FAR_Section_1.3

Question 1

Full set of Financial Statements

Answer 1

Statement of Position (Balance Sheet), Statement of Earnings Financial & Comprehensive Income (Income Statement), Statement of Cash Flows, Statement of Changes in Owners’ Equity (statement of Investments by and Distributions to Owners)

Question 2

10 key elements of Financial Statements

Answer 2

Assets, Liabilities, Equity, Investments by owners, Distributions of Owners, Comprensive Income, Revenue, Expenses, Gains, and Losses.

Question 3

Assets

Answer 3

Economic resource that has a probable future benefit, one can obtain the benefit, one can obtain the benefit, and the transaction creating the benefit has already occurred

Question 4

Liabilities

Answer 4

An economic obligation in which one needs to use or transfer an asset, it can?t be avoided and the transaction has already occurred

Question 5

Equity or Net Asset

Answer 5

Assets left over after deducting liabilities; 3 elements: Contributions/investments by owners, Distriubutions to owners, Comprehensive income

Question 6

Distributions of owners

Answer 6

Dividends

Question 7

Comprehensive income [DENT]

Answer 7

All changes in equity other than “owner” sources. These items affect Comp. Income, but not net income [DENT]: Derivatives cash flow hedges, Excess adjustment of Pension PBO and FV of plan assets at year, Net unrealized gains orloses on “available-for-sale” securities, Translation adjustments for foreign currency; 4 elements: revenues, expenses, gains, and loses

Question 8

Physical capital maintenance concept

Answer 8

only recognize an event when an aset is sold or a liability is settled (measures the effects of price changes in nominal or constant dollars)

Question 9

Financial capital mainten

Answer 9

recognize an event as a change in the value of an asset or liability occurs (recognize holding gains and losses - current GAAP)

Question 10

Revenue

Answer 10

Inflows from an entitiy’s primary operations

Question 11

Expenses

Answer 11

Outflows due to an entity’s primary operations

Question 12

Gains

Answer 12

Increases in equity from incidental transactions

Question 13

Losses

Answer 13

Decreases in equity from incidental transactions

Question 14

Accounting rules and concepts

Answer 14

Consistency, Conversation, Cost/benefit, Matching, Full disclosure, Recognition, & Realization

Question 15

Consistency

Answer 15

Same principle each year

Question 16

Conversation

Answer 16

considering all risks inherent in the business (accuring a contingent loss)

Question 17

Cost/benefit

Answer 17

costs don?t exceed benefits to be derived

Question 18

Matching

Answer 18

recognize a cost as an expense in the same period as the benefit (usually a revenue) is reocgnized

Question 19

Allocation

Answer 19

spreading a cost over more than one period

Question 20

Full disclosure

Answer 20

providing all useful info in the ifnancial statements

Question 21

Recognition

Answer 21

booking an item in the financial statements

Question 22

Relization

Answer 22

converting non-cash resources into cash or a claim to cash

Question 23

When to recognize a financial statement element and how to measure it

Answer 23

Meets the definition of an element (assets, liability); Elements is the capable of being measured in monetary terms; The item is Relevant and Faithful Representation (useful)

Question 24

To measure in Monetary Items

Answer 24

Historical cost, Replacement cost, Fair market value (FMV), Net realizable value, Present value

Question 25

Historical cost

Answer 25

amount you paid for it (PP&E)

Question 26

Replacement cost

Answer 26

what it would cost to replace an item (inventory)

Question 27

Fair market value (FMV)

Answer 27

Per ASC 820, “the price that would be received to sell an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date”

Question 28

Net realizable value (NRV)

Answer 28

amount expected to a be converted into (A/R)

Question 29

Present value (PV)

Answer 29

discounted cash flows due to the time value of money (notes/recievable, bonds/payable, leases)