Is Flashcards
Which one of the following areas does not require disclosures about the risks and uncertainties that exist?
Current vulnerability due to a possible recession is not a required disclosure regarding risks and uncertainties. The nature of operations, the use of estimates in preparation of financial statements, and current vulnerability due to concentrations are all required disclosures according to ASC Topic 275, Risks and Uncertainties.
Smith Company reports under IFRS. A note payable is classified as current in Smith’s statement of financial position. Under what conditions can the note payable be classified as noncurrent instead of current?
This answer is correct because in order to reclassify a liability from current to noncurrent, an agreement to refinance the liability as long-term must be executed before the statement of financial position date.
Financial statements shall include disclosures of material transactions between related parties except
This answer is correct. ASC Topic 850 requires disclosure of any material related-party transactions except
1. Compensation agreements, expense allowances, and similar items in the ordinary course of business.
2. Transactions which are eliminated in the preparation of consolidated or combined financial statements.
Since sales of inventory between subsidiary and parent are eliminated in preparing consolidated financial statements, such sales need not be disclosed as a related-party transaction.
In Dart Co.’s year 2 single-step income statement, as prepared by Dart’s controller, the section titled “Revenues” consisted of the following:
Sales $250,000 Purchase discounts 3,000 Recovery of accounts written off 10,000 Total revenues $263,000 In its year 2 single-step income statement, what amount should Dart report as total revenues?
This answer is correct. Total revenues recognized on an income statement are calculated as sales less sales returns and allowances, sales discounts, and estimated allowance for returns. The purchase discounts account is a contra account to purchases, and is not used in the calculation of net sales. Recovery of accounts written off requires an entry to reinstate the account receivable, and a second entry to record the payment. It does not affect total revenues. Therefore, total revenue is equal to the sales amount of $250,000.
On March 21, year 2, a company with a calendar year-end issued its year 1 financial statements. On February 28, year 2, the company’s only manufacturing plant was severely damaged by a storm and had to be shut down. Total property losses were $10 million and determined to be material. The amount of business disruption losses is unknown. How should the impact of the storm be reflected in the company’s year 1 financial statements?
This answer is correct. Subsequent events are of two types: (1) those that relate to the current financial statements but come to light after year-end, and (2) those that come to light after year-end and relate to the next year’s financial statements. The first situation may require accrual but the second situation requires disclosure only if it is material. In this case, the company’s only manufacturing plant was shut down in February of year 2. Since this event occurred after year-end, no accrual is necessary. However it would qualify as a subsequent event requiring disclosure.
JKC is a calendar year firm that changed its method for measuring inventory from FIFO to LIFO on January 1. Records of inventory purchases and sales were not available for certain earlier years of its existence. Thus, it was impracticable for JKC to determine the cumulative effect of applying the change in principle retrospectively. If records are available for recent years, JKC should prospectively apply LIFO at the
When it is impracticable to determine the cumulative effect of applying a new accounting principle to any prior period, it should be applied prospectively at the earliest date practicable. For example, if JKC has all the required information for applying LIFO beginning with January 1, it will carry forward the prior year’s FIFO ending inventory balance. It will then begin using LIFO on January 1 of the current year.
In determining diluted earnings per share (DEPS), a potential common stock (PCS) was antidilutive in Year 2 and dilutive in Year 3. The potential common stock would be included in the computation for
DEPS is based on the number of common shares outstanding during the period plus the common shares that would have been outstanding if dilutive potential common shares had been issued. Thus, in a period in which the effect of potential common stock is antidilutive, it is not included in the determination of DEPS. It is included, however, in those periods in which its effect is dilutive.
what is the component of OCI?
PUFE
1- pension
- urealized gain or loss from available of sales securities
3- foreign translation
4- effective portion hedge of cash flow
According to ASC Topic 820, the market that has the greatest volume and level of activity is the
This answer is correct because ASC Topic 820 defines the principal market as the market with the greatest volume and level of activity.
The fair value option election applies to all of the following items except for
This answer is correct. ASC Topic 825 provides that the fair value option does not apply to pensions.The fair value option does not apply to all financial liabilities.
A company that is a large accelerated filer must file its Form 10-Q with the United States Securities and Exchange Commission within how many days after the end of the period?
This answer is correct because large accelerated filers must file Form 10-Q 40 days after fiscal quarter end.
in installment sales how you can compute the following
1- cash collection
2- A/R
3- deferred gross profit
1- cash collection= realized gross profit/gross profit precentage
2- A/R = sales - cash collection
3- deffered gross profit = A/R * gross profit
Valuation techniques for fair value measurement (FVM) must use
Inputs to valuation techniques are the pricing assumptions of market participants. The assumptions include those about the risk of a given technique or its inputs.
Which of the following activities is not considered a plan/method to alleviate an entity’s doubt about its ability to continue as a going concern?
Substantial doubt about the entity’s ability to continue as a going concern arises when it is probable that the entity will be unable to meet its obligations as they become due.
(a) Conditions or events to be examined include the entity’s: current financial condition, conditional and unconditional obligations due, and funds necessary to maintain operations.
(b) More specific examples include conditions such as: negative financial trends, default on loans, internal issues such as labor difficulties, and external matters such as legal proceedings or legislation.
(3) If substantial doubt about an entity’s ability to continue as a going concern exists, management must evaluate plans (disposal, borrowing/restructuring, delaying expenditures, increasing ownership equity) to mitigate/alleviate conditions or events giving rise to the substantial doubt.
(a) For the plans to be considered, effective implementation and mitigation of substantial doubt must be probable.
(b) If the plans alleviate substantial doubt about the entity’s ability to continue as a going concern, disclosures must include:
(1) Principal conditions or events giving rise to substantial doubt about the entity’s ability to continue as a going concern,
(2) Management’s evaluation of the significance of the conditions or events, and
(3) Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.
(c) If the plans do not alleviate substantial doubt about the ability of the entity to continue as a going concern, the footnotes must include a statement indicating that fact and include:
(1) The same disclosures as above in a(3)(b)(1) and a(3)(b)(2)).
(2) A modified a(3)(b)(3) that includes the intended plans rather than the actual plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.
According to ASC Topic 820, the fair value of an asset should be based upon
This answer is correct. ASC Topic 820 requires that the fair value of an asset be based upon the price that would be received to sell the asset, which is an exit price.
Assume a firm elects early adoption of ASU 2014–08 related to discontinued operations. The following disposal could qualify as a discontinued operation:
This answer is correct because discontinued operations must represent a strategic shift or major operating impact.
Which of the following characteristics does not relate to prior period adjustments?
This answer is correct. There are three criteria for a prior period adjustment. These criteria are as follows: (1) the effect of the adjustment is material to income from continuing operations, (2) the adjustment can be identified with a prior period, and (3) the amount of the adjustment could not be estimated in prior periods. ASC Topic 250 does not require that a prior period adjustment be attributable to economic events occurring subsequent to the prior period financial statements.
Nutmeg Corporation prepares its financial statements in accordance with IFRS. Which of the following items is required disclosure on the income statement?
This answer is correct. The income statement may be prepared by presenting expenses either by nature or by function. The minimum required disclosures on the income statement include income, finance costs, share of profits and losses using the equity method, tax expense, discontinued operations, profit or loss, noncontrolling interests in profits and losses, and the net profit (loss) attributable to equity holders of the parent.
