Basic Concepts

Question 1

How do you convert cash payments to suppliers to CGS? (Formula)

Answer 1

Cash payments to suppliers
+ Inc in A/P
- Inc in Inv
=CGS

Question 2

What org is responsible for setting IFRS?

Answer 2

International Accounting Standards Board (IASB)

Question 3

What are the two main components that contribute to the main objective of decision usefulness?

Answer 3

Relevance and Faithful Representation

Question 4

What are the components of relevance?

Answer 4

Confirmatory Value
Predictive Value
Materiality

Question 5

The balance a deferred revenue account should reflect what?

Answer 5

The liability for outstanding performance obligations.

Question 6

Earnings EXCLUDE certain gains and losses that are INCLUDED in comprehensive income? TF

Answer 6

True

Question 7

Earnings INCLUDE certain gains and losses that are EXCLUDED in comprehensive income? TF

Answer 7

False

Question 8

How would you compute the total debits to installment AR?

Answer 8

Deferred GP/GP Ratio

Question 9

How would you compute cash collections?

Answer 9

Total debits to AR (DGP/GP Ratios) - AR ending balance

Question 10

How would you compute GP realized?

Answer 10

GP Ratio x Cash Collections

Question 11

What are the components of faithful representation?

Answer 11

Neutrality
Free from material error
Completeness

Question 12

What are enhancing characteristics of financial information?

Answer 12

Comparability
Understandability
Timeliness
Verifiability

Question 13

What is the final step before issuing a new FASB statement?

Answer 13

A majority vote by the members of the FASB

Question 14

Revenues are recognized when…

Answer 14

They are realized/realizable and have been earned

Question 15

Cash basis accounting includes AR. TF

Answer 15

False

Question 16

Cash basis accounting includes unearned revenues? TF

Answer 16

True

Question 17

Collections = Cash basis Revenues. TF

Answer 17

True

Question 18

Collections are subtracted from AR. TF

Answer 18

True

Question 19

Sales Revenues = Cash basis Revenues. TF

Answer 19

False. Only collections = cash basis revenues.

Question 20

Inability to determine BI for supplies would cause NI to be understated. TF

Answer 20

F. Overstated, due to supplies expense being understated for the year.

Question 21

Inability to determine BI for supplies would cause OE to be understated. TF

Answer 21

False. There would be no effect on OE.

Question 22

What is the formula for Deferred Gross Profit?

Answer 22

DGP = GP Rate x AR

Question 23

What is the private company council?

Answer 23

An organization that will assist setting accounting standards for private companies established by the FAF.

Question 24

The private company council allows private entities to amortize goodwill. TF

Answer 24

True

Question 25

When is liquidation basis accounting required?

Answer 25

When liquidation is imminent

Question 26

Assets are presented at fair value under the liquidation basis?

Answer 26

False. The are presented at the amount of cash expected from the liquidation process.

Question 27

The statment of changes in equity is a required account under US GAAP. TF

Answer 27

False, shareholders equity

Question 28

Prepaid taxes are not current assets. TF

Answer 28

True

Question 29

Gains and losses on sales of plan assets are recorded in what section of the statement of cash flows prepared using the indirect method?

Answer 29

Operating

Question 30

What is the defensive interval ratio?

Answer 30

The ratio of quick assets to daily operating expenditures. Measures liquidity

Question 31

Notes payable are not to be measured at anything other than their original amount during liquidation. TF

Answer 31

True