MCQ Review 9 Flashcards
How are work of arts reported in personal financial statements?
- Appraised value
- Assets must be presented at their estimated current values in a personal statement of financial condition
- Current value may be based on discounted cash flow, market price, appraisal value, or other basis, depending on the asset
The information provided by financial reporting pertains to
Individual business enterprises rather than to industries or an economy as a whole, or members of society as consumers.
What is the effect of the purchase of the treasury stock on the amount reported in the balance sheet under the cost method?
- Under the cost method, the acquisition of treasury stock is recorded as a debit to treasury stock and a credit to cash equal to the amount of the purchase price.
- This transaction results in a decrease in both total assets and total equity.
- Additional paid-in capital is unaffected by the treasury stock purchase.
What is the effect of a stock dividend on shareholder’s equity?
- When a stock dividend is declared, a portion of retained earnings is reclassified as contributed capital.
- Net effect on total equity is ‘0’
Under operating lease, should company recognize interest expense?
- Under an operating lease, the lessee recognizes periodic rental expense but records neither an asset nor a liability
- Company should not recognize interest expense on an operating lease.
The measurement date for shares issued to employees in share option plans accounted for using the fair-value method is
- The date on which options are granted to specified employees not the date the options are exercised.
- Under the fair-value method, compensation cost is measured at the grant date, which is when any needed approvals have been received, and the employer and employee “reach a mutual understanding of the key terms and conditions of a share-based payment award.”
- This expense is based on the fair value of the award at that date and recognized over the requisite service period. This period is most often the period over which the vesting conditions are expected to be satisfied.
What are the Statements of Financial Accounting Concepts intended to establish?
- The objectives and concepts for use in developing standards of financial accounting and reporting.
- SFACs do not establish accounting and reporting requirements. They are nonauthoritative guidance for nongovernmental entities. SFACs describe the objectives, qualitative characteristics, and other fundamental concepts that guide the FASB in developing sound accounting principles.
Disclosure of information about significant concentrations of credit risk is required for
- Most financial instruments.
- GAAP require the disclosure of information about the fair value of financial instruments, whether recognized or not
- GAAP also require disclosure of all significant concentrations of credit risk for most financial instruments
The statements required for proprietary funds include
(1) Statement of net position
2) Statement of revenues, expenses, and changes in fund net position
(3) Statement of cash flows
- Because proprietary funds concentrate on the capital maintenance concept, their reporting requirements are similar to those for business enterprises.
What is Agency fund?
- An agency fund collects cash to be held temporarily for an authorized recipient to whom it will be later disbursed.
- This recipient may be another fund or some individual or firm or even government outside of the government.
- Only B/S-statement of Fiduciary net position is reported
- NO I/S and Cash flows reported
How does tax collection funds recorded in Agency fund?
-Tax collection funds exist when one local government collects a tax for an overlapping governmental unit and remits the amount collected, less administrative charges, to the recipient unit.
-Cash xxxx
Due to other units(towns) xxxx
Due to county general fund xxxx (due to no I/S of agency fund, it is reported as general fund)
