#5 Flashcards
Selling expense consist of
Advertising, freight out, sales salaries and commissions, rent for office space used by sales department
Should discontinued operations be in revenues?
No. discontinued operations should be in discontinued operations, which comes after continuing operations. It should not be in revenues.
How should cost of building a cabinet to display merchandise that is expected to last 5 years be expensed?
the cabinet costs should be expensed as a selling expense over 5 years
Where to report gain on debt extinguishment, if it’s considered a usual and recurring part of operation.
As part of continuing operations
Is extraordinary item part of net income?
YES. Net income is the “bottom line”, after everything that’s not other comprehensive income has been factored in. Extraordinary items are part of income that comes after continuing operation and discontinued operation, so they are part of net income.
When a fixed asset like a warehouse is sold, how should the gain or loss be recognized?
Recognized as part of income from continuing operations
Higher production cost from going on strike and penalty cost from getting caught doing illegal shit. Are they reported as extraordinary items?
The penalty from doing illegal shit is, while higher production cost from going on strike is not.
Under U.S. GAAP, is the cumulative effect of an inventory pricing change on prior years earnings reported on the financial statements for LIFO to weighted average and weighted average to LIFO?
It’s reported as an adjustment to beginning retained earnings when it is considered practical to calculate the cumulative effect. When switching to LIFO, it’s considered impractical and accounted for prospectively.
How should change in method of inventory valuation be accounted for?
Inventory is a balance sheet item, so change is based on just the balances at the end of the last year the prior method was used.
Effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate should be reported as
As a component of income from continuing operations
Where is the cumulative effect of a change in accounting principle reported in the financial statement
in the retained earnings statement with separate disclosure. NOT in income statement.
What should the effective tax rate expected to be applicable for the year reflect?
All that anticipated tax related shit shit foreign tax rate, etc. If it’s got the word tax in it, fucking anticipate and reflect it.
Advertising costs may be accrued or deferred to provide an appropriate expense in each period for interim financial reporting or year-end financial reporting?
BOTH. Surprise again, motherfucka! What if it’s a year-long advertising campaign? What if it’s multi-year advertising campaign?
Interest earned on loans to other industry segments, does it affect the combined revenue in determining reportable segments?
NO.
How does general operating costs and interests affect the operating profit of reportable segments?
General operating costs and interests should NOT affect operating cost of reportable segments
If revenue from a single external customer is 10% or more of total revenue, what does the company have to do?
It has to disclose the fact, the total revenue from the customer, and the segment reporting the revenue
A segment must be 10% of
combined revenue OR operating income OR identifiable assets
Deficits accumulated during the development stage of a company should be:
Reported as part of stokholders’ equity
How does financial reporting by a developmental stage enterprise differ from an established operating enterprise?
It requires additional footnote disclosure for cumulative amount from inception for various shits for developmental stage enterprise
Total assets equal
Total liabilities + stockholders’ equity
