Question 1

Using the conceptual frameworks and other ideas, discuss whether a change in accounting policy should be treated prospectively or retrospectively.

Accepted Answer

The answer of Using the conceptual frameworks and other ideas,...

Question 2

An adjusted trial balance for Wizzard Industries Limited at December 31, 2011, follows.
Prepare a balance sheet at December 31, 2011, with items classified as current or non-current.

Accepted Answer

The answer of An adjusted trial balance for Wizzard Industries...

Question 3

A company's reported earnings are $2,000 and cash flows are $1,600. Based on economic conditions during the year, the company booked allowances of $150. As a result of contractual incentives, the company booked a further $250 in accruals. What is the amount of unbiased earnings?

Accepted Answer

A) $150 
B) $400 
C) $1,750 
D) $2,000 
A) $150 
B) $400 
C) $1,750 
D) $2,000

Question 4

Which of the following would be accounted for retrospectively? (More than one answer may be correct.)
A. A furniture maker decreases bad debts expense from 3% to 2% of credit sales.
B. A manufacturer determines that credit losses are becoming material due to deteriorating economic conditions. As a result, it decides to set up an allowance for doubtful accounts at 5% of amounts over 90 days.
C. A parking service estimates bad debts to be 10% of the value of parking violations issued. In the current year, it changes to estimating the allowance for bad debts to be equal to 20% of accounts 30 to 90 days and 50% of accounts over 90 days.
D. A shipbuilder changes its revenue recognition policy from the point of receipt by the customer to when the ship leaves the factory shipyard. This change results from a change in shipping policy from f.o.b. destination to f.o.b. shipping point. (Recall from introductory accounting that f.o.b. means "free on board," and it refers to the point at which ownership transfers from seller to buyer.)
E. An electronics retailer has never accrued for warranties or product guarantees. A new consumer protection law comes into effect, giving buyers of electronic products a guarantee against defects for 180 days after purchase and the ability to return defective products to the retailer.
F. A clothing company that has been operating for 20 years decides to obtain an external audit for the first time in order to meet the bank's demands. The audit firm recommends that management report inventories at the lower of cost and net realizable value, whereas the company has previously only tracked and reported inventory figures at cost.

Accepted Answer

The answer of Which of the following would be accounted...

Question 5

Prepare a single-step income statement using the following data for Leila Inc. for the year ended December 31, 2012.

Accepted Answer

Leila Inc.
Income St

Question 6

Assume that a company has a fiscal year of July 1, 2012-June 30, 2013. August 15, 2013, was the end of the period for gathering information pertaining to the financial statements. The financial statements were authorized for issue on August 24, 2013. What is the cut off point for the "measurement" of transactions and events in a reporting period?

Accepted Answer

A) July 1, 2012. 
B) The end of the subsequent events period. 
C) August 24, 2013. 
D) June 30, 2013. 
A) July 1, 2012. 
B) The end of the subsequent events period. 
C) August 24, 2013. 
D) June 30, 2013.

Question 7

Explain how "accruals" are used in financial reporting. Provide an example to support your discussion.

Accepted Answer

•Accruals are accounting entries that re

Question 8

Sing Songs Ltd. started operations on January 1, 2010. During its first year of operations, the company had a choice of accounting policies:
   Assume that the company selected Accounting Option 1. Using the following information about activities for 2010-2012, derive the net income for each year:

Accepted Answer

Accounting

Question 9

What is classified as a "non-current" liability?

Accepted Answer

A) An obligation expected to be settled within the ordinary operating cycle of the business. 
B) An obligation related to the company's normal operating activities. 
C) An obligation where the company has breached its covenant violations. 
D) A debt that need not be settled until more than a year after the balance sheet debt. 
A) An obligation expected to be settled within the ordinary operating cycle of the business. 
B) An obligation related to the company's normal operating activities. 
C) An obligation where the company has breached its covenant violations. 
D) A debt that need not be settled until more than a year after the balance sheet debt.

Question 10

Which of the following is not an example of a "cash" cycle?

Accepted Answer

A) Receipt of funding from investors that is used to generate returns from investments and operations, and then returned to investors. 
B) Purchase of property with long-term future benefits which results in cash inflows and then the property is disposed of. 
C) Planning for product growth which results in investment opportunities that will create returns for investors. 
D) Purchase of inventory, conversion into products that are delivered to customers, and receipts from customers. 
A) Receipt of funding from investors that is used to generate returns from investments and operations, and then returned to investors. 
B) Purchase of property with long-term future benefits which results in cash inflows and then the property is disposed of. 
C) Planning for product growth which results in investment opportunities that will create returns for investors. 
D) Purchase of inventory, conversion into products that are delivered to customers, and receipts from customers.

