F4

Question 1

Employee compensation for future absences should be accrued if:

Answer 1

1. Services have already be rendered
2. the obligation related to vest or accumulated rights
3. the amount can be reasonably estimated
4. payment is probable

Question 2

If a company is using other sources of income (such as proceeds from sale of c/s) to retire a notes payable it should:

Answer 2

exclude that amount from current liabilities

rule:
Long-term debt that matures within one year should be classified as a current liability, unless retirement is to be accomplished with other than current assets.

Question 3

Short-term debt that is expected to be refinanced is classified as

Answer 3

long-term to the extent of post-balance sheet refinancing.

Question 4

ARO you use the

Answer 4

discounted value Is used on the date the asset is placed into service

Question 5

if ARO liability is adjusted the change is recognized

Answer 5

in profit or loss

Question 6

if a gain from a lawsuit is estimated and probable it should be disclosed in the

Answer 6

notes with the undetermined range expected to receive

Question 7

gain contingencies are recorded when the gain is

Answer 7

realized

Question 8

when an asset retirement obligation exists:

Answer 8

you should record an ARC which would increase the carrying value of the asset, which would also increase the the liability record pn b/s

the amount recorded to oth the aset and liability will be equal to the FV which is determined BY the discounted future cash flows

Question 9

contingent liabilities that are remotely possible are neither disclosed or accrued unless a related party transaction Is involved

Answer 9

then it must be disclosed

Question 10

What is the OWNES criteria?

Answer 10

O ownership of the underlying asset transfer from the lessor to the lessee by the end of the term
W The lesse has written option to purchase underlying asset: the option is reasonably certain to exercise
N the Net present value of all lease payments and any guaranteed residual value equals or exeeds substanially all of the assets future value (more than 90%)
E the term if the lease represents the major parts of the economic life remaining (more than 75%)
S the asset is specialized such that it will not have an expected alternativr use to the lessor when terms end

Question 11

If OWNES criteria is met then the asset should be an operating or financing lease?

Answer 11

financing lease
only one criteria needs to be met

Question 12

What rate should be used when given the incremental rate and the implicit rate?

Answer 12

the lesser of the 2

Question 13

Capitalized equipment should be depreciated in accordance with the

Answer 13

lessee normal depreciation policy, not the expected useful life