Deck 11

Question 1

When the effect of a change in accounting principal is inseparable from the effect of a change in accounting estimate, the reporting treatment for the overall effect is:

Answer 1

As a change in estimate, and is prospectively reported.

Question 2

The realization concept is confirmed by:

Answer 2

Depreciated equipment sold in exchange for a note receivable. Revenues and gains are realized when assets are exchanged for cash of claims to cash.

Question 3

Interim financial reporting should be viewed as:

Answer 3

Reporting for an integral part of an annual period.

Question 4

Under current cost accounting, holding gain is the:

Answer 4

Excess of replacement cost over the original purchase price. Price level index is used for historic cost/constant dollar method. Selling prices are not a component of holding gains.

Question 5

Under the installment method, deferred gross profit is calculated by:

Answer 5

Multiplying the balance in the receivable account by the gross profit percentage.

First, get the receivable balance (Note-Payment)
Then, get the gross profit percentage (Gain/original cost)

Question 6

Under the installment method, collections is determined by:

Answer 6

Taking the Gross Profit for the year and dividing it by the gross profit percentage.

Question 7

When marketable securities are transferred between trading and available for sale, the transfer is made at:

Answer 7

Fair value, and the difference is recorded as unrealized loss and charged to the income statement. The new carrying vale becomes the basis for future gains or losses.

Question 8

Available for sale securities are reported at fair value, any temporary differences are reported as:

Answer 8

“Net unrealized loss on available for sale security” in other comprehensive income on the statement of stockholder’s equity.

Question 9

A held to maturity bond is reported at:

Answer 9

Carrying value.

Question 10

Trading and available for sale securities are reported at:

Answer 10

Fair value.

Question 11

Dollar-value LIFO ending inventory is the:

Answer 11

Dollar value base layer plus the current year base times the conversion factor. Conversion factor is calculated as Ending current year divided by ending base year.

Question 12

A cash dividend from an investment that you have significant influence over is a:

Answer 12

Return on capital under the equity method, thus significant influence. The investment account would be decreased.

Question 13

Interest costs incurred during the construction period of machinery to be used by the firm as a fixed assets is:

Answer 13

Capitalized as part of historic cost of acquiring the fixed asset.

Question 14

Interest costs on the fixed asset after the completion of construction is:

Answer 14

Expensed. Interest costs on machinery held for sale is also expensed.

Question 15

Agricultural product’s revenue is recognized at the time of:

Answer 15

Production, not sale.

Question 16

Under the book value method, the conversion of debt requires:

Answer 16

Credits to common stock and additional paid in capital to be equal the book value of the bonds.

Question 17

Deferred tax expense equals:

Answer 17

Current period temporary differences times the enacted future tax rate.

Question 18

Water and sewer deposits that are abandoned or escheat properties that are held by the State are accounted for by:

Answer 18

The Private Purpose Fund. The private purpose trust fund is the designated fund for reporting all arrangements under which principal and income are for the benefit of a specific individual, a private organization, or other governments (the State).

Question 19

A cash gift that is restricted with stipulations should be recorded as:

Answer 19

A temporary restricted asset, not liability.

Question 20

Under the liquidation basis of accounting the disclosure of the assumption used to value the assets and liabilities will be in:

Answer 20

The “Statement of Net Asset in Liquidation”, not the “Statement of Equity in Liquidation.”

Disclosures will include information on the types of costs and income accrued.

Question 21

Under the percentage-of-completion method, in order to get current gross profit take:

Answer 21

Current cost and divide it by the total cost for that project to get current cost %, then multiple % by GP for that project.

Question 22

Investments in marketable equity securities which the company does not intend to sell in the near term should be classified as:

Answer 22

Available for sale.

Question 23

Temporary decline of an available for sale security below cost (a loss) should be reported as:

Answer 23

A valuation allowance in the asset section of the balance sheet.

The valuation account is a contra-asset account, not a liability.

Question 24

The entry to write-off uncollectible accounts under the allowance method:

Answer 24

Has no effect on net income.

The entry is to debit allowance account and credit accounts receivable.

Question 25

When dealing with net markups and markdowns:

Answer 25

Add markups to purchases and add markdowns to sales.

Purchases plus markups on retail is then divided by cost to get the % of retail related to cost. Then multiply cost % by total sales including markdowns.

Question 26

The total compensation cost is allocated to compensation expense on:

Answer 26

A straight-line basis over the time period in which the employee must provide service.

Question 27

Basic EPS:

Answer 27

Income available to common shareholders divided by weighted-average # of common shares outstanding

aka Net Income less Cumulative Preferred Stock Dividend divided by Common Stock Outstanding

Question 28

The schedule of actuarially determined contributions displayed in the required supplementary information should be presented:

Answer 28

To the extent available (for a minimum of 10 years). Except when the company has been in existence for less time.

Question 29

Fundamental Qualitative Characteristics are:

Answer 29

Relevance and Faithful Representation
Relevance includes "Passing Confirms Money":
-Predictive value
-Confirming Value
-Materiality
Faithful Representation includes "Completely Neutral is Free from Errors"
-Completeness
-Neutrality
-Free from Errors

Question 30

Enhancing Qualitative Characteristics are:

Answer 30

“Compare and Verify in Time to Understand”

• Comparability
• Verifibility
• Timeliness
• Understandability

Question 31

Under IFRS, all deferred tax assets and deferred tax liabilities are reported as:

Answer 31

Noncurrent on the balance sheet.

Question 32

When remeasuring foreign currency financial statements into functional currency, historical exchange rates should be used for those balance sheet accounts that are:

Answer 32

Carried at cost, which is most non-monetary items. Otherwise, the general rule is current exchange rate. The exception to the rule is marketable equity securities, they are non-monetary items, but are reported at fair value. And thus are remeasured using current exchange rate.

Question 33

When available for sale unrealized loss is classified as “other than temporary” the loss is:

Answer 33

Removed from OCI and is now realized on the income statement, decreasing net income.

Question 34

A Capital (finance) lease’s present value is calculated on:

Answer 34

Lease payments less real estate tax (or taxes). Taxes are expensed when paid.

Question 35

Dividends paid go in the (Stmt of Cash Flows):

Answer 35

Financing section of the statement of cash flows.

Question 36

Purchase of Treasury Stock go in the (Stmt of Cash Flows):

Answer 36

Financing section of the statement of cash flows.

Question 37

The Statement of Activities is the government-wide financial statement use to:

Answer 37

Report revenues and expense for governmental and business-type activities.

Question 38

The only governmental fund type that will fall in the “business-type” classification of the Statement of Activities is the:

Answer 38

Enterprise Fund.

Question 39

Reciprocal interfund activity includes:

Answer 39

Interfund loans and services provided and used.

Question 40

Non-reciprocal interfund activities are:

Answer 40

Transfers and interfund reimbursements.

Question 41

Financing section of the Statement of Cash Flows displays the cash effects of:

Answer 41

Borrowing or paying back of debt and buying or selling the equity of the company.