Term
| Current Liability defined by FASB |
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Definition
| Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events |
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Term
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Definition
1) obligations of a company
2) amounts received in advance for future services |
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Term
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Definition
| Obligations whose liquidation is reasonably expected to require use of existing resources properly classified as current assets, or the creation of other current liabilities |
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Term
| Typical Current Liabilities |
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Definition
1)Acct/note/dividend payable
2)Sales/Income taxes payable
3)Unearned revenues
4)Current maturities of long-term debts
5)Short-term obligations expected to be refinanced
6) customer advances/deposits; Employee related liabilities |
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Term
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Definition
-Balances owed to others for goods, supplies, or services
***Involves Time lag between the receipt of services or acquisition of title to assets and payment for them*** |
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Term
| Notes Payable (and classification) |
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Definition
| Written promises to pay a certain sum of money on a specified future date (current or long term) |
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Term
| What Do Notes Payable arise from? |
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Definition
| Arise from purchases, financing, or other transactions |
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Term
| Current Maturities of Long-Term Debt |
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Definition
| Portion of bonds, mortgage notes, and other long-term indebtedness that matures within the next fiscal year |
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Term
| What are 3 general exceptions to excluding long term debts maturing currently? |
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Definition
1) retired by assets accumulated that have not been shown as current assets
2)Refinanced, or retired from the proceeds of a new debt issue Or
3) Converted into capital stock |
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Term
| Revenue Recognition Issue- Right of Return |
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Definition
| -granted for product for various reasons (e.g. dissatisfaction with product) |
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Term
| Right of Return: Company Returning the product receives what? |
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Definition
1.) Full/partial refund of any consideration paid
2.) Credit that can be applied against amounts owed to the seller
3.) Another product in exchange |
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Term
| Revenue Recognition Issue: Repurchase Agreemnts |
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Definition
| -Transfer control (sell) of an asset to a customer but have an obligation or right to repurchase |
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Term
| Repurchase Agreement: If right to repurchase is for an amount greater than or equal to selling price |
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Definition
| -Then the transaction is a financing transaction |
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Term
| Revenue Recognition Issue: Bill-and-hold Agreements |
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Definition
| -Contract under which an entity bills a customer for a product but the entity retains physical possession of the product until a point in time in the future |
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Term
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Definition
| The result when buyer is not yet ready to take delivery but does take title and accepts billing |
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Term
| What criteria needs to be met in a Bill-and-hold Agreement? |
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Definition
A) B&H must be substantive B) must be identified separately as belonging to Buyer C)Must be ready for physical transfer
D) Seller cannot be able to use product or direct it to another customer |
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Term
| Revenue Recognition Issue: Principle-Agent Relationships |
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Definition
| - Agent's performance obligation is to arrange for principal to provide goods or services to a customer |
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Term
| Principle Agent Relationship Example: |
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Definition
-Travel company agent facilitates booking of cruise for Cruise Company (principal)
*amounts collected on behalf of the principal are not revenue of the agent; revenue for agent = commission) |
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Term
| Revenue Recognition Issue: Consignment |
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Definition
| -Manufacturers (or wholesalers) delivers goods but retain title to the goods until they are sold |
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Term
| Consignment: Consignor & Consignee |
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Definition
Consignor: ships product to consignee, who acts as an agent in selling merchandise; Makes a profit on the sale and carries merchandise as inventory
Consignee: makes commission on the sale |
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Term
| Revenue Recognition Issue: Warranties |
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Definition
1) Product meets agreed-upon specifications in contract at time product is sold; warrant included in sales price (assurance-type warranty)
2) not included in sales price of product (service-type warranty); Recorded as a separate performance obligation |
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Term
| Revenue Recognition Issue: Nonrefundable Upfront Fees Defined |
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Definition
| -Payments from customers before: 1) Delivery of a product 2) Performance of a service |
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Term
| Nonrefundable Upfront Fees: Explain it and Examples of |
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Definition
-Generally relates to initiation, activation, or setup of a good or service to be provided or performed in the future
Examples: Most upfront payments are nonrefundable (Membership fee in health club; activation fees for phone) |
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