Unearned Revenue Recognize Unearned Revenue Cash Days

Document Sample
Unearned Revenue Recognize Unearned Revenue Cash Days Powered By Docstoc
					               Unearned Revenue

Recognize Unearned Revenue
Cash      (asset)
          Unearned Revenue          (liability to customer)

Close
Unearned Revenue          (reduce liability)
          Revenue         (recognize revenue)

               Installment Sale

Installment Sale Initial
Installment A/R         (sp)
           Deferred Gain            (plug, liability)
           Cost of Sale             (cost)

Payment
Cash
               Installment A/R      (reduce A/R)

Recognize Gain (Same proportion as initial recordation)
Deferred Gain       (reduce liability)
          Revenue (recognize revenue)

               Right of Return

Sale for right of return, to record sales
A/R         (asset)
            Sales Revenue           (revenue)

Record estimated returns
Estimated Sales Returns          (contra revenue, deduction from sales revenue)
           Allowance for Estimated Sales Returns      (contra to A/R on B/S)

               Franchise Revenues

Initial fees
Cash
               Franchise Revenues
               Unearned Revenue

Continuing franchise fees
A/R
          Franchise Revenue
           Longterm Contracts     (% completed by cost)

Record cost of construction
Construction in Process (WIP)     (costs accumulated in asset account)
           Cash or A/P

Record progress billings (sent to "buyer")
A/R
          Billings on CIP          (contra asset)

Record Collections
Cash
           A/R

Recognize revenue and gross profit (annual % completion)
Construction in Process        (gross profit plug, revenues - cost)           (or % * total estimated gross profit)
Cost of Construction           (cost, from CIP above)
           Revenue from Long-Term Contracts            (total revenue * % - recognized revenue)

Final approval of contract (% completion)
Billings on Construction in Proccess                      (close out recorded billings)
             Construction in Process                      (close out CIP account)

Final approval of contract (comp completion)
Construction in Process          (identical to the accumulated CIP in the annual % completion methnod)
Cost of Construction             (cost, from CIP above)
           Revenue from Long-Term Contracts             (total revenue * % - recognized revenue)

Billings on Construction in Proccess                      (close out recorded billings)
             Construction in Process                      (close out CIP account)
Theory = Expense
Practice = Defer and Amortize
Convertible Bond = Liability always
Total Interest Expense = Coupon Interest + Discount
FAS 159 not address measurement of interest expense (FV Option)

            Bonds Issued Between Interest Dates

Issuance
Cash       (include bond premium, subtract issue cost, add accrued interest of period as cash)
Bond Issue Cost
           B/P
           Premium
           Interest Payable     (Accrued interest)

Interest Payment
Interest Expense (for the last portion of month)
Interest Payable       (reverse first entry)
            Cash

            Detachable Warrants

Nondetachable Warrants - Do not allocate any value
Detachable Warrants
Proportional - FV of bonds without warrants/(FV of bonds withour warrants + FV of warrants) x Issue Price

Cash
Discount (face - calculated bond value or plug)
           B/P (face)
           APIC - Warrants (calculated)

Incremental - Allocate remaining amount to value that is unknown

Cash
Discount (known)
           B/P (face)
           APIC - Warrants (plug)

            Bond Discount

Inception              Interest Payment
Cash                   Interest Expense       (using market int rate)
Discount                           Discount
            B/P                    Cash       (using coupon int rate)
              Fair Value Option

Effective amortization method
Loss (FV - CV at time)
*Interest expense - loss = same

Present value
Loss (FV - CV original)
*Interest expense - loss = same

              Bond Conversion

Book Value - No G/L since earnings process not complete

B/P
              Discount
              CS
              APIC (plug)

Market Value - Report G/L on diff between MV and CV, earning process is complete

B/P
Loss (plug)
              Discount
              CS
              APIC (FV of Stock - PAR)

*Or FV stock - CV of Bond

              Early Extinguishment of Debt

*G/L by comparing price paid with net carryhing value of bond (CV - unamortized issue costs)
Basically… Carrying Value - Bond Retirement

