Questions 2 Flashcards
On Dec 31, Brooks Co decided to end operations and dispose of its assets within three months. At Dec 31, the net realization value of the equipment was below historical cost. What is the appropriate measurement basis for equipment included in Brooks’ Dec 31 Balance Sheeta. current reproduction costb. net realized valuec. historical costd. current replacement cost
b. net realized valueb/c of the decision to end operations and quickly (3 months) dispose of its assets
According to the FASB and IASB conceptual frameworks, which of the following is an enhancing qualitative characteristic?a. materialityb. timelinessc. neutralityd. completeness
b. timeliness
What are the characteristics that enhance the usefulness of information the is relevant and faithfully represented
timeliness understandability comparability verifiability
What is the two key component of faithful representation
Neutrality ………….. Completeness
What is the key component of relevance
materiality
A US public company needs guidance in accounting for and reporting a complex derivative transaction that it entered into with a European subsidiary. This company is most likely to find appropriate guidance in the a. FASB Statements of Financial Accounting Conceptsb. FASB Statements of Financial Accounting Standardsc. International Financial Reporting Standardsd. FASB Accounting Standards Codification
d. FASB Accounting Standards Codification is the single source of US GAAP US public companies are required to follow US GAAP
Users of financial statements frequently rely upon the data displayed in the financial statements to predict future financial out comes. Financial accounting concepts refer to the characteristics of accounting information that provides predictive value to users as the quality of:a. comparabilityb. relevancec. faithful representationd. understandabiltiy
b. relevance
Which of the following is NOT defined in FASB Statement of Financial Accounting Concepts Number 7 as one of the five elements of present value (or economic value) measurement used to establish the value of assets or liability using cash flows information?a. estimate of future cash flowb. risk tolerance of managementc. time value of moneyd. timing variations of future cash flows
b. risk tolerance of management
List the five elements of present value measurement identifying by mnemonic:UVOTE
U = the price fro bearing uncertaintyV = expectations about timing variations of future cash flowO = other factor (liquidity issues and market imperfections?T = time value of moneyE = estimate of future cash flow
According to the FASB and IASB conceptual frameworks, the quality of information that helps users forecast future outcomes is:a. neutralityb. representational faithfulnessc. confirming valued. predictive value
d. predictive value ………………. forecasting is predicing
Which of the following assumptions means that money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis?a. periodicityb. monetary unitc. going concernd. economic entity
b. monetary unit
Which of the following statements best describes an operating procedure for issuing FASB Acounting Standards Update?a. a new accounting standards update can be rescinded by a majority vote of the AICPA membershipb. an accounting standard update us issued only after a majority vote by the members of the FASBc. the exposure draft is modified per public opiniond. the emerging issue task force must approve a discussion memo before disseminated to the public
b. an accounting standard update us issued only after a majority vote by the members of the FASB
Which of the following is true regarding the comparison of managerial to financial accounting?a. managerial accounting has a past focus and financial accounting has a future focusb. the emphasis on managerial accounting is relevance and the emphasis on financial accounting is timelinessc. managerial accounting need not follow generally accepted accounting principals (GAAP) while financial accounting must follow themd. managerial accounting is generally more precise
c. managerial accounting need not follow generally accepted accounting principals (GAAP) while financial accounting must follow thempublic companies must follow GAAP for (external) financial reporting purposes. GAAP need not be followed for (internal) managerial accounting purposes
Which of the following is a generally accepted accounting principle that illustrates the practice of conservatism during a particular reporting period?a. reporting investments with appreciated market values at market valueb. capitalization of research and development costsc. reporting inventory at the lower cost or market valued. accrual of a contingency deemed to be reasonably possible
c. reporting inventory at the lower cost or market value
Define the rule of conservatism
states that revenues and gains should be recognized when the earnings process is complete, but the expenses and losses should be expensed immediately.
