FINANCIAL STATEMENT

Question 1

How many Parts for form 10 K

Answer 1

4 parts and 15 sections or items
1. Overview of business, risk factors, properties and info on legal proceedings.
2. Includes financial data, Managements discussion and analysis and audited financial statement
3. Includes details about the directors and executives, executives compensation, any related party transaction information and fees paid during the accounting period.
4 includes exhibits and financial statement schedule.

Question 2

What are financial statement required by a non governmental not for profit organization.

Answer 2

Statement of financial position
Statement of activities
Statement of cash flows.
NFP reports the expenses on the basis of their nature and functions. It can be done on statement of activities, on a schedule in the notes or a separate statement.

Question 3

OCBOA - Other comprehensive basis of Accounting - which is not coming?
1. Full accrual basis of accounting
2. Cash basis
3. Modified cash basis
4. Income tax basis

Answer 3

Full accrual basis of Accounting. Full accrual basis of accounting is not an OCBOA

Question 4

Prepaid taxes - if it is considered as a current asset.

Answer 4

PT Wouldnt end up on the final BS because in recording Income tax EXP the PT would be credited and end up at 0.

Question 5

Which are the types of OCBOA - OTHER comprehensive BASIS OF ACCOUNTING.

Answer 5

1. Cash baais
   2 Modified cash basis
2. Income tax basis

Full accrual accounting is not coming under OCBOA.

Question 6

Which are the types of OCBOA - OTHER comprehensive BASIS OF ACCOUNTING.

Answer 6

1. Cash baais
   2 Modified cash basis
2. Income tax basis

Full accrual accounting is not coming under OCBOA.

Question 7

How is a change in reporting entity accounted.

Answer 7

Retrospectively. Including note dosclosures and application to all prior period financial statements presented..it is reported similar to a change in accouting peinciple.

Question 8

FORM 10Q

Answer 8

Part 1 includes financial info for the quarter.
Including unaudited financials, MDA, disclosure about market risk, overview of controls and procedures.
Part 2 - includes all other information - any other legal proceedings, unregistered sale of equity securities, any proceeds from sale of such equity securities. Default of any senior securities and any other material information.

Question 9

AFS, HTM and trading.. How is equity securities reported in the companies balance sheet.

Answer 9

When Equity securities are held as investment all equity securities are carried at fair value unless in case significant influence is exercised by using equity method. The trading and AFS classifications are not used in case of equity securities. However trading and AFS securitie classifications are used in case of debt securities. Since the company intend to sell all of the shares within near future it is a current asset.

Question 10

OCI - Y1 - Unreallised loss on sale of AFS securities is debited to OCI. IN Y2 these securities were sold at a loss equal to unrealised loss previously recognized. What is the reclassification entry.

Answer 10

First debit OCI For Unreallised losses on AFS securities. In Y2 These were sold and cash reallised so credit the unreallised loss to OCI which makes the difference between unreallised loss and realised loss. Now thw loss is recognised in the current income for the period.

Question 11

Diff between Ordinary annuity and an Annuity due.

Answer 11

Ordinary annuity involves payment to be made at the end of the year but annuity due involves pmt to be done at the beginning of the year.

Question 12

Form 8K

Answer 12

Any major developments which is not included in the form 10 K AND 10 Q. It is an unscheduled filing.

Question 13

How should a non govt NFP report investments in FS

Answer 13

FV with gains and losses reported in the statement of activities.

Question 14

What is discontinued operation..
1. Disposal of a part of line of business
2. Planned and approved sale of a segment
3. Phasing out a production line
4. Changes related to technological improvements.

Answer 14

It is when a major component of a business is disposed and the disposal has a significant effect on the equity.
The disposal of a segment is a discontinued operation.

Question 15

Duplicate sales recorded in y1 - 100000 and y2 - 135000. What is the amount to be credited in AR as an error correction provided the effective tax rates through y1 to y3 is 30%. Give JE.

