The conservatism principle involves “recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received” (The conservatism principle). Requirement 2 – B Hudson’s wholesale inventories should be reported on the balance sheet at the replacement cost amount. The text indicates that the replacement cost is less than the NRV (or ceiling) and more than the NRV-NP (or floor) making the
Selling expenses are those which are incurred directly on making sales. Examples are: sales commissions, sales salaries, advertising expense, delivery expense and depreciation expense of sales equipment. The administrative expenses are those relating to general administrative activities. Examples are: depreciation expense on office building, office salaries, office supplies expense and office utilities expense. The non-operating section of a multi-step income statement, usually labeled as 'other incomes and expenses' contains those revenues and expenses which are not earned directly through principle business activities but are incidental to them.
When we determine the method for recognizing revenue for the Power Starterpack, we should consider which deliverable and unit of accounting. In order to identify this issue, I will discuss it from three different situations. 1. The activation card is not a separate deliverable and not a separate unit of accounting. First, according to the ASC 605-25-25-6, “a delivered item or items that do not qualify as a separate unit of accounting within the arrangement shall be determined for those combined deliverables as a single unit of accounting.” If the Power starterpack is not a separate deliverable, it shall be considered as a single unit of accounting, which is not a separate unit of accounting.
ASC 350-30-35-1: Expenses related to intangible assets that have a finite useful life must be capitalized and amortized over the useful life of the intangible assets. 2. ASC 730-10-05-2: Research and development costs are not eligible to be capitalized and must be expenses as incurred. 3. ASC 350-30-35-3: Legal, regulatory, or contractual provisions may limit the useful life of an intangible asset.
Net sales and gross revenues. State separately: (a) Net sales of tangible products (gross sales less discounts, returns and allowances), (b) operating revenues of public utilities or others; (c) income from rentals; (d) revenues from services; and (e) other revenues. Amounts earned from transactions with related parties shall be disclosed
Cui xin yuan Case 11 -1 Polluter Corp Objectives: the appropriate classification in the statement of cash flows for the company’s purchase and sale of Emission allowances Accounting pronouncement: ASC 230 -10 statement of cash flow ASC 350 -30 -25 -3 General Intangibles Other than Goodwill Question 1: What is the appropriate classification in the statement of cash flows for the company’s purchase of Emission Allowances? The recognition of intangibles is defined under ASC 350 -30 -25 -3[Costs of internally developing, maintaining, or restoring intangible assets that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business or nonprofit activity and related to an entity as a whole, shall be recognized as an expense when incurred According to case, Upon receipt of the EAs, the Company recorded the EAs as intangible assets with a cost basis of zero, in accordance with The Federal Energy Regulatory Commission (“FERC”) accounting guidance for EAs. And To meet its need for additional EAs in fiscal years 2010–2014, on April 2, 2010, the Company spent $3 million to purchase EAs with a vintage year of 2012 from Clean Air Corp Acquiring of emission allowances means that Polluter Corp. had to buy allowances from another company. The emission allowances re regarded as tangible assets with zero cost basis. because the Emission and the cost of emission allowances have indetermination lives and inherent in a continuing business , the emission allowance is recognized as expense when incurred.
Traditional allocations with one resources to spread overhead often charges products an "average rate" and so fussy and difficult products get a break (charged less than they consume or "under costed") and easy low-hassle products look worse than they are (charged more then they consumer or "over costed"). Companies that benefit from ABC are those that have significant levels of variable overhead and those with products that use disproportionate share of overhead resources. Companies with small overhead or products that all use overhead in about the same proportion would get about the same overhead allocation under traditional and ABC methods. Since ABC methods are more work (so more expensive), if there isn't a benefit, it is better to stick to a simpler and cheaper method. Krishnan (2006) implemented ABC at a university (actual university was kept anonymous in the study) to help them understand their costs and cost drivers in order to better understand why their operation costs were so high.
Less costly financing c. 100% financing at fixed rates d. All of these 23. Which of the following best describes current practice in accounting for leases? a. Leases are not capitalized. b.
Stated that the lease is a capital lease, under ASC 840-30-30-1, “The lessee shall measure a capital lease asset and capital lease obligation initially at an amount equal to the present value at the beginning of the lease term of minimum lease payments during the lease term excluding that portion of the payments representing executory costs (such as insurance, maintenance, and taxes to be paid by the lessor) including any profit thereon.” This passage informs us that Lucas excludes executory cost. Also in support, ASC 840-10-25-5(b) states, For a lessee, minimum lease payments comprise the payments that the lessee is obligated to make or can be required to make in connection with the leased property, excluding both of the following: a) Contingent rentals b) Any guarantee by the lessee of the lessor's debt and the lessee's obligation to pay (apart from the rental payments) executory costs such as insurance, maintenance, and taxes in connection with the leased property. In conclusion, Lucas will not include the general repairs and maintenance cost towards minimum lease payments. Instead, the general repairs and maintenance
Material participation is a concept used by the law to determine what qualifies as a passive activity. A passive activity is defined as any business or trade activity that the taxpayer does not materially participate in running. Therefore, material participation as a concept helped with the difficulty in dealing with such a subjective issue. It is important to distinguish passive income from active income, since losses are treated differently under each classification on the taxpayer’s tax return. Problems: