Accounting Test 3

Gift Cards

Form of Deferred Revenue

If Gift Cards Are Redeemed Or Used By Customers Report As

Sales Reveune

Gift Card Breakage

If Gift Cards Expire Before Use

Contingent Liabilities

an existing uncertin situation that might result in a loss depending on the outcome of future events

Likelihood of Payment-

Probable- Likely to Occur
Reasonably Possible
Remote- The Chance Is Slight

Amount of Payment Options

Reasonably Estimable
Not Reasonably Estimable

For Contingent Liabilities When Do You Write A Journal Entry

Probable and Resonably Estimable

For Contingent Liabilities When Do You Write A Journal Entry When There is A Range

Record Minimum Amount

Property, Plant, Equitment Definition

Costs Plus All Expenses Necessary To Get Asset Ready For Use

Property, Plant, Equitment Examples

Land, Land Improvements, Buildings, Equitment

Basket Purchase

Purchase More Than One Asset At The Same Time For One Puchase Price

Expense

officially count it as a cost in your financial records

Capitalize

to record a cost as an asset, not an expense

Intangibles

Assets with no physical substance

How To Acquire Intangibles

Purchase- Record their original cost plus other costs needed to get asset ready to use

Research and Develop- If Asset is internally expensed we incur the cost since it is hard to determine what will benifit us in the future.

Goodwill

When Compnay buys other company they pay for the assets as well as the good name and reputation

Expenditures After Acquisition- Capitalize

If It Increases Future Benefits

Expenditures After Acquisition- Expense

If It Only Benefits the Current Years
Repairs

Expenditures After Acquisition-Materiality

Large Enough to Influence A Decision
If Not Materiality (you dont care) Expense it

Service Life (Useful Life)

How Long You Plan to Use Assets

Residual Value (Salvage Life)

The Price You Think You Can Get For Selling Asset

Allocate

the process of assigning or distributing costs, income, or expenses to different accounts

Describe the Stright Line Allocation

Has an equal amount of depreciation each year

Describe Double-Declining Ballance Allocation

Accelerated Method, more depreciation expense is taken in earlier years

Describe Activity Based Allocation

Activity associated with the assets
Most commonly used with natural resources

Amortization Defined

Gradually pay off intangibles over time through regular payments.

What kind of intangibles are subject to amortization

Intangibles with a finite useful life

For Intangibles With a Finite Useful Life

Residual Value is Zero
Use the Straight-line Method
Credit Amortization to Intangible asset account

What kind of intangibles are NOT subject to amortization

Intangibles with an infinite useful life- Land, Goodwill

Debit or Credit a Gain

Credit

Debit or Credit a Loss

Debit