FINANCIAL STATEMENTS NEW PLAN

Question 1

When there is a problem which has a Prepaid paid expense of 300,000 and the income tax also ends up being 300,000, what amount should be accounted for the calc of Current Assets?

Answer 1

0
BECAUSE THE PREPAID AMOUTS ARE COVERED BY THE INCOME TAX EXPENSE

Question 2

During the accrual basis of accounting if revenue is received do we recognize it as revenue for accrual basis of accounting?

Answer 2

NO
We don’t recognize it because during accrual accounting revenue is (Earned) NOT (Received) so we subtract the receivables

Question 3

True or False When financial statements are prepared under the cash basis of accounting The cash basis are modified so accrual of income taxes was reported? Does that modified cash basis of accounting?

Answer 3

TRUE

Question 4

When a short term obligation are to be refinance to long term obligation does it need to change from from current obligation to noncurrent?

Answer 4

YES

Question 5

When an entity declared a 5% stock dividends do we need to adjust it for all stock issued and declared?

Answer 5

YES for all businesses

Question 6

WHEN Stocks are issued for an entity how do we calc it?

Answer 6

When it’s issued we

4/1 Issued 30,000 shares of common stock

6/1 Issued 36,000 shares of common stock

30,000 x 9/12 x 1.05 from the dividends declared

Question 7

In computing WACC outstanding during the year

Answer 7

MUST BE ACCOUNTED RETROACTIVELY adjusted so declaration and distribution of stock dividends would be approriate

Question 8

Calc, the COGS for the year?

Answer 8

Remember the formula COGM + BI - EI = COGS

Question 9

When there is a event or transaction that is unusal in nature or infrequent in occurrence must be reported

Answer 9

before the results of discontinued operations. Such items are NOT reported on the income statement net of income taxes

Question 10

The purpose of reporting comprehensive income?

Answer 10

to summarize all changes in equity of a business

Question 11

A simple capital structure includes items such as stock options and convertible debt outstanding?

Answer 11

No it includes the following

Common Stock
Preferred Stock
Debt outstanding

Question 12

When calc the gross profits for contract for let’s say YEAR 3 do we need to include the calc for Year 2 as well?

Answer 12

Yes, we need to include the calc for year 2 as well

Question 13

When revenue for a contract cannot measure the outcome of the contract how is the revenue from the contract should be recognized ?

Answer 13

Only to the extent of the costs incurred

Question 14

Why isn’t operating income not required to allocate intraperiod income tax?

Answer 14

BC in order to allocate the income tax expense you need the discontinued operations, OCI, and Income from continuing operations

You can’t use use operating income

Question 15

According to GAAP and FASB an entity that presents a full set of financial statements must report

Answer 15

Comprehensive income if it has OCI items however if it doesn’t have any it doesn’t need to report

Question 16

Calc, the bonds dilutive securities?

Answer 16

Step 1 - We have Net Income of 600,000

Step 2 - We can 5,000,000 face amount x 9% = 450,000 - 20,000 discounts being amortized x (1-25%)

Question 17

Gains from remeasuring a foreign subsidiary financial statements should be included?

Answer 17

In the income from continuing operations

Question 18

FASB’s standard on revenue from contracts with customers includes

Answer 18

Products or service warranty contracts

Question 19

In order to calc the expense amount that should be included in the third quarter interim F/S?

Answer 19

We need to allocate the property taxes by 4 quarter and unanticipated major repairs on factory equipment by the quarters as well

Question 20

How to adjust the prior period error correction?

Answer 20

By restating the prior period statements and the correction must not include in the current year net income

Question 21

For the change in accounting estimate not effected by the change in principle?

Answer 21

Neither the cumulative effect of a change in Accounting principle & Pro Forma effect of retrospective application of new depletion base effect the change in principle

Question 22

During the prior period adjustment

Answer 22

change from unaccepted principle to accepted principle

Question 23

Are prior period adjusted included in net income for the current period?

Answer 23

No

Question 24

When see anything that a change from chash basis to accrual basis how is that adjusted on the financial statements?

Answer 24

prior period adjustment bc we need to go back to the cash basis in order to accrual basis of accounting since the adjustment was made prior period

Question 25

When inventory costing method when from LIFO to FIFO on calender year 3, how is this adjusted since it was LIFO during year 2 and FIFO during year 3?

Answer 25

Year 2 would be adjusted for cumulative effect which which are inventory and retained earnings

Question 26

When there is a change in estimate how are they reported?

Answer 26

In the current periods and future periods

Question 27

TRUE or FALSE Are all period required to be adjusted for the period specfic effect of applying the new principal?

Answer 27

YES example would be FIFO periodic inventory system to WACC System

Question 28

When new information has been obtained is that change in accounting estimates or change in accounting reports?

Answer 28

If new Information has been obtained then that is change in accounting estimates (Prospectively)

Question 29

Calc the prior period adjustment for depreciation?

Answer 29

Step 1 - Allocate the tax rate 30%

210,000 machine x (1-30%)

210,000 x 0.70 = 147,000 understatement of net income equal

Step 2 - 210,000 machine purchased - 10,000 salvage value = 200,000 / 10 years = 20,000 depreciation expense

Step 3 - 20,000 x 3 years x (1.0 - 30%) 42,000 bc there was the result of an overstatement of net income equal

Step 4 - 147,000 understatement of net income - 42,000 overstatement of net income equal = 105,000

Question 30

When an error is found for prior period such as depreciation after the balance sheet date how would that be adjusted in the current year?

Answer 30

There would be no adjustments made bc the the corrections of the prior period errors must not be included in Net income for the current year

Depreciation is more so a prospectively bc the bc the change in estimate

Question 31

When there is change in the reporting entity does that need to be reported propectively or retrospectively?

Answer 31

Any changes in the reporting entity are required to be changed retrospectively