F1

Question 1

Relevance is a fundamental qualitative characteristic. What are its attributes & definition?

Answer 1

Definition: Capable of making a difference in the decisions made by users.
Attributes: Predictive value, confirmatory value, materiality.

Question 2

Faithful Representation is a fundamental qualitative characteristic. What are its attributes & definition?

Answer 2

Definition: faithfully represents reported information.
Attributes: completeness, neutrality, free from error (completely neutral is free from error)

Question 3

What are the enhancing qualitative characteristics?

Answer 3

comparability (trend analysis), verifiability (independent observers can reach consensus, timeliness, understandability. compare and verify in time to understand.

Question 4

Multi step I/S

Answer 4

Net Sales (sales less discounts/returns)
-COGS
=Gross Margin
-SG&A
-depreciation
=Income from Ops
+other rev/gains (int, AFS security, other)
-other expenses/losses (int exp, sale of FA, restructuring exp)
=Income before tax (from continuing ops)
-Income tax expense
=Income from continuing ops
-discontinued ops (net of tax)
=net income

Question 5

Single step I/S

Answer 5

Revenues & other Items:
+sales revenue(net of returns & discounts)
+gain on sale of AFS securities
+other revenue/gains
=total revenues
Expenses and other Items:
-COGS
-SG&A
-Interest exp
-loss on sale of FA
-other expenses & losses
-income tax expense
=total expenses
=income from continuing ops
+/-discontinued ops (net of tax)
=Net Income

Question 6

When does a contract modification become accounted for as a separate contract instead?

Answer 6

The scope of the original contract increases through additional distinct goods/services. This is a change in price, scope, or both

Question 7

Incremental cost of obtaining a contract that are classified as an asset

Answer 7

legal fees for the contract, commissions, any cost that would not have been incurred if the contract was not obtained.

Question 8

Financing arrangement

Answer 8

the seller is obligated to repurchase the asset & the repurchase price is greater than the original selling price. additionally, the expected market value is greater than the original price but less than the repurchase price. This gives the buyer economic incentive to exercise the option of requesting the seller to repurchase.

Question 9

Formula for percentage of completion

Answer 9

total cost to date / total estimated cost of contract

Question 10

find current year income for percentage of completion method

Answer 10

Total contract sales price
-total estimated cost of contract
=total gross profit
*% of completion (total cost to date/total estimated cost)
=gross profit to date
-income recognized in PY
=Income CY

Question 11

Percentage of completion: find current asset/liability

Answer 11

cumulative cost + cumulative gross profit recognized - cumulative billings = current asset or liability.

when billings exceeds cost + profit, it is an asset.
when billings are less than cost + profit, it is a liability

Question 12

What is included in finding gain/losses on discontinued operations?

Answer 12

year that a component is classified as held for sale but is not sold: operating losses/gains + impairment loss

year of sale: operating losses/gains + gain/loss on sale

Question 13

Define Comprehensive Income

Answer 13

The change in equity (net assets) from nonowner sources.

net income + OCI

Question 14

components of OCI

Answer 14

PUFI
1. Pension adjustments - pension changes in funded status dur to gain/loss, prior service cost, & net transition asset or obligation (until recognized as pension expense on I/S)
2. Unrealized gain/loss for AFS securities & hedges
3. Foreign currency translation adj
4. Instrument specific credit risk - the change in FV for liabilities with a FV option elected.