BASIC CONCEPTS & FINANCIAL STATEMENTS

Question 1

Not considered an appropriate means of measuring an element of financial reporting in monetary terms?

Answer 1

Expected Fair Market Value

Question 2

Determine FV of an Asset when no principal market exist

Answer 2

Market Quoted Price - Transaction Cost - Transportation Cost
1000 - 75 = 925
1050 - 150 = 900

925 (Market Quoted) 1000 FV

Question 3

should interest and advertising be included in general and administrative expenses?

Answer 3

Neither Interest not advertising

Question 4

How does Cash Basis accounting Recognize revenue?

Answer 4

Revenue when cash is received

Expense when cash is paid

Question 5

Accrual Basis Recognize

Answer 5

Revenue when cash is earned

Expense when cash is incurred

Question 6

Single Step (INCOME STATEMENT) Calc

Answer 6

Puts all gains and revenue in one group

Puts all losses and expense in one group

Question 7

Does Financial Accounting Standards Board (FASB) provides the gudance, conceptual framework, and develpo principles

Answer 7

• provides guidance on implementation
• Conceptual framework of Accounting
• COSO develop Principles & attributes related to internal controls

Question 8

Not a FASB Standards…

Answer 8

It develops principles and attributes that allow organizations to understand the necessary elements to ensure a robust system of internal control

Question 9

Asset valuation accounts

Answer 9

Neither Assets or Liability

Question 10

Current Liabilities due within one year or less Examples

Answer 10

Accounts Payable 
Notes Payable 
Dividends Payable 
Income tax payable 
Accrued Expense 
Unearned Revenue 
Other Short Term Debt 
Current portion of Long Term Debt

Question 11

How to calc Sales Tax?

Answer 11

Sales tax = Total sales × Sales tax rate

Beginning balance $ 4,500
Sales tax collected 40,000. (800,000 x 5%)
Sales tax remitted (39,500)
Ending balance $ 5,000

Question 12

two required financial statements of a defined contribution retirement plan

Answer 12

1. statement of net assets available for benefits of the plan
2. statement of changes in net assets available for benefits

Question 13

Times interest earned ratio

Answer 13

Times interest earned ratio = Income before interest expense and taxes/ Interest expense

=$900,000$100,000=9.0

Question 14

A/R turnover ratio

Answer 14

A/R turnover = Net credit sales

Average net receivables

Question 15

What are the Qualitative characteristics of useful information?

Answer 15

RELEVANCE
- Predictive value
- Confirmative Value

FAITHFUL REPRESENTATION
- Completeness
- Neutrality
- Free From Error

ENCHANCING CHARACTERISTICS

• Comparability
• Understanding
• Timeliness
• Verifiability