SEC Reporting and other topics

Question 1

What is Income approach?

Answer 1

methods that based on future amounts and earnings and cash flows

Question 1

What is the Market Approach?

Answer 1

information from market transaction that involve identical or comparable items

Question 2

Should a loss that is material loss on an asset be recognized?

Answer 2

Yes, the lost must be recognized in the F/S bc this event provided additional information with in respect to the conditions at the balance sheet date

Question 3

In general, an enterprise preparing interim financial statement should

Answer 3

Use the same accounting principals its latest annual financial statements

Question 4

On a change in warranty obligation new information is obtained

Answer 4

When there is new information that is being obtained it’s “Change in accounting estimate which is accounted for prospective basis”

When there is a change in or new information that accounting should be be reported on period of change

Question 5

FMV of an asset or liability is based on FV hierarchy that established priorities among inputs to valuations techniques?

Answer 5

Unadjusted quoted prices for an identical assets or liability are on level 1

Level 1 inputs are unadjusted quoted prices in active markets for identical assets

Question 6

What should be including in the summary of significant accounting method?

Answer 6

1) basis of consolidation
2) depreciation methods
3) amortization of intangible
4) inventory pricing
5) recognition of profit on the long term construction type contracts
6) recognition of revenue from franchising and leasing operations
7) the policy for defining cash information about PP&E

Question 7

Calc the involuntary conversion gain or loss for the nonmonetary asset to monetary assets?

Answer 7

Original cost 100,000
CV 70,000

Gain. 30,000

Question 8

Calc, the gain or loss on disposal of the machine?

Answer 8

To cal the disposal you need to know the difference between the proceeds received and the carrying amount of the machine on transaction date

90,000 ORIGINAL COST
X 0.5 / 10 YEARS USEFUL LIFE
= 4500

5000 - 4500 = 500 GAIN

Question 9

Calc the gain on the condemnation of a property?

Answer 9

Start off with the CV 575,000
Add Apprasial fees 2,500
Add Attorney fees 3,500

Gain on the condemnation 581,000

Question 10

How do you know if there is an impairment loss?

Answer 10

1. Carrying amount of the long lived asset is not recoverable
2. the carrying amount exceeds the assets group of FV

100 CV exceeds the FV 75

Question 11

When is testing for impairment long lived asset is required?

Answer 11

whenever events or changes in circumstance indicate that its carrying amount may not be recoverable

When CV is not recoverable an impairment loss is recognized equal to the excess of the carrying amount over the FV

Question 12

Calc the Impairment loss that needs to be reported?

Answer 12

Formula is CV - FV = impairement loss

This problem we have

Question 13

When there is errors for correction for prior period errors must not be included in the current year net income, how are they adjusted

Answer 13

since it’s a prior period adjustment we will not included the adjustment in the current year so we will accumulated the depreciation as it will increase by 40,000

Question 14

How subsequent events as such fire or other casualty are reported on the financial statements?

Answer 14

they are not reported however they are disclosed in the financial statements

Question 15

The Financial statement must disclose significant risks and uncertainties what may they be?

Answer 15

vulnerability due to a concentration if a near term severe impact is at least reasonably possible

Question 16

Disclosure of information about significant concentrations of credit risk is required for

Answer 16

most financial instruments

Question 17

Calc the net income for the discontinued operation?

Answer 17

Loss on discontinued Operation 70,000
Tax rate. (1-40%) 0.60

= 42,000

Income from continuing ope. 72,000
42,000

= 30,000

Question 18

Are there disclosures required for the market price of securities?

Answer 18

No disclosures are required since the market price doesn’t affect the presentation of the financial statements

Question 19

Describe the market approach?

Answer 19

transactions involving identical or comparable items

Question 20

Describe the cost approach?

Answer 20

current replacement cost

Question 21

Describe the Income approach?

Answer 21

The asset will measure the Fair Value by discontinued future cash flows of the asset

Question 22

The summary of significant accounting policies should disclose the

Answer 22

criteria for determining which investments are treated as cash equivalent

Question 23

For the purpose of FV of an asset or liability a transaction is assumed to occur in the

Answer 23

principal market if one exists bc the principal market has the greatest volume or level of activity

Question 24

Warranty costs are considered a change in estimate or correction on error?

Answer 24

change in estimate bc the the cost affects the current and future income

Question 25

When there is an error for depreciation expense do we need to make adjustments to include in net income?

Answer 25

correction of prior period errors should not be included in net income

Question 26

Level 2 inputs include the following

Answer 26

quoted for similiar items in active markets

quoted prices in market that are not active

observable inputs that are not quoted prices

Question 27

For interim financial reporting, a company income tax provision for the second quarter should be determined using the

Answer 27

effective tax rate expected to be application for the full year as estimated as the end of the second quarter

Question 28

Calc, the amount Raft uses report as a prior period adjustment?

Answer 28

Step 1 - calc the net income for machinary

210,000 x (1.0 - .30 tax rate)
147,000 net income

Step 2 - not recognizing annual depreciation

210,000 machinary cost
10,000 Salvage value
10 years
= 20,000

20,000 x 3 years x 1.0 -.30 tax rate 42,000

147,000 - 42,000 = 105,000

Question 29

When the given amount of the loss contingent can’t be estimated how should the loss be recorded?

Answer 29

Only disclose the loss not accrued it

Question 30

Are Losses accrued when the loss is probable and reasonably estimated?

Answer 30

In the note disclosure only

Question 31

With respect to litigation are the number of parties involved in the litigation likely to be used?

Answer 31

No

Question 32

What are the 2 main things required for a material contingent to occur?

Answer 32

1) - it is probable
2) - the amount of loss can be reasonably estimated

If one of these isn’t met NO loss is Accrued

Question 33

When there is a subsequent event of a fire or other casualty is that required to be disclosed

Answer 33

advise management to disclose the event in notes to the financial statements

Question 34

Disclosed in the notes to its financial statements that a significant number of its unsecured

Answer 34

Concentration of credit risk

Question 35

Should subsequent events that provide additional evidence with the respect to condition at the balance sheet date be record?

Answer 35

Yes bc since the information provide

Question 36

The correct concerning financial statement disclosure of accounting polices?

Answer 36

Disclosure of accounting policies is an integral part of the financial statements.

Question 37

Calc, the amount that would be used for interest expense be understand?

Answer 37

Year 3 - 10,000 x 12% x 10 /12 = 1,000

Year 4 30,000 x 12% x 6 /12 = 1,800

Year 5 16,000 x 12% x 8 / 12 = 1280

= 1,000 + 1800 + 1280 - 3000 interest expense = 1,080 interest expense

Question 38

When are quarterly filing due?

Answer 38

May 10TH

Question 39

SBW began expensing all insurance costs when they are incurred

Answer 39

an improvement in financial reporting

Question 40

A material loss is not a component of current period income from continuing operations when it is

Answer 40

A cumulative effect change in accounting principle

Question 41

When the recoverability of a building carrying amount is determined to be impaired, the building Fair Value is the best measured as the

Answer 41

Price that would be received for this type of building based on observable inputs in its principal market

Question 42

A material loss is NOT a component of current period income from continued operations when it is

Answer 42

A cumulative effect change in accounting principal

Question 43

Standard assurance warranty on its equipment?

Answer 43

In year 2 income from continuing operations