F2

Question 1

Which should be disclosed in the summary of significant accounting policies?

Refinancing of debt subsequent to the balance sheet date
Guarantees of indebtedness of others
Criteria for determining which investments are treated as cash equivalents
Adequacy of pension plan assets relative to vested as cash equivalents

Answer 1

Criteria for determining which investments are treated as cash equivalents

Question 2

Computing ……. Method is a GAAP method of ……. Should be described in the summary of significant accounting policies

Answer 2

Depreciation principally by straight line

Depreciation

Question 3

Which of the following should be disclosed in a summary of significant accounting policies

1. Concentration of credit risk of financial instruments
2. Composition of plant assets
3. Basis of consolidation
4. Adequacy of pension plan assets in relation to vested benefits

Answer 3

3. Basis of consolidation

Question 4

Measurement bases, accounting principles & methods, criteria, & policies such as basis of consolidation, depreciation methods, revenue recognition, etc.

Answer 4

Summary of significant accounting policies

Question 5

If a meeting took place during subsequent events evaluation period would a disclosure be required if a proposed acquisition was discussed but rejected?

Answer 5

No, because no event actually occurred

Question 6

When an entity does not file its financial statements with SEC, what date does the subsequent event evaluation period run through?

Answer 6

When the financial statements are available to be issued

Question 7

Financial statements that file with SEC are considered to be “issued” when:

Answer 7

FS are in form & format that comply with GAAP
&
FS have been widely distributed to financial statements users

Question 8

Where there is a deductible to be paid for a subsequent event that happened after year end but before the financial statement, should it be disclosed?

Answer 8

Yes indicating the possible loss of the amount of deductible only if insurance can over the rest of liability

Question 9

An entity that files its statements with SEC are not required to

Answer 9

Disclose date through which subsequent events have been evaluated

Question 10

If a note payable is due within a year is refinanced it then becomes a

Answer 10

Non-current asset

Question 11

When FS are “available to be issued” they must have

Answer 11

FS in form & format that comply with GAAP
&
All approvals necessary for issuance of FE have been received

Question 12

When FS are considered to be “issued” they must have

Answer 12

FS in form & format that comply with GAAP
&
FS have been widely distributed to FS users

Question 13

If there is no principal market, then the fair market value should be the

Answer 13

Best price after considering transaction costs

Question 14

Quoted market prices on a stock exchange for an identical asset are considered to be

Answer 14

Level 1 input, the most reliable of all

Question 15

Fair value is a …..

1. Entity specific measurement
2. Measurement that does not consider risk
3. Market-based measurement
4. Measurement that does not consider restrictions

Answer 15

3. Market-based measurement

Question 16

What are level 3 input to valuation techniques used to measure the fair value of an asset

Answer 16

Unobservable inputs for the asset

Question 17

Level 2 valuation techniques used to measure the fair value of an asset

Answer 17

Inputs other than quoted market prices that are either observable or unobservable

Question 18

Uses prices & other relevant information from market transactions involving identical or comparable assets/liabilities to measure fair value

Answer 18

The Market Approach

Question 19

Uses current replacement cost to measure the fair value of assets

Answer 19

The Cost Approach

Question 20

The price that would be received when selling an asset/paid when transferring a liability in an orderly transaction between market participants

Answer 20

Fair value for an asset or liability is measured as

Question 21

Which if the following would not be considered a level 2 observable input used to determine an asset/liability’s fair value?

1. Interest rates that are observable at commonly quoted intervals
2. Internally generated cash flow projections for related asset or liability
3. Quoted prices for identical assets & liabilities in markets that are not active
4. Quoted prices for similar assets & liabilities in markets that are active

Answer 21

Internally generated cash flow projections for a related asset or liability

(Internally generated cash flow projection is based on “unobservable” inputs

Question 22

Fair value includes transportation cost but not

Answer 22

Transaction cost

Question 23

The price in the principal market for an asset or liability will be the

Answer 23

Fair value measurement

Question 24

A change from cost approach to market approach of measuring fair value is considered to be what type of accounting change

Answer 24

Change in accounting estimate

A change in valuation technique used to measure fair value is a change in accounting estimate

Question 25

The fair value of a non financial asset is the

Answer 25

Value at its highest & best use

Question 26

The market with the greatest volume of activity for the particular asset for which a fair value is being determined would be

Answer 26

The principal market

Question 27

Which of the following types of entities are required to report on business segments? 1. Non public business enterprises 2. Joint ventures 3. Not-for-profit enterprises 4. Publicly-traded enterprises

Answer 27

Publicly traded enterprises

Question 28

Quantitative threshold for reportable segments test size is?

