F1

Question 1

SFAC No.8

Answer 1

Conceptual framework of financial reports

Question 2

SFAC No.4

Answer 2

Financial reporting by nonbusiness organizations

Question 3

SFAC No.5

Answer 3

Recognition and measurement of financial statements

Question 4

Replacement cost

Answer 4

Amount that would be paid to replace an asset currently

Question 5

Net realizable value

Answer 5

Selling price minus any disposal costs

Question 6

Historical cost

Answer 6

Amount originally paid to acquire an asset

Question 7

Multi step income statement

Answer 7

Net Sales
Minus COGS
Equals gross margin
Minus operating expenses
Equals income or loss from operations
Plus other revenue and gains
Minus other expenses and losses
Plus or minus unusual shit
Equals income before taxes
Minus income tax expense
Equals income from continuing operations 
Plus or minus discontinued operations net of tax
Equals net income

Question 8

How to account for an incident that is unusual but is a common occurrence

Answer 8

Record the actual gain or loss for the year incurred and if it is common you don’t need a separate disclosure but if it’s not common you need a separate disclosure

Question 9

5 Step revenue recognition approach

Answer 9

• Identify contract with a customer
• Identify separate performance obligations in the contract
• Determine transaction price
• Allocate transaction price to the separate obligations
• Recognize revenue when obligations are satisfied

Question 10

Criteria for revenue recognition

Answer 10

• all parties have approved of contract
• rights of each party are identified
• payment terms can be identified
• contract has commercial substance or future cash flows
• probable that entity will collect most of consideration due in the contract

Question 11

Journal entry to record revenue recognition of multiple performance obligatoins

Answer 11

Dr. Cash
Cr. Obligation 1
Cr. Obligation 2
Cr. Obligation 3

Question 12

If there is a service like technical support that stretches past installation of some shit how do you account for it?

Answer 12

You initially credit unearned revenue then you allocate each year as you earn the revenue

Question 13

Output Methods

Answer 13

• Units produced or delivered
• Time elapsed
• Milestones achieved
• Surveys of performance completed to date
• Appraisals of results achieved

Based on how customer or buyer perceived shit

Question 14

Input Methods

Answer 14

• Cost incurred relative to expected costs
• Resources consumed
• Labor-hours expended
• Time elapsed

based on how the seller or the one performing the services sees shit

Question 15

Incremental Costs of Obtaining a contract

Answer 15

Costs that were needed to secure the contract are capitalized and amortized while costs like travel and meals are expensed

Question 16

Costs to fulfill a contract

Answer 16

In order for costs to fulfill a contract to be considered an asset that have to relate directly to the contract, generate resources, and are expected to be recovered, other than that they are expensed like selling & general and administrative costs

Question 17

What is an agent principle contract

Answer 17

Think of travelocity as an agent and how they find you flights from other companies for commission from the principal like United Airlines

Question 18

Repurchased agreements

Answer 18

• forward: obligation for seller to repurchase in contract
• Call: seller has right to repurchase the asset
• Put: obligation for seller to repurchase at customers request

Question 19

Accounting for repurchase agreements

Answer 19

If the repurchase price it less then it is a lease, but if it is more than the selling cost & FV then it is a financing agreement, the amount more paid is recognized as interest expense

Dr. Interest expense
Cr. Financial liability

Question 20

If the repurchase agreement lapses

Answer 20

Dr. Financial liability
Cr. Revenue

For the amount of the repurchase price

Question 21

Refund liability journal entries where initial liability on a cash sale of $50,000 where 10% of items purchased

Answer 21

Dr. Cash 50,000
Cr. Revenue 45,000
Cr. Refund liability 5,000

Cash paid to customers for 3,000 returns
Dr. Refund liability
Cr. Cash

Question 22

Accounting for percentage of completion

Answer 22

1. Contract price minus estimated total cost equals gross profit
2. % of completion is total cost to date divided by total estimated cost of contract
3. Multiply step 1 by step 2 for gross profit earned
4. Current year gross profit is profit to date minus previous year profit to date

Question 23

Accounting for completed contract method

Answer 23

Gross profit or loss equals contract price minus total costs

Question 24

How to calculate asset or liability for percentage of completion

Answer 24

Actual costs incurred for the year plus gross profit recognized. Find the difference between that and billings & collections

you have to do all the steps

Question 25

Changing to LIFO accounting principle

Answer 25

Because its impossible to get the LIFO layers accurately, you just do it prospectively

Question 26

Items included in other comprehensive income

Answer 26

• pension adjustments, gains & losses from defined benefit pension plan
• unrealized gains & losses on available for sale debt securities
• foreign currency translation adjustments
• instrument specific credit risk(changes in FV for FV elected liabilities

Question 27

Unearned revenue journal entries

Answer 27

Unearned Revenue J/E
Dr. Cash
Cr. Unearned revenue

Adj to record unearned rev that has been earned
Dr. Unearned revenue
Cr. Revenue

Question 28

Prepaid expense journal entries

Answer 28

To record prepaid
Dr. Prepaid expense
Cr. Cash

Adjusting entry to expense prepaid
Dr. Expense
Cr. Prepaid expense

Question 29

Reporting components of comprehensive income

Answer 29

Company can report them as individual net tax basis or each component on a before net tax basis so if tax rate is given in the question then net it against other comprehensive income