ACTG 2011 Lecture Notes - Lecture 3: Deferral, Financial Transaction, 18 Months
Document Summary
Lecture 3 case study (daphne"s catering ltd) Layout to how to approach a case: corporation = ltd, private company she owns. Purchase price is of the average net income. Original asking price: (((160 000+275000) / 2) x 5) + 550 000 = 1,637,500. Not an issue but starting point for the calculation. 3 ways to know if its an asset: previous financial transaction: bought in 2019, future economic benefit: no, emphasizes on 2019 events. Based on criteria: does not fit the criteria. Must be specific on what is happening: dr expense, cr asset. Joe will be benefited, as expense is going up (lower in the net income and lower the purchase price) Revenue recognition criteria: 5 step model is only used under ifrs, aspe criteria is different. Revenue needs to be recognized in the next fiscal year (the service date was moved to oct and the year end is sept 30)
