SEC Reporting and other topics

Question 1

What is Income approach?

Answer 1

methods that based on future amounts and earnings and cash flows

Question 1

What is the Market Approach?

Answer 1

information from market transaction that involve identical or comparable items

Question 2

Should a loss that is material loss on an asset be recognized?

Answer 2

Yes, the lost must be recognized in the F/S bc this event provided additional information with in respect to the conditions at the balance sheet date

Question 3

In general, an enterprise preparing interim financial statement should

Answer 3

Use the same accounting principals its latest annual financial statements

Question 4

On a change in warranty obligation new information is obtained

Answer 4

When there is new information that is being obtained it’s “Change in accounting estimate which is accounted for prospective basis”

When there is a change in or new information that accounting should be be reported on period of change

Question 5

FMV of an asset or liability is based on FV hierarchy that established priorities among inputs to valuations techniques?

Answer 5

Unadjusted quoted prices for an identical assets or liability are on level 1

Level 1 inputs are unadjusted quoted prices in active markets for identical assets

Question 6

What should be including in the summary of significant accounting method?

Answer 6

1) basis of consolidation
2) depreciation methods
3) amortization of intangible
4) inventory pricing
5) recognition of profit on the long term construction type contracts
6) recognition of revenue from franchising and leasing operations
7) the policy for defining cash information about PP&E

Question 7

Calc the involuntary conversion gain or loss for the nonmonetary asset to monetary assets?

Answer 7

Original cost 100,000
CV 70,000

Gain. 30,000

Question 8

Calc, the gain or loss on disposal of the machine?

Answer 8

To cal the disposal you need to know the difference between the proceeds received and the carrying amount of the machine on transaction date

90,000 ORIGINAL COST
X 0.5 / 10 YEARS USEFUL LIFE
= 4500

5000 - 4500 = 500 GAIN

Question 9

Calc the gain on the condemnation of a property?

Answer 9

Start off with the CV 575,000
Add Apprasial fees 2,500
Add Attorney fees 3,500

Gain on the condemnation 581,000

Question 10

How do you know if there is an impairment loss?

Answer 10

1. Carrying amount of the long lived asset is not recoverable
2. the carrying amount exceeds the assets group of FV

100 CV exceeds the FV 75

Question 11

When is testing for impairment long lived asset is required?

Answer 11

whenever events or changes in circumstance indicate that its carrying amount may not be recoverable

When CV is not recoverable an impairment loss is recognized equal to the excess of the carrying amount over the FV

Question 12

Calc the Impairment loss that needs to be reported?

Answer 12

Formula is CV - FV = impairement loss

This problem we have

Question 13

When there is errors for correction for prior period errors must not be included in the current year net income, how are they adjusted

Answer 13

since it’s a prior period adjustment we will not included the adjustment in the current year so we will accumulated the depreciation as it will increase by 40,000

Question 14

How subsequent events as such fire or other casualty are reported on the financial statements?

Answer 14

they are not reported however they are disclosed in the financial statements

Question 15

The Financial statement must disclose significant risks and uncertainties what may they be?

Answer 15

vulnerability due to a concentration if a near term severe impact is at least reasonably possible

Question 16

Disclosure of information about significant concentrations of credit risk is required for

Answer 16

most financial instruments

Question 17

Calc the net income for the discontinued operation?

Answer 17

Loss on discontinued Operation 70,000
Tax rate. (1-40%) 0.60

= 42,000

Income from continuing ope. 72,000
42,000

= 30,000

Question 18

Are there disclosures required for the market price of securities?

Answer 18

No disclosures are required since the market price doesn’t affect the presentation of the financial statements

Question 19

Describe the market approach?

Answer 19

transactions involving identical or comparable items

Question 20

Describe the cost approach?

Answer 20

current replacement cost

Question 21

Describe the Income approach?

Answer 21

The asset will measure the Fair Value by discontinued future cash flows of the asset

Question 22

The summary of significant accounting policies should disclose the

Answer 22

criteria for determining which investments are treated as cash equivalent