Answer 28

10%

Question 29

In financial reporting of segment data, which if the following items is always used in determining a segment’s operating income? 1. Income tax expense 2. Sales to other segments 3. Gain or loss on discontinued operations 4. General corporate expense

Answer 29

2. Sales to other segments

Question 30

To be significant enough to report on, a segment must be at 10% of one of the three

Answer 30

Combined revenues (whether inter segment of affiliated customers) Operating profit (of all segments not having an operating loss) Identifiable assets

Question 31

What info should a public company present about revenues from its reporting segments

Answer 31

Disclose separately the amount of sales to unaffiliated customers and the amount of intracompany sales

Question 32

Which of the following is the annual report that is filed with the United States Securities & Exchange Commission? 1. Form 10-k 2. Form S-1 3. Form 8-k 4. Form 10-q

Answer 32

Form 10-k

Question 33

Report filed quarterly with SEC by U.S. registered companies

Answer 33

Form 10-Q

Question 34

Report used to register securities with the SEC

Answer 34

Form S-1

Question 35

Filed to report major corporate events such as corporate asset acquisition/disposals, changes in accountants, etc.

Answer 35

Form 8-k

Question 36

In general an enterprise preparing interim financial statements should: 1. Allocate revenues & expenses evenly over the quarters, regardless of when they actually occurred 2. Defer recognition of seasonal revenue 3. Disregard permanent decreases in the market value of its inventory 4. Use the same accounting principles followed in preparing its last way annual financial statements

Answer 36

4. Use the same accounting principles followed in preparing its latest annual financial statements. (Unless change in accounting principle is adopted)

Question 37

Filed semiannually by foreign private issuers & contains unaudited financial statements.

Answer 37

Form 6-k

Question 38

Filed annually by non-U.S. registrants registered with the SEC and must contain audited financial statements

Answer 38

Form 20-F

Question 39

Filed annually by specific Canadian companies registered with the SEC & must contain audited financial statements

Answer 39

Form 40-F

Question 40

XBRL has which of the following features? XBRL does not require the use of tags XBRL is interchangeable with SQL XBRL tags define the data XBRL is interchangeable with HTML

Answer 40

XBRL tags define the data

Question 41

US SEC regulations for the financial statements presentation & disclosure requirements of SEC filings can be found in;

Answer 41

Regulation S-X

Question 42

An XBRL financial statement exhibit is required to be submitted with all of the following SEC filings except: 1. Form 10-k 2. Forms 3, 4, & 5 3. Form 20-k 4. Form 6-k

Answer 42

2. Forms 3, 4, & 5

Question 43

For large accelerated filers, the 10-Q is due within …… of the period end

Answer 43

40 days

Question 44

A company with a large accelerated filer must file its Form 10-Q with US SEC within how many days after end of the period

Answer 44

40 days for large corporations & 45 for small corporations

Question 45

Maximum number of days after the company’s fiscal year end that the company has to file Form 10-k with the SEC? 1. 75 days 2. 60 days 3. 120 days 4. 90 days

Answer 45

75 days

Question 46

A US public company with worldwide public float of 800 million at end of second quarter of fiscal year is required to file its annual report with the U.S. SEC on:

Answer 46

Form 10-k within 60 days (if it hits 700 million or more then they will have to do 60 days)

Question 47

A smaller reporting company with respect to market value as established by US SEC includes companies with less than what amount in public equity float? 1. $100 million 2. $125 million 3. $150 million 4. $75 million

Answer 47

4. $75million

Question 48

Which of the following is a common modification used to prepare modified cash basis financial statements? 1. Capitalizing inventory 2. Recognizing revenues when earned 3. Recognizing expenses based on the methods & principles used to prepare the tax return 4. Matching expenses to related revenues

Answer 48

1. Capitalizing inventory

Question 49

Which of following aje is necessary to convert cash receipts to revenues as reported on an accrual basis? 1. Subtract ending contract liability from cash receipts from customers 2. Add beginning accounts receivable to cash receipts from customer 3. Subtract beginning contract liability from cash receipts from customers 4. Subtract ending accounts receivable from cash receipts from customers

Answer 49

1. Subtracting ending contracts liability from cash receipts from customers (Subtract ending unearned (or deferred) revenue

