Test 3- Incorrect Questions Flashcards
What must be present to require the disclosure of the estimated effects of a change in an estimate used in the preparation of financial statements
- It is reasonably possible that the estimate will change in the near term
- The effect of a change in estimate would be material
How do you calculate the total prize expense to be recorded in the financial statement
First payment
+ PV of additional payments
= expense in Year 1 income statement
Is market research related to a major product for the company considered to be an R&D expense?
Yes
What are the requirements for a segment to be considered a reportable segment?
The segment must meet one of the 10% size tests:
- revenues
- reported profit/loss
- Assets
What are the 3 tests for reportable segments
- Revenues
- Reported profit/loss
- Assets
How should end of years officers bonuses be reported?
They should be accrued at year-end and included in total accrued salaries.
How should expenses be reported throughout the year?
Actual and estimated expenditures benefiting all interim periods equally should be expensed ratably throughout the year
How would 150,000 for unanticipated repairs to office equipment be reported throughout the year
it would be expensed ratably throughout the year
How are deferred income taxes that are based on temporary differences be classified on the balance sheet?
non-current deferred tax liability
How do you calculate ending Asset Retirement Obligation (ARO)?
Beginning ARO + PV of new ARO + Accretion Expense - ARO settled during the period
Where does allowance for doubtful accounts belong on the balance sheet?
Current assets
it is subtracted/contra account
Where does discount on BP belong on the balance sheet?
Non-current liability
It is subtracted/contra account
How is treasury stock reported on the balance sheet
negative/contra account
when should a loss on inventory be accounted for?
When the loss is probable and estimable and the loss must be recorded in full
What is included in the cost of land
Cost of land includes all costs necessary to put it in the place and condition for construction of the building
Are legal fees and title insurance included in the cost of land
Yes
How do you calculate goodwill
LOOK UP
How do you calculate accounts receivable turnover in days?
365/ Accounts rec turnover
Accounts rec turnover= net credit sales/ average net rec
What costs are included in patent capitalization?
Purchase price + Acquisition costs + Legal fees (if successful)
What if you have two patents and they are challenges and one wins and one losses…what amounts are capitalized
you would capitalize all amounts for the winning patent… The other patent would not be capitalized at all. This means the purchase price would not be included, the acquisition costs and the losing fees
How is a majority voting interest achieved?
Majority voting interest is achieved when
1) control over an investee is established
2) more than 50% of the voting stock of the investee has been acquired.
when an entity reissues financials what is the rule about recognizing events that occur during that period?
When an entity reissues financial statements, the entity should not recognize events (adjust for events) that occured between the date the original financial statements were issued or available to be issued and the date the financial statements were reissued.
what is the journal entry for when taxpayers are billed for property taxes?
D: Property Taxes Receivable
Cr: Revenues
What is the rule for losses related to percentage complete method and the completed-contract method?
for both the percentage of completion and completed contract methods, the entire estimated loss is recorded for a loss contract in progress (not only the loss incurred to date)
What happens when a company pledges their accounts receivable to another group?
When a company assigns receivables in return for a loan, the assigning (company that owns the accounts) company will retain title to the receivables and will use the proceeds collected from the receivables to repay the loan
Who retains title of the AR when AR is pledged?
The assigned company (the company that has the AR)
Who assumes responsibility for collecting AR when Ar is assigned to another company?
the main company
How are donated services recorded for a NFP
Record as increase in revenues, gains, and other support without donor restrictions
How would the following be recorded by NFP?
receiving an investment subject to the donor’s requirement that investment income be used to pay for services consistent with the mission
- Increase in net asset with donor restrictions
The investor is still choosing how the money will be used
How do you evaluate impairment loss?
step 1: Determine if impairment exists:
sum of undiscounted cash flows vs. CV
Step 2: Carrying value - FV
What document is issued as part of the due-process activities of the financial accounting standards board for amendment of FASB codification
A proposed accounting standards update
What is a proposed accounting standards update
Released when deciding whether to make an amendment to the codificaiton
How a hospitals long term debt reported in the city’s financial statement
Recorded as a long term debt in the component unit column of the government-wide long-term debt in financial statements
How do you record AP using the net method
Accounts payable gross amount
- purchase discounts in AP balance available
AP net of purchase discounts
Question 25
Look up
What is the income approach
Determines fv by converting future amounts including current cash flow or earnings to a single discounted amount
Requires the discount rate
For a capital lease, the amount recorded initially by the lessee as a liability should normally
Equal the present value of the minimum lease payments at the beginning of the lease
How are discontinued operations that occur at midyear initially reported?
Included in NI and disclosed in the notes to the interim financial statements
What is the amount of interest expense recorded for the year for a capital lease
interest rate x PV of lease payments = interest expense
Question 26- discontinued operations
look up
How are hospital funds restricted
in the same manner as NFP
How is compensation expense recorded?
compensation cost is measured on the grant date and is charged to compensation expense over the service period (year 1 and year 2)
Total compensation expense / service period
What is the underlying cost
the rate that is agreed on to be paid (upfront)
What is the notional amount
the amount of money that is agreed to be sold
What is the initial investment for a forward contract?
There is no initial investment for forward contracts
What is the settlement amount
(underlying amount x amount)
