New Study Plan Flashcard Deck 2

Question 1

Two methods that help variable consideration must be estimated by applying consistently throughout the contract period?

Answer 1

Expected value
most likely amount

Question 2

When there is an error net that has error for the prior period how is that corrected?

Answer 2

it needs to be adjusted for the prior period adjustments

Question 3

When there is a change in accounting principle for comparative financial statements how is that corrected?

Answer 3

The beginning of the inventory and retained earnings must be adjusted bc it needs the change from LIFO to FIFO

Question 4

How to calc the accumulated depreciation for a purchase machine?

Answer 4

Step 1 - Calc the depreciation expense by finding the original amount of the machine and divide it by the useful life of the machine

Machine is 528,000 / 8 years useful life = 66,000 depreciation expense

Step 2 - Next step is to calc the accumulated depreciation so first we need use the depreciation expense for the prior step which was depreciation expense multiply by the estimated useful life of 3 years

Depreciation expense of 66,000 x 3 years = 198,000

Step 3 - Next step we need to calc the purchase amount of the machine and subtract the accumulated depreciation

Carrying amount - Purchase amount - accumulated depreciation

Purchase amount - 528,000 - accumulated depreciation of 198,000 from the prior step

528,000 - 198,000 = carrying amount 330,000

Step 4 - Carrying amount - the salvage value which is given and divide it by the estimated useful life 3 years because we calc it for 4 years total

carrying amount of 330,000 - 48,000 / 3 years = 94,000 deprecaition

Step 4 - subtract the carrying amount of 330,000 - 94,000 = 198,000 accumulated depreciation for year 4

Question 5

In order to adjust beginning retained earnings what is the process of doing that?

Answer 5

To adjust retained earnings we need to adjust prior period adjustments. If there is a prepayment we would need to allocate that to three years period

Question 6

When a adjustment needed beginning of retained earnings and there is an decrease in sales what adjustment is required?

Answer 6

The adjustment would be nothing bc since there was an decrease in sales that would make the adjustment a future or change in estimate usually any change made for retained earnings are retroactively

Question 7

When there is a change from cash basis of accounting to accrual basis of accounting how is that corrected?

Answer 7

As a prior period adjustment by adjusting the beginning balance of retained earnings

Question 8

how to adjust the expense for the machine which is adjusted prior period adjustments?

Answer 8

Step 1 - To adjust the machine for prior period we need to adjust the machine using the straight line method which is mentioned on the problem

Step 2 - and next we need to adjust the results after tax understatement of net income

Step 3 - We use the annual depreciation and divide it by 3 which would be the estimated life and multiply it by the tax rate

Step 4 - Understated of net income subtracting the after tax overstatement of net income

Question 9

When there are any changes any depreciation problem from the method being used or changes to sales how is the retained earnings adjusted per year?

Answer 9

They are not adjusted since there were changes made so that would be a change in prospective not retrospective

Question 10

A change in standard assurance type warranty is what kind of change in adjustment?

Answer 10

change in estimate for prospectively

Question 11

When a change in accounting principle that is inseparable from the effect of a change in accounting estimate it would

Answer 11

it can only be accounted on the change in estimate only

Question 12

Calc, the revenue and interest income from contract?

Answer 12

To calc the interest income

Start off with the cash selling price 250,000 x implicit interest rate 10% = 25,000

Next we need to subtract annual payment 144,049 - 25,000 1st installment payment

= 119,049
250,000 - 119,049 = 130,951

Final step is 130,951 x 10% = 13,095 interest income

Question 13

In order to measure the progress toward complete satisfaction of a performance obligation must be measured

Answer 13

it’s the input method

Question 14

What are some conditions where there are no financial statement adjustments required?

Question 15

Subsequent events such as fire client suffers a fire after balance sheet

Answer 15

advise management to disclose the event to the financial statements so the events don’t seem misleading on the notes

Question 16

Any sales of division require what kind of adjustments for the financial statement?

