9

What is a prepaid expense?

Answer 9

Amount we pay in advance for a good or service you will receive in the future

Question 10

What are assets that are tangible assets?

Answer 10

these are depreciation assets machine, equipment, vehicles

Question 11

What are assets that are intangible assets?

Answer 11

these are amortization intangible assets franchises, patents, license

Question 12

Assets that are capitalized and that are reported as intangible assets on the Balance Sheet?

Answer 12

Cost of patent registrations

Question 13

What happens to a patent when one is successfully defended and the other is not?

Answer 13

Successfully defended patent we need to are amortized by the original useful life while when it’s unsuccessful we need to recognize a loss

Question 14

According to GAAP how is royality revenue recognized for licensed patents?

Answer 14

recognized revenue quarterly based on usage or sales based

Question 15

What happens to investment when the investor uses the equity method to account for an investment in common stock?

Answer 15

increase in shares of the earnings of the investee and decrwase by the shares of the losses of the investee

Question 16

When en entity purchase a machinery and they pay freight charges and interest costs?

Question 17

According to U.S GAAP are the incidental costs such as legals fee and patents application costs required to be capitalized?

Answer 17

Yes

Question 18

What happens to shares of earnings using the equity method to account?

Answer 18

INCREASE
By the share of the earnings of the investee

Question 19

What happens to shares of losses using the equity method to account?

Answer 19

DECREASE
By the share of losses of the investee

Question 20

What are the cost used to capitalized of costs incurred to fulfill a contract with a customer?

Answer 20

1) COST DIRECTLY RELATED TO ANTICIPATED CONTRACT

2) COST GENERATE OR ENHANCE

3) COST EXPECTED TO RECOVER

Question 21

Are previously recognized impairment loss reserved?

Answer 21

NO

Question 22

Are license fee for significant financing recognized on the commencement date?

Answer 22

Yes

Question 23

How are long lived asset held for sale reported?

Answer 23

Separately in the balance sheet

Question 24

So when the questions is asking for bank statement balance what do we do with deposit and checks?

Answer 24

We MINUS deposit in transit

also for ADD outstanding checks we are using algebra to solve this

Question 25

when there is an overstated of ending inventory will that cause an overstated of net income?

Answer 25

Yes When overstated ending inventory there fore the results in understated COGS, overstated NI, and overstated RE in the period of the error

Question 26

What causes a temporary difference?

Answer 26

When there is a difference between GAAP basis and tax basis of a asset and liability differ

Question 27

What is deferred tax liabilities?

Answer 27

When a company pays LESS taxes NOW and MORE in the future

Question 28

What is a deferred tax asset?

Answer 28

When a company pays more taxes NOW so they can pay LESS in the Future

Question 29

Examples of Permanent difference and it's purpose?

Answer 29

Never reserve so we don't include them in calc for deferred tax assets Ex - Municipal bond interest, Political Contribution,

Question 30

When deferred taxes asset goes UP what happens to deferred tax expense/ benefit?

Answer 30

When deferred tax assets goes UP we pay less in taxes

Question 31

When deferred taxes liability goes UP what happens to deferred tax expense/ benefit?

Answer 31

When deferred taxes asset goes UP what happens to deferred tax expense/ benefit?