FAR Deck - 4 Flashcards
True or False:
Dividend revenue, under the fair value method, should be recognized to the extent of cumulative earnings since acquisition and return of capital beyond that point
TRUE!
The portion of the dividends received this year that were not in excess of the investor’s share of investee’s undistributed earnings since the date of investment should be reported as Income.
True or False:
Bonds or Debt Securities as an Investment classified as Held-to-Maturity should be reported at Fair Value.
FALSE!
Bonds or investments which are intended to be held until the maturity date are classified as held-to-maturity securities and are reported at their AMORTIZED COST.
Trading debt securities and available-for-sale debt securities are reported at their FAIR VALUE.
What kind of risk associated with financial instrument must be disclosed on the financial statements?
CONCENTRATION OF CREDIT RISK.
Concentration of credit risk - the risk that the other party to the instrument will not perform - must be disclosed.
Disclosure of market risk - the risk of loss from changes in market prices - is encouraged, but not required.
What is the effect on Accounts Receivable and Allowance for Credit Losses when collection of an account previously written off?
Accounts Receivable - NO EFFECT
Allowance for Credit Losses - INCREASE.
JE to Restore account previously w/off:
Accounts Receivable - Debit
Allowance for Credit Losses - Credit
JE to record Collection
Cash - Debit
Accounts Receivable - Credit
True or False:
LIFO inventory costing method will produce a lower inventory turnover ration in an inflationary economy.
FALSE!
FIFO will provide Low Inventory Turnover ratio as COGS will be Lower and Inventory will be Higher.
True or False:
During periods of rising prices, when the FIFO inventory method is used, a perpetual inventory system results in an ending inventory cost that is the same as in a periodic inventory system.
TRUE!
Under dollar-value LIFO method of Inventory when is the ending inventory greater than comparable base year value?
When the price index is greater than 1.0, dollar-value LIFO will be greater than the comparable base-year amounts.
What is the effect of goods-in-transit purchased FOB on Assets and Retained Earnings if these goods were excluded from the Ending Inventory?
F.O.B. shipping point means title will revert to the buyer when the seller delivers goods to a common carrier. The buyer should include the goods in his/her inventory upon shipment.
Both Assets and Retained Earnings are UNDERSTATED in this situation.
Excluding from Ending Inventory leads to LOWER / UNDERSTATED Assets and HIGHER / OVERSTATED Cost of Goods Sold.
OVERSTATED COGS = UNDERSTATED RETAINED EARNINGS.
Contribution revenue recognition for not-for-profit organizations is based on the concept of _____________________.
SATISFYING CONDITIONS.
Contribution revenue recognition for not-for-profit organizations is based on the standard of satisfying conditions. Unconditional contributions are recognized as revenue and then classified as either without donor restrictions or with donor restrictions.
Conditional contributions are accounted for as a refundable advance, and conditional promises or pledges receive no accounting treatment.
