Practice Problems Takeaways

Question 1

Statement of Financial Accounting Concepts (____) provide theory behind accounting/reporting and provide guidance when no ____ exists.

Answer 1

SFAC; GAAP

Question 2

_____ is the process of formally recording or incorporating an item into the _______ as an asset, liability, revenue, expense, etc.

Answer 2

Recognition; Financial statement

Question 3

What is the concept that supports the issuance of interim reports?

Answer 3

Relevance, because it provides basis to forecast future earnings and provides feedback about prior performance expectations (predictive, confirmatory values)

Question 4

_____ is an underlying assumption that the business is not expected to liquidate in the near future.

Answer 4

Going concern assumption

Question 5

Ande Co. estimates uncollectible accounts expense using the ratio of past actual losses from uncollectible accounts to past net credit sales, adjusted for anticipated conditions. The practice follows the accounting concept of _______

Answer 5

Matching

Question 6

_____ provides for inter period comparability and the identification of trends.

Answer 6

Consistency

Question 7

_______ means that the financial statements reflect the financial reality of the entity (economic substance) rather than the underlying legal form of transactions/events.

Answer 7

Substance over form

Question 8

______ is a basic principle that believes for income to be stated fairly, all expenses incurred for generating revenue for a period must be recognized in that same period.

Answer 8

Matching

Question 9

To be classified as “discontinued operations”, it is sufficient if management committed to ______ that is ______

Answer 9

Disposal plan; Reasonable

Question 10

Loss from discontinued operations = ?

Answer 10

(Loss from operations) + (Estimated loss from disposal)

Question 11

Current liabilities are obligations whose liquidation is expected to require the use of _________ or creation of _______.

Answer 11

Existing current assets; Other current liabilities

Question 12

All deferred tax assets/liabilities are reported as _______

Answer 12

Non-current

Question 13

What is the purpose of reporting comprehensive income?

Answer 13

To summarize all changes in equity from non-owner sources

Question 14

“Loss on discontinued operations” is part of __________

Answer 14

Comprehensive income

Question 15

Information from statement of cash flows provides reasons for differences between ____ and associated ______, not its financial position.

Answer 15

Net income; Cash receipts and payments