f2c Flashcards
A newly acquired plant asset is to be depreciated over its useful life. What is the basis for this accounting method?
A basic feature of financial accounting is that the business entity is assumed to be a going concern in the absence of evidence to the contrary. The going-concern concept is based on the empirical observation that many entities have indefinite lives. The reporting entity is assumed to have a life long enough to fulfill its objectives and commitments and therefore to depreciate wasting assets over their useful lives.
or external reporting purposes, it is appropriate to use estimated gross profit rates to determine the cost of goods sold for
interim / year ending financial report
his answer is correct. Per ASC Topic 270, determining the cost of goods sold by using estimated gross profit rates is only appropriate for interim periods and is not appropriate for year-end external reporting. For year-end reporting, the actual cost of goods sold must be determined by using the inventory flow method which most clearly reflects income.
Which of the following is a true statement regarding FASB ASC 825-10-25-1?
The statement permits election of fair value measurement on a contract-by-contract basis.
Some costs cannot be directly related to particular revenues but are incurred to obtain benefits that are exhausted in the period in which the costs are incurred. An example of such a cost is
Expenses should be recognized when a benefit has been consumed. The consumption of benefit may occur when (1) the expenses are matched with the revenues, (2) they are allocated on a systematic and rational basis to the periods in which the related assets are expected to provide benefits, or (3) the cash is spent or liabilities are incurred for goods and services that are used up either simultaneously with the acquisition or soon after. An example of a cost that (1) cannot be directly related to particular revenues but (2) is incurred to obtain benefits that are exhausted in the same period in which the cost is incurred is salespersons’ monthly salaries.
Under what condition is it proper to recognize revenues prior to the sale of the merchandise?
When the ultimate sale of the goods is at an assured sales price.
because profit is to be considered realized when a sale in the ordinary course of business is effected. Inventory valuation above cost can only be justified by the following: an inability to determine approximate costs, immediate marketability at a quoted price, and the characteristic of unit interchangeability. Thus, a condition permitting recognition of revenue prior to sale would be an assured sales price.
Under IFRS reporting, a prior period error includes all of the following except for:
Changing accounting policies.
under IFRS reporting, changes in accounting policies are not considered prior period errors. Prior period errors include arithmetic mistakes; accounting policy application mistakes; and recognition, measurement, presentation, and disclosure mistakes.
What is the purpose of SFAC 4 as stated in that concepts statement?
To provide a basis for establishing detailed accounting and reporting standards for nonbusiness entities
The diluting effect of options and warrants and their equivalents is reflected in diluted EPS by application of the treasury stock method, which assumes that:
Exercise of options and warrants is assumed at the beginning of the period. Proceeds are assumed used to purchase common stock at the average market price during the period. The incremental shares are included in the denominator of diluted EPS.
Financial information is most likely to be verifiable when an accounting transaction occurs that
Verifiability is an enhancing qualitative characteristic of relevant and faithfully represented financial information. Information is verifiable (directly or indirectly) if knowledgeable and independent observers can reach a consensus (but not necessarily unanimity) that it is faithfully represented. The existence of an arm’s-length transaction between independent interests suggests that the transaction is verifiable.
Which SEC document provides instructions for filing the nonfinancial statement forms required under the Securities Act of 1933?
Regulation S-K contains the instructions for filing the nonfinancial statement forms required by the SEC.
Regulation S-X contains information regarding the financial statements that must be submitted to the SEC. There are no such documents as the “SEC Form Guide” or “Regulation 10-K-I (Instructions).”
Which of the following organizations is responsible for setting International Financial Reporting Standards?
International Accounting Standards Board (IASB) issues International Financial Reporting Standards.
According to the Private Company Decision-Making Framework, which of the following five items are to be used as a guide to determine if there should be differential guidance between public and private companies.
ive items to be used as a guide to determine if there should be differential guidance between public and private companies are: recognition and measurement; disclosures; display; effective date; and transition method
under IFRs for goods that are similar in nature and value.how to compute the gain
Barter transactions are not recognized if the exchanged goods are similar in nature and value. If the goods are dissimilar, revenue is recognized at fair value of the goods received. If the fair value of the goods received cannot be measured, revenue is recognized at the fair value of goods or services given up.
