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Amortization of Intangibles Limited-Life Intangibles: Amortize to expense. Credit asset account or accumulated Indefinite-Life Intangibles: No foreseeable limit on time the asset is expected to provide cash flows. No amortization.

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In general, costs incurred to achieve greater future benefits should be capitalized, whereas expenditures that simply maintain a given level of services should be expensed. To capitalize costs, one of three conditions must be present: Useful life of the asset must be increased. Quantity of units produced from asset must be increased. Quality o...

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Many companies use LIFO for tax and external financial reporting purposes FIFO, average cost, or standard cost system for internal reporting purposes. Reasons: Pricing decisions Record keeping easier Profit-sharing or bonus arrangements LIFO troublesome for interim periods

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Example Data Credit sales $500,000 Estimated % of credit sales not collected 1.25% Accounts receivable balance $72,500 Estimated % of A/R not collected 8% Allowance for Doubtful Accounts: Case I $150 (credit balance) Case 2 $150 (debit balance)

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Companies recognize revenue and gross profit only at point of sale—that is, when the contract is completed. Under this method, companies accumulate costs of long-term contracts in process, but they make no interim charges or credits to income statement accounts for revenues, costs, or gross profit.

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2 The basis recommended by the FASB for the statement of cash flows is actually “cash and cash equivalents.” Cash equivalents are short-term, highly liquid investments that are both: (a) readily convertible to known amounts of cash, and (b) so near their maturity that they present insignificant risk of changes in interest rates. Generally, only inv...

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(a) A large portion of a tobacco manufacturer’s crops are destroyed by a hail storm. Severe damage from hail storms in the locality where the manufacturer grows tobacco is rare. (b) A citrus grower's Florida crop is damaged by frost. (c) A company sells a block of common stock of a publicly traded company. The block of shares, which represents l...

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The correct order to present current assets is a. Cash, Accounts Receivable, Prepaid Items, Inventories. b. Cash, Accounts Receivable, Inventories, Prepaid Items. c. Cash, Inventories, Accounts Receivable, Prepaid Items. d. Cash, Inventories, Prepaid Items, Accounts Receivable.

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(a) is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. helps present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receipts. portrays the economic resources of an enterprise, the cla...

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Expectation Gap What the public thinks accountants should do versus what accountants think they can do. Difficult to close Sarbanes-Oxley Act (2002) Public Company Accounting Oversight Board (PCAOB)

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