Financial Statements

Question 1

How is the income statement prepared?

Answer 1

-All inclusive approach (almost all revenues, expenses, gains, and losses included, prior period adj however excluded and appear on statement of R/E)

Question 2

What items are included in comprehensive income?

Answer 2

• Unrealized gains and losses on AFS securities
• Certain pension cost adjustments
• Foreign currency translation adjustments
• Certain gain/loss deferrals on hedge accounting

Question 3

What does the statement of comprehensive income report?

Answer 3

-All non-owner changes in equity over same time period as I/S

Question 4

What are the two formats for the Balance Sheet?

Answer 4

• Account Format

- Report Format

Question 5

How are assets, liabilities, and equity items presented?

Answer 5

• Assets in order of decreasing liquidity
• Liabilities in order of earliest maturity
• Equity in order of decreasing permanence

Question 6

What are current assets?

Answer 6

-Cash or assets to be converted into cash within 1 yr or operating cycle, whichever is longer

Question 7

What are current liabilities?

Answer 7

-Liabilities due in upcoming year or operating cycle of business, whichever is longer. Also must be met through transfer of a CA or creation of a CL

Question 8

What are cash equivalents?

Answer 8

Short term investments that:

 - Are convertible into a known and fixed amount of cash
 - Have an original maturity to purchaser of three months or less

Question 9

What must match between Balance Sheet and Statement of CFs?

Answer 9

-Definition of Cash or CCE must match!