FAR F.2

Question 1

How would you recognize revenue using an output method

Answer 1

recognize revenue as milestones are achieved

Question 2

A purchase of merchandise was completed prior to year end it was only recorded in the inventory. What would be wrongly stated on the balance sheet?

Answer 2

Assets: No effect
Liabilities: Understated (Accts payable is understated)

Question 3

if the Accts receivable turnover increases significantly it indicates what?

Answer 3

The company is collecting Accts more aggressively.

Question 4

What requires a restatement of the financial statements?

Answer 4

A change from the income tax basis of accounting (non-gaap) to accrual basis of accounting.

Question 5

which financial statement would not be appropriate for OCBOA reporting financial statements

Answer 5

Statement of financial position

Question 6

Changes in accounting estimates

Answer 6

Whenever it is impossible to determine whether a change in accounting estimate or a change in accounting principle has occurred, the change should be considered a change in estimate.

Question 7

How do you account for a change in accounting principle that is inseparable from the effect of change in accounting estimate

Answer 7

a component of income from continuing operations

Question 8

where should the effect of a new estimate be recorded if it is discovered after the yearend.

Answer 8

A change in estimate should be recorded in the following years continuing operations.

Question 9

what happens when accounting changes that result in financial statements that are, in effect, the statements of a different reporting entity?

Answer 9

Financial statements of all prior periods presented should be restated when there is a “change in entity”