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F1 Flashcards

1
Q

What are the 4 enhancing qualitative characteristics?

A

Timeliness
Understandability
Comparability
Verifiability

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2
Q

In the percentage of completion method - how do you calculate the “completion percentage” per year?

A

Total actual cost
__________________
Total estimated costs

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3
Q

When a company decides to sell a component/division that qualifies for discontinued operations - what all is included?

A

Revenue and expenses from the year
Gain or loss resulting of sale

Sum of the above * 1-T = what is shown on the IS

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4
Q

How do you account for an Error correction?

A

Adjusting Prior Period F/S to correct error

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5
Q

How is the change in estimated useful lives accounted for?

A

Estimate –> prospectively (no prior pd adjustment)

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6
Q

When will the seller book financing arrangement?

A

When Repurchase price >= Original SP AND Mkt value

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7
Q

What are the 2 qualitative characteristics

A
  1. Relevance
  2. Faithful representation
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8
Q

What are the 3 components of Relevance?

A

Predictive value
Confirmatory value
Materiality

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9
Q

What are the 3 components of faithful representation

A

Completeness
Neutrality
Free From Error

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10
Q

What is the difference between Contract asset and Contract liab

A

Contract asset = entity performed prior to payment
Contract liability = payment prior to completion of project

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11
Q

What are the 3 indicators of consignment?

A
  1. Entity controls product until certain event occurs
  2. dealer does not have unconditional right to pay
  3. entity can require return
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12
Q

When is a warranty a separate performance obligation?

A

When there is a longer coverage pd or if it can be sold separately

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13
Q

How is change in accounting principle reported

A

Retrospective (restate FS, adj Beg RE)

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14
Q

What type of accounting change is LIFO to FIFO and how is it reported?

A

Change in principle

Net of tax to beg RE in earliest year presented

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15
Q

Under Completed contract - when is the gross profit recognized

A

At the end of contract (SP - total costs)

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16
Q

Under Percentage of completion - what are the following entries

Costs incurred per year

Billings in contract

Amount at collection

Revenue and cost per period

A

DR: CIP
CR: Cash

DR: Contract Receivable
CR: Progress billings

DR: Cash
CR: Contracts receivable

DR: Construction expense
CR: Revenue (GP % * contract price)
DR: CIP (plug)

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17
Q

When there is a new FASB std adopted –> what kind of accounting change is this?

A

Change in principle –> change Beg RE and CY earnings

18
Q

What equity transactions are allowed in comprehensive income?

A

All equity transactions excluding owner investments and distributions to owners

19
Q

What are 3 indicators of an agent?

A
  1. another party (principal) is primarily responsible for fulfilling the contract
  2. entity does not have inventory risk
  3. entity does not have ability to establish prices of other party’s goods/services
20
Q

What is the entry to recognize a call option where the repurch price is greater than the original price?

What is the entry when this option lapses?

A

DR: Cash
CR: Financial liability

DR: Financial liability
CR: REvenue

21
Q

How do you calc Gross profit for % of revenue?

A
  1. Contract price - Estimated total costs
  2. Take total costs incurred / total estimated costs
  3. Step 1 * step 2 = cumulative gross profit
  4. Subtract out previous rec profit = C profit
22
Q

What is the calc or AR Turnover?

A

Sales
___________________________
Avg AR (net of allowance)

23
Q

What are the two inseparable changes from accounting principle to accounting estimate?

A

changing inv TO LIFO
Change Depreciation method

Change in principle but handled prospectively

24
Q

When is the LCM used compared to the LCNRV method?

A

LCM –> LIFO
LCNRV –> FIFO

25
Q

In order for financial information to be useful - what must it provide?

A

provide information useful for making business decisions

26
Q

How are nonrefundable advances received treated at year end for performance in next year?

A

As unearned income

27
Q

What is the accounting change from method of demo costs written off (S/L to expensing immediately)

A

Accounting principle change however is inseparable to accounting estimate and therefore accounted prospectively

28
Q

What is the order in which enhancing qualitative characteristics are applied?

A

No prescribed order as it is an iterative process

29
Q

How is the G/L of discontinued ops reflected on the Income statement?

A

After income from continuing ops , net of tax

30
Q

What is the impact of an error of depreciation overstated in yr 1?

A

Adjustment to beg RE in yr 2 to increase RE for amount overstated net of tax

31
Q

What is the impact on deferred rev in the following:
1. When gift certificates are sold
2. when certificates are redeemed
3. When certificate lapses

A
  1. Increase (future income)
  2. Decrease (rev earned)
  3. Decrease (have to get rid of liability)
32
Q

What are the components of OCI? (PUFI)

A

ALL Net OF TAX (1-T)
Pension adj (G/L from defined benefit plan) - prior service cost
Unrealized G/L from AFS or CF hedge
Foreign translation adj
Instrument specific (Liab w/ FVO)

33
Q

When a debt security is transferred from HTM TO AFS –> what is the amount recorded to OCI?

I.e - Face value = 500, FV @ y/e = 497, Amort cost @ y/e = 495

A

Take FV - Amort cost –> unrealized G/L * (1-T) to OCI

34
Q

How to figure out the translation loss?

A

Assets - Liab&SE = amount of loss/gain (this is net of tax)

35
Q

What type of expense is payroll tax expense?

A

G&A

36
Q

What is the calc of Total Comprehensive income

A

Net income(net of tax) + OCI items(net of Tax)

37
Q

What is the purpose of reporting total comprehensive income?

A

To summarize all changes in equity from non-owner sources (excludes owner investments and distributions)

38
Q

What is the Prior service Cost?

A

pension plan is initiated that gives employees credit prior to inception of pension plan (prior year rec expense) or Amended plan

DR: OCI loss
CR: Pension liability

39
Q

If a warranty is inseparable from the equipment purchase - when should the costs for warranty expense be recognized?

A

When the machine is sold

40
Q

Where is AOCI reported on

A

The Balance sheet

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