Far 1

Question 1

Fixed asset sold for gain. In income statement this operation should be reported

Answer 1

Net concept (proceeds less carting amount). Showing total gain as part of continuing operation, Not net of tax

Question 2

Which is true regarding other comprehensive income disclosure?

Answer 2

Changes in accumulated balances by component may be shown in statement or in the notes of FS

Question 3

Under US GAAP, material transaction that is infrequent but not unusual in nature should be presented as a separate component of income from continuing operation when transaction result in

Answer 3

Gain- Yes

Loss-Yes

Question 4

How different bank accounts would be reported:

Answer 4

Segregated account used to pay current maturity of long term bond sinking fund debt -Non current asset. Not cash.

Overdraft bank account- current liability

Question 5

All items component of income from continuing operations

Answer 5

Gain on debt extinguishment- usual and recurring

Hurricane- unusual and infrequent

Question 6

Income from continuing operations:

Answer 6

Gain on requisition and retirement of bonds-Continuing

Loss of the abandoned equipment- treated like a sale- Continuing

Gain on disposal of component of a business-discontunied

Question 7

The cumulative effect of a change in Accounting principles for inventory

Answer 7

No change if it’s change for LIFO. NOT PRACTICAL

Change if it’s change From Lifo to e.g. weighted everage.

Question 8

Company contracted to dispose of an industry segment in November year 1. How much of operating loses should be included in loss from discontinued operations Year 1

Answer 8

The whole year l. The date when decision was made doesn’t matter.

Question 9

Unusual and infrequent items reported as

Answer 9

Separate component of income from continuing operations. Pretax, not net of tax

Question 10

Change from cash basis to accrual basis during the current year should be reported in current year FS

Answer 10

As prior period adjustment resulting from correction of an error

Question 11

Discontinued operations are reported

Answer 11

NET of tax. Operating losses for a year + loss from disposal total * tax

Question 12

Prior period adjustment net of tax:

Answer 12

Amount which belongs to next year e.g $60,000 prepaid insurance*2/3 which belongs to next perior *70% net of tax if tax rate 30%

Question 13

Output method-Milestone achieved

Answer 13

Input method - Resources consumption, labor hours expended, cost incurred to total cost

Question 14

Persentage of completion method

Answer 14

Annual GP = actual total cost incurred/total expected cost * total expected GP - GP previously recognized

Question 15

Old building being actively marketed for sale will be valued at

Answer 15

Lower of it’s book value or net realizable value (fair value minus cost to sell)

Question 16

Which statement is correct regarding reporting comprehensive income?

Answer 16

Accumulated other comprehensive income is reported in stockholders equity section of the balance sheet

Question 17

Pension in comprehensive income:

Answer 17

• Prior service cost not recognized in net periodic pension cost (minus) -
• Prior service cost recognized (plus) +
• Amortization of actuarial loss on pension plan assets (plus) +
• Prior service cost in the year that it was amortized to net periodioc service cost
• Actual return on pension plan assets (NOT part of accumulated comprehensive income

Prior service costs recognized in the year of adjustment should be recorded to PBO and other comprehensive income (or loss), which then becomes part of accumulated other comprehensive income (or loss). The unrecognized prior service cost in accumulated other comprehensive income (or loss) is amortized to pension expense over the plan participant’s remaining years of service.

Question 18

extinguishment of debt (paid face value of s security)

Answer 18

Included in net income NOT in other comprehensive income

Question 19

How should the effect of a change in Accounting principle that us inseparable from effect of a change in Accounting estimate be reported.

Answer 19

As a component of income from continuing operations. It is treated as change in estimate. If error and change in Accounting principles all present periods should be redtated

Question 20

Components of comprehensive income:

Answer 20

• Loss from discontinued operations included in Net income which is a component of comprehensive income
• Prior period error correction change in stock holders equity, not resulting from owners investments and distribution to owners and so included in comprehensive income
• Unrealized loss on investments in non current marketable equity securities

Question 21

Which it in other comprehensive income can not have negative (debit) balance?

Answer 21

Fixed assets revaluation because it can be only gain, credit. Loss debit goes to current net income

Question 22

Change in Accounting estimate

Answer 22

Affects only current and subsequent periods.

Question 23

Change in Accounting principle

Answer 23

Cumulative effect of a change. Retained earnings

Question 24

What amount of current asset for interest for note receivable dated June 30 company should recognize at year end

Answer 24

The interest to be received within one year. Remaining balance* %

Question 25

Pair of fundamental qualitative characteristics of useful info with one of its components:

Answer 25

Relevance and materiality

Characteristics which enhance the usefulness of RELEVANT AND FAITHFULLY PRESENTED information; timeliness, verifiability,

Question 26

In income statement line item displayed before considering income tax effec is:

Answer 26

Income /loss from operations

Question 27

Part of discontinued operations

Answer 27

Gain/loss on the disposal of component of business even company has similar operations in another location

Question 28

Part of continuing operations:

Shown on pretax

Answer 28

Hurricane damage
Gain on debt extinguishment
Gain on requisition and retirement of bonds
Loss of the abandoned equipment

Question 29

The effect of new estimate of warranty cost is a change in estimate and reported in Income from continuing operations

Answer 29

Accounting change of principle is shown net of tax on the retained earnings statement

Question 30

Revenue recognition formula current asset:

Answer 30

Accumulated cost + GP - billing = current asset

Question 31

Transaction will be booked as a financing arrangement if

Answer 31

Repurchase price is equal or greater than original sales price and expected market value. E.g. Original price $50, Repurchase price $60 Expected market value $58

Question 32

What line item displayed in income statement before considering tax

Answer 32

Income/loss from operations before Tax

I income/loss from continuing operations-Net of tax
Net income-Net of tax

Question 33

Unusual and infrequent items should be reported as

Answer 33

Income from continuing operations pretax basis. It’s a component of net income.