Question 11

Assume that a company has a calendar year of January 1, 2012-December 31, 2012. March 15, 2013 was the end of the period for gathering information pertaining to the financial statements. The financial statements were authorized for issue on March 24, 2013. What is the cut off point for the "recognition" of transactions and events in a reporting period?

Accepted Answer

A) January 1, 2012. 
B) March 15, 2013. 
C) March 24, 2013. 
D) December 31, 2012. 
A) January 1, 2012. 
B) March 15, 2013. 
C) March 24, 2013. 
D) December 31, 2012.

Question 12

Changes in accounting estimates

Accepted Answer

A) are accounted for in the same manner as changes in accounting policies. 
B) reduce the relevance and reliability of financial reporting. 
C) are applied to current and past reporting periods. 
D) are applied to current and future reporting periods. 
A) are accounted for in the same manner as changes in accounting policies. 
B) reduce the relevance and reliability of financial reporting. 
C) are applied to current and past reporting periods. 
D) are applied to current and future reporting periods.

Question 13

Which of the following is an example of the "financing" cash cycle?

Accepted Answer

A) Receipt of funding from investors that is used to generate returns from investments and operations, and then returned to investors. 
B) Purchase of property with long-term future benefits which results in cash inflows and then the property is disposed of. 
C) Planning for product growth which results in investment opportunities that will create returns for investors. 
D) Purchase of inventory, conversion into products that are delivered to customers, and receipts from customers. 
A) Receipt of funding from investors that is used to generate returns from investments and operations, and then returned to investors. 
B) Purchase of property with long-term future benefits which results in cash inflows and then the property is disposed of. 
C) Planning for product growth which results in investment opportunities that will create returns for investors. 
D) Purchase of inventory, conversion into products that are delivered to customers, and receipts from customers.

Question 14

For each of the following scenarios, determine the effects (if any)of the accounting change (correction of error, change in accounting policy, or change in estimate)on the relevant asset or liability, equity, and comprehensive income in the year of change and the prior year. Use the following table for your response.   A. Company A increases the allowance for doubtful accounts (ADA). Using the old estimate, ADA would have been $71,000. The new estimate is $74,000.
B. Company B omitted to record an invoice for a $7,000 sale made on credit at the end of the previous year and incorrectly recorded the sale in the current year. The related inventory sold has been accounted for.
C. Company C changes its revenue recognition policy to a more conservative one. The result is a decrease in prior year revenue of $4,200 and a decrease in current-year revenue of $6,300 relative to the amounts under the old policy.

Accepted Answer

The answer of For each of the following scenarios, determine...

Question 15

The following entry was recorded by Hollow Inc.:   What is the effect on Hollow's financial statements?

Accepted Answer

A) A cash inflow from operating activities of $70,000. 
B) Net assets decreased by $10,000. 
C) A decrease of $10,000 in using the indirect method of determining cash flows from operating activities. 
D) Retained earnings increased by $10,000. 
A) A cash inflow from operating activities of $70,000. 
B) Net assets decreased by $10,000. 
C) A decrease of $10,000 in using the indirect method of determining cash flows from operating activities. 
D) Retained earnings increased by $10,000.

Question 16

Explain the difference between a cash cycle, a financing cash cycle, an investing cash cycle and an operating cash cycle.

Accepted Answer

A cash cycle is a set of transactions th

Question 17

What is a financing cash cycle?

Accepted Answer

A) A cycle of transactions that converts cash inflows to cash outflows, or vice versa. 
B) A cycle where there is receipt of funding from investors, those funds are used to generate returns from investments and operations, and then the funds are returned to investors. 
C) A cycle where a property is purchased that has long-term future benefits for the enterprise, which ultimately results in cash inflows, and then the property is disposed of. 
D) A cycle that involves the purchase of items such as inventory; production, sales, delivery of goods or provision of services; and receipts from customers. 
A) A cycle of transactions that converts cash inflows to cash outflows, or vice versa. 
B) A cycle where there is receipt of funding from investors, those funds are used to generate returns from investments and operations, and then the funds are returned to investors. 
C) A cycle where a property is purchased that has long-term future benefits for the enterprise, which ultimately results in cash inflows, and then the property is disposed of. 
D) A cycle that involves the purchase of items such as inventory; production, sales, delivery of goods or provision of services; and receipts from customers.

Question 18

What is an investing cash cycle?