Answer 16

No adjustment of the statement however pro forma financial statements are the best method to adjust when an entity makes sales

Question 17

When events that occurred before the issuance the statements and after the balance sheet date?

Answer 17

require disclosure but NOT recognition on the financial statements

Question 18

Any event that is fire, natural disaster or explotion are they required to disclose and recognize the losses?

Answer 18

Only disclose the event

Question 19

What determines the Fair value of an asset?

Answer 19

Which ever market has the higher sales proceeds costs

Question 20

Calc, the entity sale for performance obligation?

Answer 20

Standalone selling price - 40,000
120,000
Standing selling price of product Z 160,000

40,000 + 120,000 + 160,000 = 320,000

40,000 selling price / 320,000 standalone selling price = 0.125

exchange for 250,000 x 0.125 = 31,250

Question 21

How is transaction price calc?

Answer 21

By allocating performance obligations

Which would be by adding the standalone price by the standing alone selling price

Question 22

Calc, the gross profit for the completion for project using the input method?

Answer 22

Step 1 -

First add the incurred cost and the estimated cost to complete

cost incurred 1,800,000
estimated cost 600,000

Incurred cost - 2,400,000
Contact - 3,000,000
Total anticipate gross profit - 600,000

Step 2 - Next we need to calc percentage to calc

Cost incurred - 1,800,000
2,400,000
= 75%

Step 3 - Total anticipate 600,000 x 75% = 450,000 - 300,000 = 150,000 gross profit

Question 23

Are deposit and transit included in in the bank statement balance?

Answer 23

NO they are not included. They’re never added to the bank balance

Question 24

Outstanding checks that are not cleared by the bank are included in the cash per book or per bank statement?

Answer 24

Cash per book

Question 25

For problems that ask for net cash balance do we need to included the Bank service charge and NSF check?

Answer 25

No we don’t include it for cash balance

Question 26

For cash in bank balance do we need to include deposit in transit and outstanding checks

Answer 26

Yes we do include then for the calc for cash bank bal

Question 27

Where is the foreign gain and losses reported?

Answer 27

On other comprehensive Income

Question 28

Calc the net income attributable to the investment?

Answer 28

Investment 410,000
purchase of investment 400,000

Fair Value investment - purchase an investment = investors recognizes an unrealized gain

Paid dividends x percent = dividend income

Question 29

A transaction that is unusal in nature or infrequent in occurrence should be reported as a

Answer 29

must be reported in separate income from continuing operations and those items must not be reported on the face of the income statement net of income taxes

Question 30

Gains or loss from trans that is unusual in nature or infrequent in ocurrence should be reported separately as component of income

Answer 30

before results of discontinued operations

Question 31

For foreign currency if there is a change in gains and loss where is that reported?

Answer 31

It’s reported on the component of income

Question 32

When there is a stock dividend, stock split, or reserve split does there need to be a restatement of BEPS & DEPS?

Answer 32

YES

Question 33

When neither party has no significant influence over the investment do they have any right to use the equity method?

Answer 33

No neither is apart of it

Question 34

Calc the goodwill for the investing using the equity merthod?

Answer 34

First you need to know the amount of investment which is mentioned in the problem of 500,000

Next you need to add and subtract the necessary item for the net assets

50,000 + 250,000 FV of building 900,000+ 100,000 land - liability 100,000 = 1,200,000 x 30% = 360,000

500,000 - 360,000 = 140,000

Question 35

A transaction is unusual in nature or infrequent in occurrence should be reported as a

Answer 35

Component of income from continuing and not net of application income taxes

these items are NOT reported for INCOME TAXES

Question 36

Subsequent events affecting the realization of assets ordinary will require recognition in the financial statement because such events typically represent the

Answer 36

Culmination of conditions that existed at the balance sheet date

Realization of assets typically represent the culmination of conditions that existed at year end