Far Ch 1 Exam Matrix And Becker After Ch. Test Ch 1

Front 1

_________________ are intended to establish the objectives and concepts that the FASB will use in developing standards of FAR

Back 1

Statements of Financial Accounting Concepts

Front 2

__________ establish GAAP in financial reporting by business enterprises.

Back 2

Statements on Financial Accounting Standards (SFAS)

Front 3

The meaning of "present fairly in accordance with GAAP " and "the hierarchy of sources of GAAP" are presented in ___________

Back 3

Statements on Auditing Standards (SAS)

Front 4

Investments by owners are specifically excluded from _________

Back 4

Comprehensive income

Front 5

_______ _______ adjustments are not considered accounting changes.

Back 5

Prior period

Front 6

An entity will be reported Discontinued operations IF
1. OR 2.

Back 6

1. it has been disposed of
OR
2. Is classified as held for sale

Front 7

A component classified as held for sale is measured at the lower of
________
OR ________
less cost to sell.

Back 7

it's carrying amount
OR
fair value

Front 8

Under what principal
Defer estimated Gains until realized
Record probable estimated losses immediately

Back 8

Conservatism Principle

Front 9

Sale of a fixed asset used for operations for greater than its carrying amount should be reported in the IS using the ________

Back 9

Net concept, showing the total Gain as a part of continuing operations, NOT net of Income Taxes.

Front 10

Interest expense is classified as a __________ on the IS.
Advertising is classified as a ____________

Back 10

1. separate line item
2. selling expense.

Front 11

The best, most current estimate of the annual _________ rate should be used to determine the income tax provision for the second quarter.

Back 11

Effective tax rate

Front 12

Comprehensive income includes all changes in Equity during a period except those resulting form ______________

Back 12

Owners investments and distribution to owners

Front 13

Because the note is due within the next fiscal year, it should normally be reported as a current liability. However, if either of two events occurs prior to the issuance of the financial statements, then the liability is reported as a long-term liability because it will not require the use of current assets or the creation of another current liability. The first of these events is that the note is actually __________________. The second is that the debtor signs __________ agreement with a party to refinance the note on a long-term basis when it comes due or at some time before it comes due. The other party must be capable of meeting this obligation.

Back 13

1. refinanced on a long-term basis
2. a non-cancelable

Front 14

Who pays bond issuance costs?

Back 14

The company; it reduces the amount received

Front 15

This group of bonds was sold at a yield rate (8 percent) that was higher than the market rate at the time (7 percent). Buyers would not buy this bond without an especially high right of return. That indicates that the market was not comfortable in some way with the company or the structure of the bond. If the bond had been viewed as relatively safe, the company should have been able to negotiate a yield rate that was a bit lower than the __________. Interest expense to be recognized for the first year is the $86,000 initial book value times the 8 percent yield rate (or $6,880). Because the interest being paid at the end of the first year was only $6,000 (face value of $1 million times the stated rate of 6 percent). The additional interest of $880 recognized as an expense ($6,880 less $6,000) must be compounded or added to the book value of the bond. That brings the book value (the principal) from $86,000 to $86,880. Interest expense for Year Two is this $86,880 figure times 8 percent or $6,950.40.

Back 15

market rate

Front 16

On January 1, Year One, Big Company offers to sell a $100,000 bond coming due in exactly 10 years. This bond pays cash interest of 2 percent at the end of each year. A buyer is found who wants to earn 5 percent interest each year. After some negotiations, Big agrees to the 5 percent effective rate. The present value of a single amount of $1 in ten years at 2 percent annual interest is .80 whereas the present value of a single amount of $1 in ten years at 5 percent annual interest is .63. The present value of an annuity of $1 in ten years at 2 percent annual interest is 8.75 whereas the present value of an annuity of $1 in ten years at 5 percent annual interest is 7.70. What is the sales price for this bond?

Back 16

The set cash flows established by this bond are $2,000 per year ($100,000 times 2 percent) for ten years plus $100,000 at the end of ten years. The price of the bond will be the present value of these cash flows at the desired 5 percent annual rate. $2,000 times 7.70 is $15,400 and $100,000 times .63 is $63,000. Total present value is $78,400 ($15,400 plus $63,000). That is the amount that should be paid for these future cash flows in order to earn the equivalent of 5 percent annual interest, the negotiated rate.

Front 17

Two things (bonds and stock warrants) are issued here for a single amount. If both values are known, the $990,000 (the cash received by the company) is prorated between the two based on the ___________. If only one value is known, that value is used for reporting purposes and the remainder is assigned to the other item. In this problem, only the value of the stock warrant is specified.

Back 17

relative values - Market value

Front 18

The loan comes due within the current year and must be shown as current unless the company can show that it has both the __________ to refinance. That intent and ability is proven by either refinancing the debt prior to the issuance of the financial statements on February 27, Year Two or obtaining a non-cancellable agreement to refinance by that same date. Basically, the company must show that there is no chance that the bond will have to be paid out of the company’s own current assets. If that is demonstrated, the bond is reported as long-term.