Answer 15

FASB - 153 provides guidance on reporting of accounting changes and error correction.

Dr Retained Earnings - 1,64,500
Dr IT receivable - 70,500
Cr. AC’S receivables - 2,35,000

Question 16

Change in accounting estimate - a co provides credit. Co agreed to pay $40 penalty for late payment. Cout files it as an excessive penalty and ordered for a reimbursement recourse to the customers in y2. The co made a provision for these reimbursements in y2 as 1000000 which constituted the companies estimated total liability. In the first quarter of the y3 claims increased by 25% over the initial estimate. Calculate additional provision for penalty liability to be made.

Answer 16

1000000x. 25 = 250000..this is case of a change in accounting estimate means a change in CV of an asset or liability. A change in accounting estimate is the result of new information. Eg include. Inventory obsolosence, changes in service life or Salvage value of depreciable assets, warranty obligations, uncollectable receivables.

JE
DR PROVISON EXPS - 250000
CR PENALTY LIABILITY - 250000

Question 17

A co whose stock is trading at $10 per share has 1000 shares of $1 stock outstanding when BOD declared 30% of Stock dividend. What is the JE to recode Stock dividend.

Answer 17

Large stock dividend as declared value is more than 25% of com stock outstanding. Here debit retained earnings at par value and credit common stock at par value.

In this 30% of 1000 shares is 300 so
Dr RE - 300
Cr CS - 300

Question 18

How R&D cost recognized under GAAP

Answer 18

Under US GAAP all R&D Costs are expensed in the period incurred

Question 19

Adell Corp. is a manufacturer of paper products with a December 31 year end. Adell has not elected the fair value option.

For the transaction below, provide the correct classification and how should it be reported in the company’s (bond issuer) balance sheet.

$525,000 is held in a sinking fund, as required by the bond agreement, for principal repayment in five years.

1 CA
2 CL
3 Non CA
3 Long term Liability

Answer 19

A bond sinking fund is a restricted asset of a corporation that was required to set aside money for redeeming or buying back some of its bonds payable.

The bond sinking fund begins when the corporation deposits money with an independent trustee. The trustee then invests the money in order for the balance in the sinking fund to increase. The balance in the sinking fund will also grow from additional required deposits made by the corporation. The bond sinking fund decreases when the trustee purchases or redeems the corporation’s bonds.

A bond sinking fund is reported on the bond issuer’s balance sheet under the caption Investments, the first long-term or noncurrent section appearing immediately after current asset.

Question 20

Which of the following characteristics of accounting information primarily allows users of financial statement to generate predictions about an organization.
1 Reliability
2. Timelines
3.Neutrality
4. Relevancr

Answer 20

Relevance is comprised of
1. Confirmatory value
2. Predictive value
3. Materiality

Relevance is one of the 2 primary qualitative characteristics. They are relevance and faithful representation.

Faithful representation include
1. Completeness
2. Neutrality
3. Free from error.

Question 21

When an accounting standard is being proposed, the term “negative economic consequences” refers to:
1 Difficulty raising capital
2 The increased cost of complying with the new standard
3 Increased government intervention
4 Increased taxes

Answer 21

This term refers to the fear that the new standard could cause the firm’s earnings to fall, which would make it harder to raise capital.

Question 22

ACCUMULATED OCI is recorded in which FS

Answer 22

It is recorded in Statement of financial POSITION.

Question 23

When it is difficult to determine either change in accounting estimate or accounting principle has occured which one to consider.

Answer 23

Consider change in estimate has occurred and adjust it prospectively - goi g forward.
Change in accounting principle is a wide term and so needs to be adjusted retrospectively - going back to the old financial statements.

Question 24

Impairment loss testing

Answer 24

Impairment loss testing
Find if CV > UNDISCOUNTED FAUTURE CASHFLOWS.. IF YES
FIND IMPAIR. ENT LOSS = CV LESS FV