F1: Conceptual Framework and Financial Reporting

Question 1

Change in Accounting Estimates (application)

Answer 1

Prospective (going forward)

Question 2

Change in Accounting Principle (application)

Answer 2

Retrospective (going back)
Exception to the rule when change inventory to LIFO. This will result in prospective application because to difficult to determine.

Question 3

Change in Accounting Entity (application)

Answer 3

Restate prior period that is presented on the financial statements

Question 4

Error Correction (application)

Answer 4

Prior period adjustment

Question 5

Layout of the Income Statement

Answer 5

Net Income
-Cost of Sale
= Gross Profit

Selling and Admin Expenses
=Operating Expenses

Other income and expenses:
Interest Expense (non operating)

Other gains and losses:
Loss on sale
Gain on extinguishment of debt
Loss due to earthquake
=Income before Income Tax
-Income Tax Exp
=Income from continuing operations
-Income (loss) from discontinued operations

=Net Income