Back 18

intent and ability

Front 19

SFAS 109 requires an enterprise to net SEPARATELY all of the deferred tax assets and liabilities classified as _________ and __________.

Back 19

Current and Noncurrent

Front 20

If the decline in fair value is judged to be _________, the cost bases of the individual security shall be written down to fair value as a new cost basis and the amount of the write-down shall be included in earnings ( as a realized loss) - DECREASE IN NET INCOME

Back 20

OTHER THAN TEMPORARY

Front 21

Idle machine, cash surrender value of life insurance on corporate executives, and marketable equity investments valued at FMV should be reported as
_____________ on the B/S

Back 21

current assets

Front 22

Current assets consist of cash and other assets reasonably expected to be realized in cash or sold or consumed in operations within _______ or an operating cycle, whicherver is longer.

Back 22

One year

Front 23

A material event or transaction that is unusual in nature or occurs infrequently but not BOTH, and therefore does not meet both criteria for classification as an extraordinary item, should be reported as a separate component of __________

Back 23

Income from continuing operations

Front 24

___________ differences do not affect either interperiod or intraperiod Income Tax allocation.

Back 24

Permanent

Front 25

The net unrealized loss on marketable trading securities is included in ___________

Back 25

Income S., not in Other comprehensive income

Front 26

CORRECTION OF AN ERROR in FS of a prior period should be accounted for and reported as a prior period adjustment and should not affect income of the __________ period.

Back 26

Current

Front 27

Total assets = Total Liability + Stockholder's Equity

Borrowed fund to start a corporations are part of ______________

Back 27

Total Liability

Front 28

The amortization of a bond discount is the deference between cash interest and interest expense. Cash paid for interest is reported in operating activities.
Amortization of a discount on bonds payable results in interest expense greater than cash interest.
Because more expense has been deducted in computing income than the amount of cash paid for interest, the difference (captured in the change in the bond discount account) must be added to _____ to reconcile to the cash provided or used for operating activities.

Back 28

Income

Front 29

___________ is a periodic interim invoicing for progress payments on L/T contracts. It is contra Assets account, netted against the construction in process assets account and recorded as either an asset (contraction costs in excess of billings) or as a liability (billings in excess of construction costs.)

Back 29

Billing

Front 30

The segregated account (restricted as to withdrawal or use) should be classified as ___________

Back 30

Noncurrent asset

Front 31

The overdrawn account should be reported as _________

Back 31

CURRENT LIABILITY

Front 32

Inventory is accounted for at lower of ___________ or _________.
___________ is measured as Replacement cost, Net realizable value, or Net realizable value less a normal profit margin.

Back 32

1 (Historical) cost or Market cost
2 Market

Front 33

A credit balance in the deferred income taxes account does not represent a payable in the usual sense in which the term "payable" is used in financial statements. The credit balance in the deferred income taxes account represents the tax ____________ recognized to-date for financial reporting purposes that is expected to be included in taxable income in future years. However, it does not represent an amount "owed" to the federal gov. at the B/S date.

Back 33

expense

Front 34

Consolidated statements reflect the ___________ concept.

Back 34

ECONOMIC ENTITY

Front 35

The amount to be assigned to inventories (acquired in an acquisition) of finished goods and merchandise is the
estimated selling price
less the sum of
1. costs of disposal and
2. a reasonable profit allowance for the selling effort of the acquiring corporation.

The amount to be assigned to the inventory of WIP is - the
estimated selling prices of finished goods
less the sum of
1. costs to complete,
2. costs of disposal, and
3. a reasonable profit allowance for the completing and selling effort of the acquiring corporation based on profit for similar finished goods.

The amount to be assigned to raw material is - current replacement cost.

Back 35

The general guidelines for assigning amounts to the inventories acquired

Front 36

Depreciation expense of the asset sold to subsidiary company at a GAIN (treated as unrealized gain) on a Consolidated IS should be the depreciation that would have been expansed on ________ if the equipment had not been sold

Back 36

Parents books

Front 37

__________ statements may be used to present the results of operations of
1. companies under common management AND
2 commonly controlled companies

Back 37

COMBINED STMTS

Front 38

Other Comprehensive income includes revenues, expenses, gains, and losses that are included in Comprehensive income but __________.
The total of Other Comprehensive income for a period must be transferred to a separate component of Equity in the B/S at the end for the accounting period.

Back 38

EXCLUDED from NET INCOME

Front 39

Dividends paid to ___________ would NOT be included in computation of COMPREHENSIVE INCOME

Back 39

STOCKHOLDERS

Front 40

_________ securities include debt securities and readily marketable equity securities that are bought and held principally for the purpose of selling them in the near term.
_______ securities are recognized in the B/S at fair value. Unrealized holding G/L are included in earnings.

Back 40

TRADING

Front 41

__________ securities are recognized in the B/S at fair value. However, any related unrealized holding G/L are excluded from _________ and reported as __________.

Back 41

A-FOR-SALE : INVESTMENTS IN DEBT AND EQUITY SEC
NET INCOME
OTHER COMPREHENSIVE INCOME