FAR

Question 1

Which F/S would best assess liquidity?

Answer 1

Balance Sheet

Question 2

Multi Step income statement prepared because:

Answer 2

more meaningful presentation of revenue & expenses

Question 3

Multi Step Income statement

Answer 3

Gross Profit, Operating Profit, and Pretax Income from continuing operations

Question 4

transactions that are infrequent but not unusual

Answer 4

component of income from continuing ops- not net of taxes

Question 5

intra-period income tax allocation does not apply to

Answer 5

operating income

Question 6

material loss presented separately as component of income from continuing ops when

Answer 6

unusual but not infrequent

Question 7

Contingencies accrued and recognized as liability

Answer 7

when occurrence of liability is probable and amount can be reasonably estimated

Question 8

Interest and Advertising are

Answer 8

NOT G&A expenses

Question 9

Single step income statement

Answer 9

Total revenue =sum of all revenues
Discontinued ops reported at end of I/S
Cumulative change not reported

Question 10

Statement of Comprehensive Income components

Answer 10

Net Income, Unrealized G/L on AFS securities, Foreign currency translation adjustment, unrecognized G/L on pension benefits, and deferred G/L on certain hedging transactions

Question 11

unrealized loss on investments in noncurrent marketable securities

Answer 11

would cause earnings and comprehensive income to differ

Question 12

purpose of reporting comprehensive income

Answer 12

to show all changes to equity, including changes that currently are not required part of net income. Reflects all changes to equity from owner and nonowner sources

Question 13

comprehensive income and its components should

Answer 13

Be presented as part of the Income Statement or as a separate a financial statement following the Income Statement.

Question 14

Comprehensive income for a period is the:

Answer 14

Sum of net income and other comprehensive income for the period.

Question 15

The Statement of Changes in Equity:

Answer 15

Reconciles all of the beginning and ending balances in the equity accounts.

Question 16

The primary purpose of a Statement of Cash Flows is to provide relevant information about:

Answer 16

The cash receipts and cash disbursements of an enterprise during a period.

Question 17

A reconciliation of ending retained earnings to net cash flow from operations.

Answer 17

is not disclosed on the Statement of Cash Flows, either on the face of the statement or in a separate schedule, when prepared under the direct method

Question 18

Purchase of cash equivalent

Answer 18

has no bearing on statement of cash flows (it’s a wash)

Question 19

Cash flow per share is specifically prohibited from

Answer 19

being disclosed unless it is based on contractual amounts.

Question 20

The cash flows from the sale of property, plant, and equipment would be shown as a cash inflow under

Answer 20

the investing section in the Statement of Cash Flows.

Question 21

the operating activities section of a cash flow statement prepared using the indirect method would include

Answer 21

gain on the sale of a plant asset. It is a noncash item that is used to reconcile net income to cash flows from operations.

Question 22

Cashflow from operating activities : Direct Approach

Answer 22

presents operating cash flow by classes of sources and uses

Question 23

Cashflow from operating activities : Indirect Approach

Answer 23

presents operating cash flow by adjusting accrual net income to operating cash flow (reconciliation of net income and net operating cash flow) for example would include gain on sale of plant asset as noncash item to reconcile net income to cash flows

Question 24

Cash from Operating Activities

Answer 24

any cash inflow or outflow not classified as investing or financing (settlement of lawsuit, interest payments)

Question 25

Cash from Investing Activities

Answer 25

cash inflows and outflows related to “investment in” and disposal of noncash assets (disposal of held to maturity/AFS securities, purchase of long-term assets, etc)

Question 26

Cash from Financing Activities

Answer 26

cash inflows and outflows related to how the entity is financed (sale of stock, proceeds of borrowing, payment of dividends)

Question 27

Financing activities of statement of cashflows includes

Answer 27

cash effects of transactions obtaining resources from owners and providing them with a return on their investment

Question 28

Concentration of credit risks

Answer 28

disclosed in notes to F/s

Question 29

Summary of significant accounting polices should include

Answer 29

depreciation method
basis of profit recognition on LT construction contracts
–info regarding important accounting methods and policies chosen by firm

Question 30

Material related party transactions must be disclosed unless

Answer 30

are ordinary business transactions, such as payment of employees and other routine transactions.

Question 31

Quick Ratio

Answer 31

cash + net AR + marketable securities/current liabilities

Question 32

A/R Turnover

Answer 32

Avg. A/R/Net Credit sales x 365

Question 33

Inventory Turnover

Answer 33

COGS/avg. inventory

Question 34

Acid test ratio

Answer 34

cash + net AR/current liabilities

Question 35

Times Earned Interest Ratio

Answer 35

Income before int. exp and tax/interest expense

Question 36

Nongovernmental NFP orgs required to report financial statements on…

Answer 36

economic resources measurement focus.

Question 37

4 NFP categories

Answer 37

1. colleges & universities
2. hospitals/healthcare entities
3. voluntary health & welfare orgs
4. other (including religious orgs)

Question 38

operating expenses for a nongovernmental not-for-profit organization should be reported as

Answer 38

change in unrestricted net assets