far questions set 2

Question 1

To calculate the number of days it takes for a company to collect its account receivable, which formula should be used?

Answer 1

365/ Accounts Receivable Turnover

Question 2

In fund financial reporting, how are capital assets typically treated under the modified accrual basis?

Answer 2

Under the modified accrual basis of accounting, used in fund financial reporting, capital assets are generally expensed in the period they are acquired. This differs from the accrual basis used in government-wide reporting where capital assets are capitalized & depreciated.

Question 3

In the periods of rising prices, which of the following inventory costing method will provide the lowest ending inventory?

Answer 3

If prices are rising, the dollar-value LIFO pushes the most expensive item through COGS and then the earlier item that was first purchased at lower price will then provide a lower ending inventory that the other costing methods.

Question 4

The investee reports a net loss of $8000 & pays dividends of $3,000. The investor owns 20% of the investee. what is the correct journal entry for the investor’s share of the loss

Answer 4

Debit Investment $1,600 and Credit Loss from Investment $1,600

The investor’s share of the loss is (20% of $8,000=$1,600) decreasing the investment’s carrying value (credit) and is recognized as a loss (debit)

Question 5

In correcting an error where a long-term grant was recorded as immediate revenue, what is the correct adjustment?

Answer 5

The correct adjustment for a long-term grant prematurely recognized as revenue is to record it as deferred revenue until the conditions for recognizing it as revenue are met.

Question 6

What is the primary reason for creating a valuation allowance against a deferred tax asset?

Answer 6

To ensure the tax asset is not Overvalued due to uncertainty in its realization

Question 7

Which of the following best describes the criteria for recognizing an intangible asset on the statement of financial position

Answer 7

An identifiable Non-Monetary asset WITHOUT physical substance

Question 8

What is the journal entry to record investor’s share of income. Investor records its investment using the equity method

Answer 8

Debit Investment ( is recognized as income )
Credit (increases the investment’s carrying value)

Question 9

A firm recv’d a bill for $1800 for utilities used in Dec, to be paid in January. On a December accrual
basis balance sheet, how should this be recorded?

Answer 9

Debit Utility Expense $1,800, Credit Accounts Payable $1,800. Accrual accounting recognizes expenses when incurred.

Question 10

Which of the following is true about the direct write off method of accounting for bad debts?

Answer 10

It violates the matching principle. The direct write off method records bad debt expense only when a specific account is deemed uncollectible. This often occurs in a different period than the recognition of the related revenue, thus violating the matching principle of accounting.

Question 11

What is the correct journal entry when a company creates a valuation allowance against a deferred tax asset?

Answer 11

Debit Income Tax Expense, Credit Valuation Allowance

The entry reflects the decrease in recognized value of deferred tax assets due to uncertainty
in their realization

Question 12

How do prior period errors affect the statement of changes in equity when corrected?

Answer 12

They are adjusted through retained earnings. , Prior period errors typically corrected by adjusting the opening balance of retained earnings in the period in which the error is discovered.

Question 13

When reconciling PPE accounts, which of the following should be considered?

Answer 13

Recording of recent asset purchases should be reviewed to ensure that they are accurately reflected in both the sub-ledger & general ledger.

Question 14

Allowance uncollectible Bg 70,000 , then 35,000 written off . End yr it was 55,000. The uncollectible accounts should be expensed at 20,000. 70000minus35,000=35,000 then that would mean the company added 20,000 to bring uncollectible back to 55,000

Answer 14

When a debt is written off under the allowance method, that amount is deducted from the allowance account, but it is not an expense. The bad debt expense only happens if the allowance itself is adjusted to be where the company wants it to be

Question 15

What amount will Pete Report as income at the end of year 1 related to its Dragon stock investment.
Pete purchased 100 shares at $10 by the end of year the shares were worth $14.

Answer 15

So a $4 increase in the share. 4X100=400. Then Dragon paid a dividend of $2 per share. 2X100=200.
Now $200 X $400= $600.00 is what Pete will report as income.

Question 16

Which of the following would result in a deferred tax asset?

Answer 16

Expenses recognized for accounting purposes but deferred for tax purposes.
A deferred tax asset arises when expenses are recognized in the financial statements (accounting purposes) before they are deductible for tax purposes. This creates a temporary difference that will result in future tax benefits.

Question 17

In the consolidation process, what happens to the carrying amount of the parent’s investment in the subsidairy?

Answer 17

It is eliminated against the subsidiary’s equity. During the consolidation , the carrying amount of the parent’s investment in the subsidiary is eliminated against the equity of the subsidiary. The elimination is crucial to avoid double counting of the investment and the subsidiary’s assets and liabilities in the consolidated statements.

Question 18

Tiden (cosignor) sells good to several boutiques (consignee) , Which of the following is true regarding the treatment of Tiden (cosignor) ending inventory?

Answer 18

The goods still belong to Cosignor(Tiden) Any unsold items at the end of year should be included in the Cosignor’s inventory .

Question 19

How should a lessee account for a residual value guarantee in a leasing arrangement?

Answer 19

The appriopriate treatment for a residual value guarantee is to include it in the measurement of lease liabilities & right of use assets.

Question 20

An investor with 40% stake in an investee using the equity method records the investee’s net income of 10,000. What will be the impact on the investor’s equity?

Answer 20

The investor’s equity will increase by their share of the investee’s net income.

Question 21

How are internally generated goodwill and brands usually treated in financial reporting?

Answer 21

Internally generated goodwill & brands are not recognized as assets in financial reporting. The costs associated with creating them are expensed as incurred. This is because it is difficult to measure their future economic benefits reliably.

Question 22

In regard’s to the treatment of expenses in a non-profits statement of financial position how are they reported?

Answer 22

Expenses are classified by function. Examples like program services, fundraising, administration

Question 23

Under which circumstance would a lessee recognize a higher lease cost in the income statement for a lease?

Answer 23

When the lease payments are made at the end of each period.