Question 34

Criteria NOT LEADS to treatment of each service as distinct obligation:

Answer 34

Service similar in nature and provided in the same manner. It means this service can be combined into single performance obligation.

Question 35

Company recognize revenue ONLY then order delivered to the customer and performance obligations satisfied even if

Answer 35

Customer asked to wait and don’t send product

Question 36

INCOME STATEMENT:

Answer 36

Net sales
-COGS
----------
GP
--------
-SG&A incl depreciation
---------
Operating income

Other income and expenses:
Interest expense

Other gains and losses:
Loss on sale of equipment
Gain on extinguishment of debt
Loss due to earthquake damage
Unrealized gain on equity securities
--------------------------------------------------------
Income before income tax

Income tax expense
Income from continuing operations
Income/loss from discontinued operations
-----------------------------------------------------------
Net income

Question 37

Characteristic which enhances relevance and faithful representation

Answer 37

Timeliness

Question 38

Loss from discontinued operations:

Answer 38

1 year. Should include operating losses and and IMPAREMENT loss on the year then when component classified as held for sale.

2 year. Operating losses for year 2 and if real sell fair value even less than fair value etimated in 1 year, recognize additional loss LOSS ON DISPOSAL

Question 39

Change in Accounting principle:

Answer 39

If balance sheet item, e.g. inventory take effect only of of last year before change

If Cost of good sold when take effect of all years

Reflect in beginning of retained earnings

Question 40

Substantial doubt about entity ability to continue as a going concern exists when relevant conditions and the events:

Answer 40

Probable that the entity won’t be able to meet it’s obligations as they come due within one year from the date THE financial statements are ISSUED

Question 41

Which is true regarding Other Comprehensive Income:

Answer 41

Must be shown on the face of income statement- NO

Related tax expense for components must be disclosed-YES

Question 42

If you need to recalculate depreciation expense, don’t recalculate prior periods

Answer 42

Start at the date when decision about changing useful life was maid, calculate remaining PPE balance

Question 43

Cost of inventory

Answer 43

FOB Shipping point - shipping is a cost of buyer

FOB Destination - packaging, shipping, handling cost of seller

Question 44

Which is true regarding disclosure of OCI

Answer 44

Changes in accumulated balances by components shown in FS or in the notes

Question 45

For interim financial reporting for tax purposes the effective tax rate should reflect anticipated :

Answer 45

Foreign Tax Rate

Available Tax planning alternatives

Question 46

How to calculate note discount:

Answer 46

1. Calculate maturity amount, e.g. 6 month 10% note = 6/12*10%
2. Discontinued to the bank for cash at 12% after 2 months=Maturity $* 4/12 *12%. Amount of cash received by entity is difference

Question 47

The cumulative effect of change in Accounting estimate should

Answer 47

Not be shown anywhere. It Handel’s prospectively

Question 48

3 years comparative FS. Error discovered in 1 year. How it should be reflected in FS

Answer 48

FS of to year 1 and 2 should be restated. Cumulative effect of change in year 1 and 2 should be reflected in carting amount of assets and liabilities at the beginning of year 3.

Question 49

What is not accurate feature of $ value LIFO method

Answer 49

$ value LIFO ending inventory must be greater than ending inventory at base year cost

Question 50

The correction of the failure to accrue warranty costs is treated as

Answer 50

a correction of an error and thus as a prior period adjustment.

Question 51

Operating Cash Flow Ratio

Answer 51

Cash from operations/Current liability

Question 52

XBRL requires all filings except

Answer 52

Forms 3.4.5. Not company but individual files

10K,6K, 20F required

Question 53

Convert from cash to accrual basis

Answer 53

+AR - Collections - Any accrued Expenses

Question 54

Company must report segment information about a company’s major customers if

Answer 54

if that customer provides 10% or more of COMBINED revenue, internal and external, of all operating segments

Question 55

Book transaction as financing arrangement

Answer 55

if repurchase price is equal or more than original sales price and expected market value

Question 56

Which disclosure required by IFRS, but not by GAAP

Answer 56

Statement of compliance with applicable Accounting principles

Disclosure of judgements made in preparation of FS

Question 57

Which is true regarding disclosure of other comprehensive income?

Answer 57

Changes in accumulated balances by component maybe shown in FS or notes in FS

Question 58

Where gain and loses from remwsurement and translation foreign statement reported?

Answer 58

Remsurement -Net income

Translation-Other Comprehensive income

Question 59

INCORRECT STATEMENT ABOUT FASB

Answer 59

It allowed to build robust internal control

Question 60

Going concern ability evaluation

Answer 60

Occur each annual and interim period

Question 61

Separate disclosure of EPS required only for

Answer 61

Discontinued operations

Question 62

FASB due process for setting accounting

Answer 62

FASB seeks info by holding public forums