specifically, revenue recognition of warranty and extended services WHY NOW: Proposed FASB rule change DETAILS: The Financial Accounting Standards Board (FASB) is proposing that Circuit City use the Deferral of Revenue method of accounting for their extended warranty contracts. Circuit City argues that this would result in a mismatch in Revenue. This issue is important to Circuit City Stores because the accounting practices that they employ to recognize revenue will significantly
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the financial reporting system depends on answers to a few fundamental questions. At what point has revenue been earned? At what point is the earnings process complete? When have expenses really been incurred? During the 1990s' boom in the stock prices of dot-com companies, many dot-com companies earned most of their revenue from selling advertising space on their Web sites. To boost reported revenue, some dot-coms began swapping web-site ad space. Company A would put an ad for its website on company
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Determination True-False 1. To measure earnings under accrual accounting, revenues are recognized when they are received. 2. Revenues are earned when the seller substantially completes performance required by an agreement. 3. The matching principle requires that expenses be recognized in the same period in which the revenues are recognized that were produced by the expenses. 4. Recognition of revenue under the cash basis occurs when the revenue is received. 5. Under the cash basis, expenses are recognized when
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$13000. The company had the highest market value of approx. $460 billion in 1999. The revenue and operating income grew an avg. of 43% and 49% per year respectively. However, Microsoft has always been conservative in its accounting choices. This case explores Microsoft's overall financial reporting strategy by examining the company's treatment of two accounting issues--software capitalization and revenue recognition. For both issues, the company selects accounting methods that are relatively conservative
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Chapter 5 REVENUE AND MONETARY ASSETS Changes from Tenth Edition The chapter has been updated. The SEC’s SAB101 Revenue Recognition tests have been added. Approach The sequence of transactions for accounts receivable and bad debts often causes difficulty; indeed, the time that one is sometimes forced to spend on this topic is all out of proportion to its importance. Students often do not understand why an Allowance for Bad Debts account is necessary at all; they do not grasp the notion
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1. Financial accounting deals almost strictly with financial statement preparation. It focuses on pronouncements issued by the Financial Accounting Standards Board (FASB) and the SEC, and on accounting concepts such as materiality, matching revenues and expenses, relevance, and consistency. It also considers highly technical details about consolidated financial statements, leases, pensions, income taxes, and inventory valuation methods that are often found on the CPA exam. 2. Financial
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was $600,000 and the tax rate was 35%. Pretax income included: Interest income from municipal bonds $25,000 Accrued warranty costs, estimated to be used in 2013 $74,000 Prepaid rent expense, will be used in 2013 $16,000 Installment sales revenue, to be collected in 2013 $45,000 Operating loss carryforward $36,000 What is the adjustment needed to correct the balance of deferred tax asset for 2012? 3. (TCO C) Presented below is pension information related to Baked Goods, Inc. for the year
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electric utility customer uses electricity, the electric company has earned revenues. It is obviously impossible, however, for the company to read all of its customers' meters on the evening of December 31. How does the electric company know its revenue for a given year? Explain. According to historical data, the electricity usage usually tended to be fairly constant from month to month. The company can estimate the revenues for each month, by using historical data. Generally high fluctuation will
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Voice Activated Device/ MD Dictation Speech recognition devices are widely used by physicians because they provide many advantages in the health care environment that they practice. Due to managed care, doctors are restricted in the amount of time they can spend with their patients because they use most of their time doing paperwork that is required of them. Speech recognition systems such as dictation programs and devices have brought a new outlook for the application of technology in healthcare
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Development of Attendance Management System using Biometrics. O. Shoewu, Ph.D.1,2* and O.A. Idowu, B.Sc. 1 1 Department of Electronic and Computer Engineering, Lagos State University, Epe Campus, Nigeria. 2 Department of Electrical and Electronics, University of Benin, Edo State, Nigeria. E-mail: engrshoewu@lasunigeria.org* ABSTRACT In this paper, the development of an attendance management system using biometrics is proposed. Managing student attendance during lecture periods has become
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