1 - Conceptual Framework, Standard-Setting, and Financial Reporting

Question 1

valuation accounts

Answer 1

increase or decrease the carrying value of assets are part of the related asset and are not assets, or liabilities. ex. adjunct(increase)-premium on bond contra(decrease)-discount on bond, deprc.

Question 2

relevance

Answer 2

predictive value, confirmatory value, or both

Question 3

faithful representation—reliability/SFAC 8.3

Answer 3

complete, neutral, and free from error

Question 4

interim income statement, income tax rate

Answer 4

use estimated effective annual rate against entire year’s income before income tax expense

Question 5

fundamental qualitative characteristics of accounting information

Answer 5

relevance and faithful representation

Question 6

-interim financial reporting FASB ASC 270-10-45-1

Answer 6

each period viewed as an integral part of an annual period

Question 7

cost-benefit

Answer 7

FASB assesses whether the benefits of reporting particular information are likely to justify the costs incurred to provide and use that information

Question 8

enhancing qualitative characteristics

Answer 8

comparability, verifiability, timeliness, and understandability

Question 9

Direct cash flow

Answer 9

add cash receipts from sales, interest, dividends, and the sale of equity securities
deduct cash payments for purchases, operating expenses, interest, income taxes, and the purchase of equity securities

Question 10

cash paid for COGS- direct cashflow

Answer 10

COGS
add an increase in inventory
deduct a decrease in inventory
add a decrease in accounts payable
deduct an increase in accounts payable

Question 11

comprehensive income

Answer 11

change in equity(net assets) from transactions and other events from non owner sources - all changes in equity except investments by owners and distributions TO owner

Question 12

discontinued operations

Answer 12

includes all previously unrecognized gains or losses from the sale of the discontinued component and the results of operations for the discontinued component during the reporting period— reported net of tax

Question 13

historical cost principle

Answer 13

assets recorded and carried at their historical acquisition cost

Question 14

current ratio

Answer 14

current assets/ current liabilities:

cash, ar, inventory

Question 15

unrealized changes in fair value between periods

Answer 15

reported in other comprehensive income, gains and losses reported on income statement when realized

Question 16

notes to financial statements

Answer 16

significant accounting principles used
alternative measures for assets and liabilities
information about long-term obligations(when due, interest rate, restrictive policies)
inventory measurement method used(lifo,fifo,etc)
revenue recognition policies
discussion of contingencies, claims, and assessments

Question 17

financing activities

Answer 17

Issuance/repayment of debt
Issuance/repurchase of common or preferred stock
resale of treasury stock(+)
payment of dividends(-)

Question 18

SEC rulemaking

Answer 18

concept release
rule proposal
rule adoption

Question 19

impairment loss

Answer 19

only recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair vale

Question 20

definition of a gain

Answer 20

increase in equity form peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period except those that result form revenues or investments by owners

Question 21

reliability

Answer 21

information about an item must be representationally faithful, verifiable, and neutral

Question 22

SFAC 4

Answer 22

to provide a BASIS for establishing detailed accounting and reporting standards for nonbusiness entities

Question 23

accrual

Answer 23

economic events that have already occurred, but have not yet been settled

Question 24

deferral

Answer 24

items that have been paid for in advance, but their associated underlying economic event has not occurred yet

Question 25

inventory losses- interim

Answer 25

if losses are recovered in subsequent period, gain recognized but by the amount of the previously booked loss.

Question 26

GASB

Answer 26

GOVERMENT not-for-profit organizations follow the SLG GAAP hierarchy in determining applicable GAAP

Question 27

current cost

Answer 27

report assets at the amount of cash or its equivalent that would have to be paid if the same or equivalent assets were acquired currently

Question 28

residual interest

Answer 28

net assets of a nongovernmental not-for-profit---assets minus liabilities

Question 29

capital maintenance concept

Answer 29

the recovery of cost; separation of return on capital from return of capital

Question 30

financial capital concept

Answer 30

the effects of price changes on assets held and liabilities owed are recognized as "holding gains and losses" and included in return on capital

Question 31

physical capital concept

Answer 31

the effect on price changes are recognized as " capital maintenance adjustments" as a separate element of equity and would not be included in return on capital

