Deck 10

Question 1

A segment meets the size test if the absolute amount of reported profit or loss is 10% or greater, in absolute amount of:

Answer 1

1. The combined reported profit of all operating segments that did not report a loss, or
2. The combined reported loss of all operating segments that did report a loss

Separate the segments that reported a loss and ones that reported a profit. Then get 10% of the greater amount, doesn’t matter if it is negative (absolute amount). Then the segments that we greater than the 10 % qualify as reportable segments.

Question 2

Timeliness, understandability, comparability, and verifiability are characteristics that:

Answer 2

Enhance the usefulness of information that is relevant and faithfully represented. Neutrality is a key component of faithful representation, not a enhancing qualitative characteristic.

Question 3

Personal financial statements usually include:

Answer 3

A statement of financial condition (similar to a balance sheet) and a statement of changes in net worth (similar to a income statement).

Question 4

A bond investment is classified as trading securities if the bond is:

Answer 4

Held for the purpose of selling them in the near future. Trading securities are reported at fair value on the balance sheet, not face value.

Question 5

A gain/loss on extinguishment is equal to the difference between:

Answer 5

The reacquisition price and the net carrying amount of the bond.
The reacquisition price is: Face value times the call amount (i.e 102).
The carrying value is: Face Value less unamortized discount less unamortized bond issue costs.

Question 6

Financing activities include the cash effects of transactions:

Answer 6

Obtaining resources from owners and providing them with a return on their investment.

Question 7

Cash provided by operations is determined by:

Answer 7

Taking Net income adding back depreciation expense and subtracting any gain on sale of equipment.

Question 8

The primary difference between the purchase method and the comsumption method of accounting for inventory is that the purchase method:

Answer 8

Initially records additions to inventory as expenditures and then establishes inventory balances and related non-spendable fund balance amounts.

Question 9

Non-capital financing activities (governmental accounting) include borrowing for non-capital purposes as well as:

Answer 9

Cash receipts from grants or subsidies, or property taxes.

Question 10

Contributions that don’t allow the recipient to have variance (discretion) power over the use of the contribution is a:

Answer 10

Liability not a temporary restricted contribution.

Question 11

Under IFRS, an impairment loss is first allocated to:

Answer 11

Goodwill, any remaining impairment loss is then allocation on a pro rata basis to the other assets of the cash-generating unit.

Question 12

Under US GAAP, R&D includes costs incurred prior to technological feasibility for:

Answer 12

Developed software that is to be sold, leased, or marketed. R&D related to Software intended for internal use is not part of R&D expense. Market research is also not part of R&D expense.

Question 13

Under IFRS, Development costs may be capitalized if all of the following criteria are met:

Answer 13

1. Technological Feasibility has been established.
2. The company intends to complete the asset.
3. The company has the ability to sell or use the asset.
4. Sufficient resources are available to complete the development and sell/use the asset.
5. The asset will generate future economic benefit.

All need to be met in order for development costs to be capitalized under IFRS. Under GAAP, both Research and Development cost are always expensed.

Question 14

The minimum operating cycle for purposes of reporting a prepaid is:

Answer 14

12 months. Even if the company’s operating cycle is 6 months, the current portion of a prepaid is 12 months. Current assets are 12 months.

Question 15

Costs associated with computer software that is developed to be sold, leased, or licensed may be capitalized:

Answer 15

Once technological feasibility has been established. The costs will continue to be capitalized until the software is released for sale. Costs incurred prior to (including planning, coding, and testing phases) and after release are expensed.

Question 16

Under percentage of completion method, current liability exists when:

Answer 16

Progress billings exceed costs and estimated earnings (aka profit).

Question 17

Nonmonetary exchanges that lack commercial substance:

Answer 17

Only in situations where boot was received and the boot is less than 10% of total consideration, then any gain recognized is reported at the ratio of cash received to total consideration (proportionally). Fair value is not used for nonmonetary exchanges that lack commercial substance.

Question 18

If boot exceeds 25% of the total consideration then:

Answer 18

The exchange is considered a monetary exchange. All gains and losses are recognized in full. Total consideration is Boot plus fair value of asset being exchanged. Gain is determined by subtracting FV and BV for old asset.

Question 19

Current cost amounts of inventory and PPE are measured at:

Answer 19

Current cost or lower recoverable amount at measurement date.

Question 20

On personal statement of financial condition:

Answer 20

Estimated income tax equals the difference between fair values and tax bases of assets and liabilities.

Question 21

On a consolidated balance sheet, the carrying amount of equipment should be reported at:

Answer 21

Cost less reported Gain.

Question 22

The rule for consolidated financials as it related to common stock is:

Answer 22

100% of a purchased subsidiary’s stockholders’ equity (including common stock) is eliminated in consolidation.

Question 23

When subsidiary’s declare and pay dividends, the only amount that should be reported on the consolidated financial statements is:

Answer 23

The amount declared and paid to external parties. Intercompany dividends should be eliminated upon consolidation.

Question 24

Consolidated net income is the same as the:

Answer 24

Parent company when using the equity method.

Question 25

Bond investments which are intended to be held to maturity are reported at:

Answer 25

Their amortized cost.

Question 26

A change from cost method to equity method is:

Answer 26

Accounted for retrospectively. However, a change from equity method to cost is not required to account for retrospectively.

Question 27

When members of a consolidated group have intercompany bond holdings:

Answer 27

The bonds are eliminated in consolidation and the difference (gain or loss) between the discounted bond price and the premium on reacquisition would be included in retained earnings.

Question 28

Marketable debt securities, both long and short term are reported at:

Answer 28

Carrying amount (amortized cost) unless there is a permanent decline in market value.

Question 29

Goodwill is calculated as:

Answer 29

Fair value of subsidiary - Fair value of subsidiary's net assets. Net assets means assets less liabilities.

Question 30

The discount on a note payable should be reported as:

Answer 30

A direct reduction to the face amount of the note on the balance sheet.

Question 31

The amount of deferred gross profit relating to installment AR collections that are more than 12 months from the balance sheet date are reported as:

Answer 31

A current asset and a contra account.

Question 32

Unrealized gains and losses on available for sale securities are booked to:

Answer 32

OCI. Changes in fair value of the securities will continue to go there until they are sold. This is only for Available for Sale securities.

Question 33

The depletion base equals:

Answer 33

the purchase price plus the development costs plus the estimated restoration costs less the expected salvage value. The amount that the company thinks they can sell the property for after depletion is subtracted from the depletion costs.

Question 34

Retained earnings are reduced by both:

Answer 34

Cash and property dividends.