FAR 9

Question 1

In general, an enterprise preparing interim financial statements should:

Answer 1

Use the same accounting principles followed in preparing its latest annual financial statements.

Question 2

APB Opinion No. 28, Interim Financial Reporting, concluded that interim financial reporting should be viewed primarily in which of the following ways?

Answer 2

As reporting for an integral part of an annual period.

Question 3

Unless temporary, declines in the market value of inventory should be recognized _______ in the interim period in which they occur.

Answer 3

in full

Question 4

For interim financial reporting, an extraordinary gain occurring in the second quarter should be:

Answer 4

Recognized in the second quarter.

Question 5

There are four criteria for a capital lease. In summary, they are:

Answer 5

1. The lease agreement transfers ownership of the leased asset to the lessee at the conclusion of the lease term (Title transfer).
2. Bargain purchase option
3. Lease term is 75% or more of estimated economic life
4. Present value of minimum lease payments at least 90% of excess of fair value of leased property.

Question 6

At the inception of a capital lease, the guaranteed residual value should be

Answer 6

Included as part of minimum lease payments at present value.

Question 7

Able sold its headquarters building at a gain and simultaneously leased back the building. The lease was reported as a capital lease.
At the time of sale, the gain should be reported as

Answer 7

An asset valuation allowance.

Question 8

Rig Co. sold its factory at a gain and simultaneously leased it back for 10 years. The factory’s remaining economic life is 20 years. The lease was reported as an operating lease.
At the time of sale, Rig should report the gain as

Answer 8

A deferred credit.

Question 9

When a transaction lacks commercial substance and cash is paid, the new asset is recorded at the _________ of the old asset plus any cash given.

Answer 9

book value

Question 10

Although diversification may be lacking in a firm’s investment portfolio, passive investments are not one of the ________ for which a firm is considered to be vulnerable.

Answer 10

concentrations

Question 11

Disclosures are required when the event is _______.

Answer 11

reasonably possible.

Question 12

Only software development costs incurred after the point of ______________ is reached are capitalized as an intangible and amortized.

Answer 12

technological feasibility