MIDTERM EXAM Flashcards
Watts Corporation made a very large arithmetical error in the preparation of its year-end financial statements by improper placement of a decimal point in the calculation of depreciation. The error caused the net income to be reported at almost double the proper Vamount. Correction of the error when discovered in the next year should be treated as a component of income for the year in which the error is discovered, but separately listed on
the income statement and fully explained in a note to the financial statements.
FALSE.
It is an adjustment to the retained earnings.
An item of property, plant and equipment qualifies to be reported as “Held for Sale”. Its fair value less cost to sell exceeds its carrying amount at the date it is reclassified as Held for
Sale. For accounting purposes, such an excess shall be credited directly to retained earnings.
FALSE.
An asset held for sale is measured at the lower of CA and FVLCD. If CA is already lower than FVLCD, no adjustment needs to be made.
An item of property, plant and equipment qualifies to be reported as “Held for Sale”. Its fair value less cost to sell exceeds its carrying amount at the date it is reclassified as Held for
Sale. For accounting purposes, such an excess shall be credited directly to retained earnings.
FALSE.
An asset held for sale is measured at the lower of CA and FVLCD. If CA is already lower than FVLCD, no adjustment needs to be made.
The nature-of-expense method identifies the major cost drivers and helps users to assess
whether these amounts are appropriate for the
revenue generated.
FALSE.
The function-of-expense method identifies major cost drivers and helps users to assess whether these amounts are appropriate for the revenue generated.
Any excess of carrying amount over the fair
value less costs to sell, at the initial recognition, shall be recognized as
impairment loss taken to profit or loss.
TRUE
IFRS requires a complete set of financial statements at the interim reporting date.
FALSE.
IFRS allows a complete or condensed set of financial statements
The accountant for the Lintz Sales Company is
preparing the income statement for 2015 and the statement of financial position at December 31, 2015. The January 1, 2015, merchandise inventory balance will appear as an addition in the cost of goods sold section of the income statement and as a current asset on the statement of financial position.
FALSE.
Beginning inventory is an addition to purchases and is used to compute the COGS. It is not a current asset in the statement of financial position
An item of property, plant and equipment
qualifies to be reported as “Held for Sale”. Its fair value less cost to sell exceeds its carrying amount at the date it is reclassified as Held for
Sale. For accounting purposes, such an excess shall be recognized as gain in profit or
loss.
FALSE.
If CA is less than FVLCD, then the PPE held for sale will be measured at CA with no corresponding gain in profit or loss.
An operating segment is a reportable segment if the absolute amount of its operating profit or loss is 10% or more of the company’s
combined operating profit or loss.
For the materiality criteria, the profit or loss of an entity is not combined but it is separated.
An item of property, plant and equipment
qualifies to be reported as “Held for Sale”.
Its fair value less cost to sell exceeds its carrying amount at the date it is reclassified as Held for
Sale. For accounting purposes, such an excess shall be recognized as gain in other comprehensive
income and transferred to profit or loss at the date of actual disposal.
FALSE.
Non-current asset held for sale is recognized at the lower of CA and FVLCD. No gain in OCI is recognized if on the reclassification date, FVLCD is greater than CA.
IFRS requires that a
single amount be disclosed within the income statement for the posttax profit/loss
on discontinued operations and the post-tax gain/loss on the disposal of discontinued operational assets.
TRUE
An entity shall classify a noncurrent asset as
held for sale if the asset is intended to be
disposed of through
a sale transaction or abandonment
FALSE.
An asset that is to be abandoned is not classified as held for sale.
An entity shall classify a noncurrent asset as held for sale if its carrying amount will be recovered through a
sale transaction or continuing use.
FALSE.
An asset that is to be subject to continuing use is not classified as held for sale.
An operating segment is a reportable segment if its operating loss is 10% or more of the
combined operating losses of segments that
incurred an operating loss.
FALSE.
Assets intended for sale within a period of
twelve months from the statement of financial
position date are classified as
current assets.
FALSE
