Are warranty costs accrued or disclosed?
They are both accrued and disclosed
Is a tax refund a gain or loss contingency?
A gain contingency so disclose only
If a gain contingency is remote, do we disclose or accrue?
Neither- no disclosure, no accrual so ignore
Are conditional promises recognized?
No entry for recipient or beneficiary
For a contingency loss range, what amount do you accrue?
If no amount is more likely than another, the lowest end of the range is used but if there is an amount deemed the most likely, then that amount is accrued
For unaffiliated recipient with variance power, recognizes what? Beneficiary?
Recipient recognizes contribution while beneficiary recognizes nothing
For unaffiliated recipient with no variance power, recognizes what? Beneficiary?
Refundable advance liability for recipient and contribution for beneficiary
For financially interrelated with recipient having variance power, what is recognized?
Recipient recognizes contribution with beneficiary recognizing nothing
For financially interrelated with recipient having no variance power, what is recognized?
Recipient recognizes contribution with beneficiary recognizing change in interest in net assets
What is the difference between depreciation and amortization?
Depreciation - tangible and physical assets like buildings, computers, machinery, etc.
vs
Amortization - intangible assets like patents, software, copyrights, etc.
Do you capitalize the cost to build a parking lot for the new warehouse?
Capitalize and depreciate
If there is a difference between income tax expense and income tax payable, what is this difference?
Change in deferred amounts; divide by tax rate to get amount of temporary difference
If there is a difference between income tax expense and income tax payable, with a valuation account how is this accounted for?
The valuation account gets added to income tax payable and the difference between that and the expense is the change in deferred amount; divide by tax rate to get amount of temporary difference
If the DTA is deemed more likely than not, NOT to be realized what is the response?
Increase f/s tax expense
If the DTA will reverse but no taxable income for the foreseeable future is anticipate, what is the response?
Increase f/s tax expense and create a valuation allowance
If income projections are more positive than previous estimates and the valuation allowance associated with a DTA is adjusted, what is the response?
Decrease valuation allowance
Does bad debt expense have an effect on pretax earnings?
Yes - it will decrease pretax income
How do you eliminate the investment in a subsidiary for consolidations?
CAR IN BIG (common stock, APIC, retained earnings, investment, NCI, balance sheet adj to FV, identifiable intangible assets, goodwill)
What is the investment in subsidiary when consolidation occurs?
Market value x # of shares
How do you record adj to goodwill?
DR Impairment loss
CR goodwill (not amortization due to indefinite life)
What is an intercompany transaction associated with the income statement?
Dividends paid will need to be eliminated
What capitalized costs are included in the warehouse?
Interest incurred during construction period and total costs for labor/materials
Are costs related to lawn sprinklers or paving driveways included in the capitalized cost of building or land?
No they are considered land improvement costs
If equipment has alternative future uses, are expenditures capitalized or expensed?
Original cost + expenditures capitalized with the expense hitting R&D expense (if being used for R&D)
