1.1 Flashcards
Which of the following statements best describes the operating procedure for issuing a new Financial Accounting Standards Board (FASB) statement?
Majority vote by FASB.
ETIF is only there to get a general consensus on new issues
Which of the following will best protect investors against fraudulent financial reporting by corporations?
The requirement that financial statements be audited.
In reference to proposed accounting standards, the term “negative economic consequences” includes:
The inability to raise capital.
Cash to accrual
add decreases in liabilities and increases in assets, and subtract increases in liabilities and decreases in assets
The premium on a three-year insurance policy expiring on December 31, 20X4 was paid in total on January 2, 20X2. If the company has a six-month operating cycle, then on December 31, 20X2, the prepaid insurance reported as a current asset would be for:
12 Months
The definition of a current asset uses the period “operating cycle or one year, whichever is longer.”
n Dart Co.’s year two single-step Income Statement, as prepared by Dart’s controller, the section titled “Revenues” consisted of the following:
Sales $250,000 Purchase discounts 3,000 Recovery of accounts written off 10,000 Total revenues $263,000 In its year two single-step Income Statement, what amount should Dart report as total revenues?
Revenues are inflows of economic resources. The purchase discounts would be netted against purchases, not sales. The recovery of accounts written off is not revenue, it is an adjustment to the allowance for uncollectible accounts. Therefore the total revenue reported should be $250,000.
Which of the following would be reported as an investing activity in a company’s statement of cash flows?
Collection of a note receivable from a related party.
Which of the following characteristics relates to both accounting relevance and faithful representation?
Comparability.
Which of the following characteristics of accounting information primarily allows users of financial statements to generate predictions about an organization?
The question is asking which of the following terms captures predictive value. Predictive value along with confirmatory value is a component of relevance.
According to the FASB conceptual framework, certain assets are reported in financial statements at the amount of cash or its equivalent that would have to be paid if the same or equivalent assets were acquired currently. What is the name of the reporting concept
Replacement cost is the amount to be paid for an item at the current time. This concept is used in the lower-of-cost-or-market inventory valuation procedure. Replacement cost is an example of an entry price-the amount required to be paid currently to obtain an asset already held
On December 31, 20X2, Brooks Co. decided to end operations and dispose of its assets within three months. At December 31, 20X2, the net realizable value of the equipment was below historical cost.
What is the appropriate measurement basis for equipment included in Brooks’ December 31, 20X2, Balance Sheet?
When a firm is in liquidation, historical cost and entry values (replacement cost) are no longer relevant.
The going concern assumption supports the historical cost principle. The firm is no longer a going concern. The only amounts relevant are the amounts to be received on sale of the assets. Net realizable value is the net value to be received, after the costs of getting the asset ready for sale are deducted.
Unearned service contract revenue
Should equal total outstanding contracts
Included in accounts receivable is $500,000 due from a customer. Special terms granted to this customer require payments in equal, semiannual installments of $125,000 every April 1 and October 1.
In Trey’s December 31, 20X5 Balance Sheet, what amount should be reported as total current assets?
Current assets are assets that are collectible within one year.
When an entity uses the fair value option for eligible financial assets and liabilities, which one of the following is not an expected outcome of the disclosures required of that entity?
Replace the kind and amount of information that would have been provided if the fair value option had not been used with information related to fair value
Users being able to understand the difference between fair value and cash flows
Which of the following relates to both relevance and faithful representation?
Verifiability and consistency (components of comparability)
Long Term Receivables Available For Sale Securities Equipment Warranty Obligations Short-term Payables Accounts Receivable Bonds Payable Trading Securities
Present Value of future cash flows Current Market Value Historical Cost Net Realizable value or settlement rate Historical Cost Net Realizable Value Present Value of future cash flows Current market value
Under IFRS for SMEs, which of the following cost flow assumptions can be used for inventory valuation purposes?
Under IFRS for SMEs, the FIFO and weighted average cost assumptions of cost flow may be used for inventory valuation purposes, but the LIFO cost flow assumption may not be used.
Which one of the following is not an other comprehensive basis of accounting (OCBOA)?
Cash basis. Modified cash basis. Income tax basis. Answer: IFRS for SMEs.
Under IFRS for SMEs, which of the following, if any, must be disclosed in financial statements?
Earnings Per Share,
Information by Segment
Under IFRS for SMEs, neither earnings per share (EPS), nor information by segment is required in financial statements. Since financial statements prepared under IFRS for SMEs are those of entities not traded on exchanges or otherwise required to file with regulatory agencies, earnings per share and segment reporting are not considered important information for users. These are two of the simplifications in IFRS for SMEs that make the standards less burdensome than either U.S. GAAP or full IFRS.
Which of the following statements, if any, concerning IFRS for SMEs is/are correct?
I. IFRS for SMEs is based on accrual basis accounting.
II. Generally, IFRS for SMEs may be used as an alternative to using OCBOA.
Both
Which one of the following is a characteristic of accounting under IFRS for SMEs?
Interest incurred during construction must be capitalized. (Under IFRS interest is not capitalized but construction expenses are)
Earnings per share must be provided in the financial statements.
Goodwill must be amortized. (Correct)
The LIFO cost flow assumption can be used in valuing inventories.
Under IFRS for SMEs, which of the following methods, if any, can be used by an investor to account for an investment in another entity (an associate) over which the investor has significant influence?
Cost,
Equity
Both Cost and Equity for IFRS,
Under US GAAP, only Equity allowed
IFRS requires a classified Statement of Financial Position. What are the required classifications?
Current and non-current assets and liabilities.
Items that would appear on the Income Statement prepared using IFRS
Disc Operations
Gross Profit
Depreciation/Amort