Question 50

Income tax-basis financial statements statements differ from those prepared under GAAP in that income tax-basis financial statements: 1. Do not include non taxable revenues and non deductible expenses in determining income 2. Include detailed information about current and deferred income tax liabilities 3. Recognize certain revenues and expenses in different reporting periods 4. Contain no disclosures about capital & operating lease transactions

Answer 50

3. Recognize certain revenues & expenses in different reporting periods

Question 51

Compared to accrual basis of accounting, the cash basis of accounting understates income by the net decrease during the accounting period AR. Accrued expenses Yes. No Yes. Yes No. Yes. No. No

Answer 51

No. Yes (Net decrease in AR means cash collected exceeds revenue recognized on the accrual basis. This would mean higher cash basis income) (Net decrease in accrued expenses mean cash paid to reduce accrued expenses was more than accrual basis expense record. That means higher expense under cash basis than under accrual basis)

Question 52

Total liabilities/ total equity =

Answer 52

Debt-to-equity ratio

Question 53

Capital stock + Retained Earnings =

Answer 53

Equity

Question 54

Assets - Equity =

Answer 54

Liabilities

Question 55

[Cash + cash equivalents + Marketable securities + AR (net) ] / current liabilities =

Answer 55

Quick ratio

Question 56

Current assets / current liabilities =

Answer 56

Current ratio

Question 57

Sales (net) / average accounts receivable (net) =

Answer 57

Accounts Receivable Turnover

Question 58

Current Ratio Assets include

Answer 58

Cash + AR(net) + Inventory

Question 59

Cost of Goods Sold / Average Inventory

Answer 59

Inventory turnover

Question 60

Net income /average total assets

Answer 60

Return on assets

Question 61

Ending inventory / ( cost of goods sold/365)

Answer 61

Days in inventory

Question 62

Sales (net) / average total assets

Answer 62

Asset turnover

Question 63

Beg inventory + purchases =

Answer 63

Goods availability for sale

Question 64

Goods available for sale - ending inventory =

Answer 64

Cost of goods sold

Question 65

Net income / net sales

Answer 65

Net profit margin

Question 66

Net income - preferred dividends / average common equity

Answer 66

Return on equity

Question 67

Income before incomes expense & taxes / interest expense =

Answer 67

Times interest earned

Question 68

Sales / Average working capital

Answer 68

Working Capital Turnover

Question 69

Income before interest income, interest expense, taxes / sales (net)

Answer 69

Return on sales

Question 70

With bonus method, when new partner pays more than the book value of capital account purchased the rest goes to

Answer 70

The existing partners

Question 71

With bonus method, when new partner pays less than the book value of capital account purchased the rest goes to

Answer 71

The new partner

Question 72

When Hill from the partnership of Hill, Billy, & Yale, the final settlement of Hill’s interest exceeded Hill’s capital balance. Under the bonus method, the excess: 1. Was recorded as goodwill 2. Reduced the capital balances of Billy & Yale 3. Was recorded as an expense. 4. Had no effect on the capital balances of Billy & Yale

Answer 72

2. Reduced the capital balances of Billy & Yale

Question 73

Interest causes a

Answer 73

Loss allocation

Question 74

Under the conversational retail method, the cost of ending inventory uses ratio after 1. Markups 2. Beginning inventory 3. Markdowns

Answer 74

Markups ``` At cost. At retail 50,000. 75,000 20,000. 30,000 0. 6,000. 70,000. 111,000. = 63% cost/retail ratio ```

Question 75

Under the cost retail method, the cost of ending inventory uses ratio after 1. Markups 2. Beginning inventory 3. Markdowns

Answer 75

Markups ``` At cost. At retail 50,000. 75,000 20,000. 30,000 0. 6,000. 0. (10,000) 70,000. 101,000. = 69% cost/retail ratio ```

Question 76

Selling price - cost of completion =

Answer 76

Ceiling price

Question 77

Ceiling price- normal profit margin =

Answer 77

Market price

Question 78

Sum of years digits depreciation = for 5 year useful life on 160,000 equipment with 10,000 salvage value first year is?

Answer 78

5/15 * 150,000 = 50,000

Question 79

Double declining balance depreciation for 5 year useful life on 160,000 equipment with 10,000 salvage value first year?

Answer 79

160,000 * 2 * 1/5 = 64,000

Question 80

If securities were purchased at par use the purchase price not ………. Value 1. Present value 2. Fair value 3. Carrying value

Answer 80

Fair value