Day 28 - Cram Day #2

Question 1

Cash to Accrual:

Answer 1

1. Add increases in CA to income
2. Subtract decreased in CA to income
3. Add decreases in CL to income
4. Subtract increases in CL to income

MCQ-06929

Question 2

In a Finance Lease the residual value of the asset is ____ to the Lease Liability?

Answer 2

Added @ the PV of guaranteed Residual Value

MCQ-00574

Question 3

How is Depr Exp and Gain from sale of Equipment affect Net Cash provided by Operating Activities?

Answer 3

Depreciation Expense = Added to Net Income
Gain = Subtracted from Net Income

MCQ-01234

Question 4

ABC changed from the individual item approach to the aggregate approach in applying the lower of FIFO cost to market to inventories. The cumulative effect of this change should be reported where on the FS?

Answer 4

Retrospective adjustment on the RE stmt, with separate disclosure

Inventory Costing Method Change = a change in Accounting Principle

MCQ-00225

Question 5

What is the appropriate characterization of the net assets of a nongovernmental NFP organization?

Answer 5

Residual Interest

Net Assets = the difference between the NFP’s assets and liabilities

MCQ-05623

Question 6

During a period of rising prices, ABC changed from FIFO to LIFO. What are the effects on Ending Inventory and Net Income?

Answer 6

Ending Inventory = Decrease

Net Income = Decrease

Under LIFO, Ending Inventory has a LOWER valuation than FIFO - since OLDER/LOWER costs are assigned to Ending Inventory

MCQ-00092

Question 7

Cash to Accrual:

Answer 7

CA:
- Add Increase
- Subtract Decrease

CL:
- Add Decrease
- Subtract Increase

NOTE: IT IS FLIPPED BETWEEN CA & CL

MCQ-04214

Question 8

ABC changed from cash to accrual basis of accounting during the CY. The cumulative effect of change should be reported in the FS as:

Answer 8

Prior Period adjustment resulting from the correction of an error

A change in Acctg Principal = implies from “good to good”

Cash basis is NOT GAAP

MCQ-09326

Question 9

Operating Activity Adjustments: CLAD

Answer 9

Current Assets & Liabilities
Losses & Gains
Amortization & Depreciation
Deferred Items

MCQ-01224

Question 10

How should the amortization of bond discount on LT debt be reported in the Stmt of CF?

Answer 10

In operating activities as an addition to income

Bond discount amortization = non-cash item that INCREASES Interest Expense, therefore DECREASING Net Income

MCQ-05930

Question 11

Formula: Effective Tax Rate

Answer 11

Total Tax / Taxable Income

MCQ-06924