Financial Reporting - For Profit II

Question 1

How is depreciation and amortization reported on a statement of cash flows?

Answer 1

Depreciation and amortization are additions to net income on the operating section of the statement of cash flows.

Depreciation and amortization are added to net income because these non-cash transaction expenses reduce net income on the income statement

Question 2

Per SFAC 8, what items should consider note disclosure?

Answer 2

1. Past and current events that could have an impact on a company’s cash flows
2. Information about the reporting entity
3. Financial statement line item explantions

Question 3

What are the criteria for “vulnerability to concentrations?”

Answer 3

1. Concentrations exist at the date in the financial statements
2. Concentration make the entity vulnerable to the risk of a severe impact in the near term
3. Reasonable possibility the event may occur in the near term

Question 4

Are contingent gains disclosed in the notes to the financial statements?

Answer 4

Gains are disclosed in the notes but are not accrued in the financial statements

Question 5

Are contingent losses disclosed int he notes to the financial statement?

Answer 5

Losses are disclosed in the notes and accrued in the financial statements. The accrual is the most likely estimate of the outcome or the lowest amount in a range of estimated outcomes

Question 6

What is the risk of accounting estimates?

Answer 6

Estimated assets are overstated and estimated liabilities are understated

Question 7

How are maturing bonds classified on a balance sheet?

Answer 7

Non-current or long-term even if maturing in less than one year