Financial Statements

Question 1

Which Personal Financial Statements are required?

Answer 1

Statement of Financial Condition & Statement of Changes in Net Worth

Question 2

How are assets and liabilities valued in a Personal Financial Statement?

Answer 2

Estimated current value

Question 3

How are estimated taxes that would be paid if all assets were converted into cash and all liabilities paid presented on a Personal Financial Statement?

Answer 3

Presented on Statement of Financial Condition between Liabilities and Net Worth

Question 4

What is the general presentation on a statement of financial condition?

Answer 4

Assets
- Liabilities
- Estimated taxes on assets sold
: Net Worth

Question 5

How is life insurance presented on a Personal Financial Statement?

Answer 5

Only shown if there is cash surrender value

It is shown net of loans against the policy

Question 6

How are business interests shown on a Personal Financial Statement?

Answer 6

Business Interests that constitute a large percentage of total assets should be separated from other investments

Question 7

What is the discreet view in an Interim Financial Statement?

Answer 7

Interim period is a separate accounting period - not GAAP

Same accounting principles used for annual reporting should be used.

Question 8

What is the integral view in an Interim Financial Statement?

Answer 8

Interim period is a part of the annual period - GAAP

Gross profit method may be used to estimate COGS and inventory

Temporary declines in inventory aren’t recognized

Question 9

How are discontinued operations & extraordinary items reported in Interim Financial Statements?

Answer 9

Aren’t prorated

Fully recognized in Interim Period as incurred

If it occurs in Q3 - it’s recognized in Q3

Question 10

How are cumulative gains and losses reported in Interim Financials?

Answer 10

Reported as if they occurred in the first quarter

Question 11

How is inventory valuation handled in Interim Financials?

Answer 11

If inventory experiences a decline in value during an interim period - the loss is recognized in the interim period

If the loss is expected to be only temporary - no loss is recognized

Question 12

What is one of the primary problems with interim reporting?

Answer 12

The matching principle gets messed up - Expenses incurred in one period may benefit future periods

Question 13

For whom is Segment Reporting required?

Answer 13

Publicly traded companies

Question 14

What factors cause a segment to be significant and therefore to be reported separately?

Answer 14

Revenue of segment is 10% or more of total

Profit is 10% or more of total

Segment assets are 10% or more of total

75% Test - All segment revenues must equal 75% of total external revenues

Question 15

What is the disclosure requirement regarding sales of 10% or more for one customer?

Answer 15

If 10% or more of enterprise revenue comes from one customer - the segment making the sales must be disclosed

Question 16

what is the accepted valuation technique for fair value estimates?

Answer 16

the cost approach.

Question 17

What is the purpose of reporting comprehensive income?

Answer 17

To report a measure of overall enterprise performance.

Question 18

ASC Topic 255 requires that the current cost for inventories be measured as the

Answer 18

Lower of current cost or recoverable amount.

Question 19

An extraordinary gain should be reported as a direct increase to which item?

Answer 19

“Net income”. as Nonrecurring items are disclosed separately and included in the calculation of income for the period.

Question 20

According to ASC Topic 820, the fair value of an asset should be based upon

Answer 20

The price that would be received to” SELL” the asset.

Question 21

Users of prospective financial information can include…

Answer 21

I. General users with whom the responsible party is not negotiating directly.
II. The responsible party.
III. Third parties with whom the responsible party is negotiating directly.

Question 22

what are the Reasons for preparing Prospective F/S?

Answer 22

• To aid in considering a change in accounting or operations.
• To aid in preparation of the budget.
• To obtain external financing.

Question 23

According to ASC Topic 820, what is the assumption used in fair value measurements of nonfinancial assets?

Answer 23

The asset is in its highest and best use.

Question 24

Where on the statement of financial position (balance sheet) should accumulated other comprehensive income be reported?

Answer 24

As a separate item under stockholders’ equity.

Accumulated other comprehensive income includes unrealized amounts while retained earnings contains largely realized amounts.