FARE. Introduction To Financial Statements

Question 0

What term is used for increases in equity from nonroutine/incidental transactions?

Answer 0

Gains

Question 1

What transactions will never be part of a comprehensive income?

Answer 1

Investments by, and distributions two, owners

Question 2

What is the order in which an income statement element after income from continuing operations should be presented?

Answer 2

1. Discontinued operations
2. Extraordinary item
3. Cumulative changes in accounting principle

Question 3

How should each element of income after income from continuing operations be shown?

Answer 3

Net of taxes

Question 4

Where should corrections of errors be shown?

Answer 4

As an adjustment to opening balance of retained earnings, net of taxes (prior – period adjustment)

Question 5

What are the two components of the discontinued operations caption?

Answer 5

1. Income or loss from operations of a discontinued division

2. Gain or loss on disposal

Question 6

What are the two criteria for extraordinary item?

Answer 6

1. Unusual in nature

2. Infrequent and occurrence

Question 7

How should the early retirement of your own debt be classified?

Answer 7

As an extraordinary item

Question 8

What changes in accounting principle are considered special changes requiring retroactive restatement?

Answer 8

1. Changing from LIFO to another method

2. Change in accounting for long-term construction contracts

Question 9

How should a change in accounting estimate be reported?

Answer 9

Prospectively. (What is Likely or expected to happen.)

Question 10

How should changes in reporting entity be reported?

Answer 10

Retroactive restatement approach

Question 11

How should A change in accounting principle inseparable from a change in estimate be reported?

Answer 11

Like a change in estimate

Question 12

How should a change from non-GAAP to GAAP be reported?

Answer 12

As a prior-period Adjustment

correction of an error

Question 13

How should revenue be recognized for an interim financial statement?

Answer 13

In the same manner it is recognized for annual financial statements

Question 14

What accounting policies must be disclosed?

Answer 14

When they are a choice from among alternative methods

Question 15

Where should accounting policies be disclosed?

Answer 15

As the first footnote, or as a separate section preceding the notes

Question 16

What is the main consideration for related party transactions?

Answer 16

Disclosure

Question 17

What are the three possible “10% tests” to determine if a segment is reportable?

Answer 17

1. Revenues are 10% or more of combined revenues
2. Assets are 10% or more of combined assets
3. Absolute amount of profit or loss is 10% or more of combined profits of all segments Earning a profit, or 10% of combined losses of all segment showing a loss – whichever is greater

Question 18

True or false?

Sales to major customer should be disclosed.

Answer 18

True

Question 19

What basis of accounting should be used for personal financial statements?

Answer 19

Accrual accounting

Question 20

How should assets be reported on personal financial statements?

Answer 20

At current value

Question 21

True or false?

Development – stage enterprises should use GAAP in the same way as established enterprises.

Answer 21

True