F1 - Conceptual Framework

Question 1

What are the fundamental ingredients of Relevance and Faithful Representation?

Answer 1

R - Confirmatory Value, Predictive Value, and Materiality

FR - Neutrality and Free from Error

Question 2

What are enhancing qualities

Answer 2

Timeliness, Comparability, Verifiability, Understandability

Question 3

Certain Assets are reported on the f/s at the amount of cash that would be paid if the same assets were acquired currently.

Answer 3

Replacement cost

* FV is if you are trying to sell, not acquire

Question 4

An Entities revenue may result from:

Answer 4

A decrease in a liability from primary operations.

Question 5

Adam had the following unusual transactions:
- $190k gain on reacquisition and retirement of bonds, seen as material and unusual.
- $260K gain on disposal of a component of business. He continues similar operations at a dif location
- $90k loss on abandonment of equipment
What amount should he report in continuing ed?

Answer 5

$190 G of reacquisition
-$90k loss on abandonment
=$100k G on continuing operations
*$260 G would be shown in disc operations section of the financials.

Question 6

Kay has an insurance policy that has a $50k deductible and allows assets to be replaced at current value. Her house was hit by a storm (one hits approx. every 4 years) and she incurred $20k of cost dismantling the house. She plans to replace it. Tax rate is 30%
CV - $300k
Replacement Cost $1.1M
What is her gain?

Answer 6

1,100,000-50,000 = 1,050,000 insurance proceeds

• 20,000 cost to dismantle = 1,030,000
• 300,000 CV = 730,000 Gain on insurance settlement

Question 7

Which of the following should be included in General and Administrative Expenses?
Interest - Advertising

Answer 7

Neither, Interest is listed separately and Advertising is a selling expense.

Question 8

Dingo had cash in 3 different banks. 1 is segregated solely for a Nov 15th payment. 2 is for branch operations and is overdrawn. 3 used for regular corporate operations and shows a positive balance.
How should they be shown on Dec 31 B/S?

Answer 8

The segregated account should be shown as a non-current asset, the overdrawn as a current liability and the last as a current asset.