ACC 321 Quiz 3
How are gain contingencies reported?
Added to notes in financial statements if there is a high probability of occurrance
Which of the following may be a current liability? Deferred Revenue Withheld Income Taxes All of these Deposits Received from Customers
All of these
True or False: R&D expenses are capitalized
False
In a business combination, companies record identifiable intangible assets that they can reliably measure. All other intangible assets, too difficult to identify or measure, are recorded as
Goodwill
Which of the following principles best describes the current method of accounting for research and development costs? Associating cause and effect Income tax minimization Systematic and rational allocation Immediate recognition as an expense
Immediate recognition as an expense
Goodwill formula
Purchase price - fair value of net assets
Which of the following loss contingencies is not usually accrued? noncollectibility of receivables. product warranty obligations. risk of loss from fire. premium offer obligations.
Risk of loss from fire
Research and development costs do not include: critical investigation aimed at discovering new knowledge routine ongoing efforts to improve the qualities of an existing product. construction of prototypes. searching for applications of new research findings.
Routine ongoing efforts to improve the qualities of an existing product
Which of the following is not a characteristic of intangible assets? They are long-term in nature. They are all subject to amortization. They are not financial instruments. They lack physical existence.
They are all subject to amortization.
True or False: Gain contingencies are not recorded.
True
Expensing all R&D costs associated with internally created intangible assets results in
Understating assets, overstating expenses
Gain contingency
claim to receive assets or have a liability reduced
contingent liabilities
contingent liabilities are liabilities created from a loss contingency
Effect of bond premium amortization on interest expense using a straight line method
decreases interest expense
Existing claims related to litigation as of December 31, 2016, indicate that it is probable that a liability has been incurred. However, as of December 31, 2016, the amount of the obligation cannot be reasonably estimated. Based on these facts, an estimated loss contingency should be
disclosed but not accrued
Assurance waranty
included in sale price, recognize warranty cost as expense in sale period to match expenses with revenues
The entry to accrue a contingent liability
includes a debit to a loss account.
Effect of bond discount amortization on interest expense using a straight line method
increases interest expense
2 ways Goodwill can arise from
internal generation, purchased
3 requirements for reporting a litigation loss contingencies
liability occurred before litigation, probable unfavorable outcome, and loss can be reasonably estimated
2 characteristics of a liability
little or no discretion to avoid payment, transaction has already happened
bonds payable
long term liability not requiring payment within 1 year or the operating cycle
Current liabilities are usually recorded in the accounting records and reported in financial statements at their:
maturity value
Service warranty
muster defer revenue and recognize it as the performance obligation is satisfied
The operating cycle is best defined as:
period of time elapsing between the acquiring goods involved in the manufacturing and the subsequent collection of cash from sales.
loss contingencies
possible loss
liabilities
present obligation satisfied by probable future transfer of assets or services
2 requirements for accruing estimated losses
probability that liability occurred, liability can be reasonably estimated
warranty
promise made by seller to buyer to make good on defect
Current liabilities are defined as obligations whose liquidation is reasonably expected to
require use of current assets or creation of other current liabilities.
Requirements for goodwill impairment test
required annually or when event occurs that could impair goodwill
indentures
spell out terms of the bonds and covenants
The carrying value of an intangible is
the asset's acquisition cost less the total related amortization recorded to date.