Question 32

asset - essential characteristics

Answer 32

1. probable future benefit 2. particular entity can obtain the benefit and control others' access to it 3. the transaction or other event giving rise to the entity's right to or control of the benefit has already occurred

Question 33

objectivity

Answer 33

states that the economic activity that underlies financial statements must be substantive in fact and presented without bias

Question 34

continuity or going concern

Answer 34

states that an entity is assumed to have a life that is indefinite or at least sufficiently long for it to accomplish its objectives and fulfill its legal obligations

Question 35

exposure draft, aka

Answer 35

proposed accounting standards update

Question 36

SFAC 4 - nonbusiness organizations indicator of performance

Answer 36

1. information about the nature and relationship between inflows and outflows of resources 2. information about service efforts and accomplishments

Question 37

IFRS- Interest expense

Answer 37

Finance Cost

Question 38

IFRS - noncash transactions

Answer 38

reported in notes to cash flow and not on face

Question 39

deferred tax liability/asset

Answer 39

classified as concurrent

Question 40

accumulated other comprehensive income

Answer 40

reported as part of equity on the balance sheet/statement of financial position--can increase or decrease total S/E

Question 41

articulation

Answer 41

means financial statements are fundamentally interrelated

Question 42

single step income statement

Answer 42

net income=(revenues + gains) - (expenses + losses)

Question 43

component of an entity

Answer 43

- segment - reporting unit - or asset group(not a part of a line of business) - whose operations and cash flows are clearly distinguished from the rest of the entity, operationally as well as for financial reporting purposes

Question 44

variable interest entity

Answer 44

a legal entity subject to consolidation according to the provisions of the "Variable Interest Entities" subsections of FASB ASC 910-10

Question 45

multi-step income statement

Answer 45

- shows calc for gross profit in order to show efficiency in use of labor and supplies - shows operating income vs. non-operating items

Question 46

diluting securities

Answer 46

stock options or warrants convertible preferred stock convertible bonds contingent shares - shares will be issued if a conditions is met

Question 47

financials of defined contrib. retirement plan

Answer 47

net assets available for benefits of the plan | changes in net assets available for benefits

Question 48

NFP - supporting activities

Answer 48

1. )management and general | 2. )fundraising

Question 49

operating segments

Answer 49

1. )engage in business activity result revenues and expenses 2. ) regularly reviewed by chief oper. officer 3. )discrete financial info. is available

Question 50

special purpose frameworks | 2160.01

Answer 50

``` cash basis tax(income) basis regulatory basis contractual basis other basis ```

Question 51

impairment

Answer 51

carrying amount exceeds undiscounted future cash flows

Question 52

reportable segments

Answer 52

revenue test profitability test asset test

Question 53

inventory turnover

Answer 53

COGS/ average inventory

Question 54

AR turnover

Answer 54

net sales/average AR

Question 55

Markup to Margin

Answer 55

=markup/(1+markup)

Question 56

LCNRV---FIFO and Weighted Average

Answer 56

``` replacement cost(market)- what you repurchase for NRV-what can you sell it for minus costs to move ```

Question 57

perpetual vs periodic

Answer 57

perpetual - takes sales out of inventory as they happen | periodic - wait until the end of the period

Question 58

supplemental disclosures to the Cash Flows

Answer 58

income tax paid interest paid conversion of debt to equity

Question 59

SFAC 8 limitations related to disclosure requirements

Answer 59

cost constraint relevance potential adverse consequences future-oriented information

Question 60

LCM --- LIFO and Retail Inventory

Answer 60

replacement cost ceiling - NRV Floor- NRV-Profit Margin ----compare against original cost

Question 61

Bonus % of NI after NI-Bonus

Answer 61

B=%ofSalesBonus (NI-Bonus)

Question 62

Times Interest Earned

Answer 62

EBIT/ Interest Payments

Question 63

Debt - - Equity

Answer 63

Total Liabilities/ Shareholders Equity

Question 64

Long-term debt to Capitalization

Answer 64

Long Term Debt/ LT Debt+Preferred Stk+ Common Stk

Question 65

Debt Service Coverage

Answer 65

Net Operating Income/ Total Debt Service