Category: Financial Accounting Review

STOCKHOLDERS’ EQUITY Accounting for Equity Transactions 1. Issuance of common stock: Par value portion is recorded in common stock. Price over the par value is

Gain or Loss on Disposal 1. If disposal price is higher than the carrying amount of the asset, gain on disposal is recognized. 2. If

Depreciation is the process of allocating the cost of property, plant and equipment over the life of the asset. Depreciation method should be rational and

Goods in Transit Entity A sold $25,000 merchandise to Entity B with the terms of FOB destination on December 22, 20×1. Merchandise arrived at destination

Cost Flow Assumptions First-in, First-out (FIFO) method Last-in, First-out (LIFO) method Weighted average method First-in, First-out (FIFO) method Old purchases are assumed to be sold

1. Classification of inventories: Raw materials, work-in-process, finished goods 2. Goods in transit: Free on board (FOB) shipping point, FOB destination, seller’s inventory, buyer’s inventory