Extraordinary…
Carry Value - Bond Retirement + Tax Benefit

              Issue New Debt and Replacing Old

Issue New Debt    Remove Old
Cash              B/P Old (Reverse face)
          B/P New Loss on Extinguishment (FV paid - CV)
          Premium             Cash (to replace bond)
                              Discount
                              Unamortized Issue Cost (if existed, split from total discount)
            Bond Sinking Fund

*SF Cash and SF Investments need to be separated in ledger
But total value = SF Cash + SF Investments

Establish Sinking Fund with Cash           Buy Investments
Sinking Fund - Cash (Investment NCA)       Sinking Fund - Investment
            Cash                                      Sinking Fund - Cash

Admin Exp                                  Dividend Income from Investment
Admin Exp                                  Sinking Fund - Cash
            Sinking Fund - Cash                       Investment Revenue

Retire Bonds
B/P
          Sinking Fund - Cash

            Settlement of Debt Method

Debtor                                     Creditor
N/P (reverse)                              Land (FMV)
Interest Payable (reverse)                 Bad Debt Expense or Loss (plug) or Allowance
           Land (BV, remove)                         N/R (Face)
           Gain Land (FV - Cost)                     Interest Receivable (Give Up)
           Gain Restructuring (Plug)
            Modification of Debt (Discount at Coupon Rate)

Debtor
*no discount, no recognize interest expense
1) Compare prestructure debt with future cash flow
Prestructure Debt = Face + Int Payable at Date
After Debt = New Face + New Int Payable
2) Gain on Modification = Difference

NP (reduction)
IP (reduction)
            Gain (total)

Creditor
1) Discount After Debt (New Face + New Int Payable) to current day
2) Subtract After Debt Undiscounted to get Interest Income/Valuation Allowance
3) Loss is Prestructure Debt - PV of After Debt

Loss (CV of Prestructure Debt - PV of After Debt)
            N/R (reduction)
            I/R (reduction)
            Allowance (plug, Discount After Debt - Undiscount After Debt )

Allowance
Cash
            N/R
            I/R
            Interest Income (from allowance)

            Impaired Loans (Discount at Coupon Rate)

Debtor
*Do nothing

Creditor
Loss = Current CV - PV Impaired Value

Bad Debt Expense
          Allowance for N/R (Loss value calculated)
FV = PV (1+i)^n
Short term notes - Record at matuirty value < 1 year
Long term notes - Record at PV
FAS 91 Loan Origination Costs and Loan Fees
Lender: Direct costs (add to CV of loan)
points, origination fees paid by the borrower, 1 point = 1 % * loan, reduce CV
Borrower: Nonrefundable loan original fees (additional interest, subtract to CV)
Notes Exchanged for Noncash Transactions
Interest rate fair = PV
Interest rate fair = not stated or unfair determine PV by
1) FMV of G/S
2) MV
3) Imputed interest rate
Rights: Fragment

       Interest Bearing Loan                   Compound Annualy                    Periodic Payments

Inception                          Inception                          Inception
Cash                               Cash                               Cash
        N/P                                    N/P                                 N/P

Interest PMT                       Interest Accrual                   Interest Accrual/Maturity
Interest Exp                       Interest Exp (manual)              Interest Exp         (amortization table)
        Cash                                   Interest Payable       Note Payable         (repay principal)
                                                                                  Cash
Maturity                           Maturity
Interest Exp                       Interest Exp                       Total Interest = Total Payments - Principal
        Cash                                   Interest Payable

N/P    (Reverse)                   N/P         (Reverse)
       Cash      (Pay back)        Interest Payable      (Reverse)
                                               Cash      (Pay back)
       Non-interest (lender)

Inception
Cash (PV)
Discount           (total interest over life of loan)
        N/P

Interest PMT
Interest Expense (utilize Amortization table)
        Discount on Note Payable

Matuirty
Interest Expense
        Discount on Note Payable               (contra)
Note Payable
        Cash

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:5
posted:10/11/2012
language:English
pages:7