Accepted Answer

A) A cycle of transactions that converts cash inflows to cash outflows, or vice versa. 
B) A cycle where there is receipt of funding from investors, those funds are used to generate returns from investments and operations, and then the funds are returned to investors. 
C) A cycle where a property is purchased that has long-term future benefits for the enterprise, which ultimately results in cash inflows, and then the property is disposed of. 
D) A cycle that involves the purchase of items such as inventory; production, sales, delivery of goods or provision of services; and receipts from customers. 
A) A cycle of transactions that converts cash inflows to cash outflows, or vice versa. 
B) A cycle where there is receipt of funding from investors, those funds are used to generate returns from investments and operations, and then the funds are returned to investors. 
C) A cycle where a property is purchased that has long-term future benefits for the enterprise, which ultimately results in cash inflows, and then the property is disposed of. 
D) A cycle that involves the purchase of items such as inventory; production, sales, delivery of goods or provision of services; and receipts from customers.

Question 19

IFRS identifies a number of criteria to determine whether an asset can be classified as current. Satisfying any one of these criteria is sufficient. For the following list of criteria, identify whether each one is relevant for the classification of an asset as current instead of non-current.

Accepted Answer

The answer of IFRS identifies a number of criteria to...

Question 20

Why is determining the "cut-off" point critical in the accrual basis of accounting?

Accepted Answer

A) Based on the periodicity concept, financial statements are prepared on a regular basis. 
B) It is important to reflect business transactions and events in the subsequent accounting period. 
C) The point in time at which one reporting period ends and another begins is important. 
D) Transactions must be reported in the cut-off period before the statements are authorized. 
A) Based on the periodicity concept, financial statements are prepared on a regular basis. 
B) It is important to reflect business transactions and events in the subsequent accounting period. 
C) The point in time at which one reporting period ends and another begins is important. 
D) Transactions must be reported in the cut-off period before the statements are authorized.

Using the conceptual frameworks and other ideas, discuss whether a change in accounting policy should be treated prospectively or retrospectively.

An adjusted trial balance for Wizzard Industries Limited at December 31, 2011, follows. Prepare a balance sheet at December 31, 2011, with items classified as current or non-current.

A company's reported earnings are $2,000 and cash flows are $1,600. Based on economic conditions during the year, the company booked allowances of $150. As a result of contractual incentives, the company booked a further $250 in accruals. What is the amount of unbiased earnings?

Prepare a single-step income statement using the following data for Leila Inc. for the year ended December 31, 2012.

Explain how "accruals" are used in financial reporting. Provide an example to support your discussion.

Sing Songs Ltd. started operations on January 1, 2010. During its first year of operations, the company had a choice of accounting policies: Assume that the company selected Accounting Option 1. Using the following information about activities for 2010-2012, derive the net income for each year:

What is classified as a "non-current" liability?

Which of the following is not an example of a "cash" cycle?

Changes in accounting estimates

Which of the following is an example of the "financing" cash cycle?

The following entry was recorded by Hollow Inc.: What is the effect on Hollow's financial statements?

Explain the difference between a cash cycle, a financing cash cycle, an investing cash cycle and an operating cash cycle.

What is a financing cash cycle?

What is an investing cash cycle?

IFRS identifies a number of criteria to determine whether an asset can be classified as current. Satisfying any one of these criteria is sufficient. For the following list of criteria, identify whether each one is relevant for the classification of an asset as current instead of non-current.

Why is determining the "cut-off" point critical in the accrual basis of accounting?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Revenue Recognition

Cash and Receivables

Inventories

Financial Assets

Property, Plant, and Equipment

Intangible Assets, Goodwill, Mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters

Exam 3: Accrual Accounting

Using the conceptual frameworks and other ideas, discuss whether a change in accounting policy should be treated prospectively or retrospectively.

An adjusted trial balance for Wizzard Industries Limited at December 31, 2011, follows. Prepare a balance sheet at December 31, 2011, with items classified as current or non-current.

A company's reported earnings are $2,000 and cash flows are $1,600. Based on economic conditions during the year, the company booked allowances of $150. As a result of contractual incentives, the company booked a further $250 in accruals. What is the amount of unbiased earnings?

Prepare a single-step income statement using the following data for Leila Inc. for the year ended December 31, 2012.

Explain how "accruals" are used in financial reporting. Provide an example to support your discussion.

Sing Songs Ltd. started operations on January 1, 2010. During its first year of operations, the company had a choice of accounting policies: Assume that the company selected Accounting Option 1. Using the following information about activities for 2010-2012, derive the net income for each year:

What is classified as a "non-current" liability?

Which of the following is not an example of a "cash" cycle?

Changes in accounting estimates

Which of the following is an example of the "financing" cash cycle?

The following entry was recorded by Hollow Inc.: What is the effect on Hollow's financial statements?

Explain the difference between a cash cycle, a financing cash cycle, an investing cash cycle and an operating cash cycle.

What is a financing cash cycle?

What is an investing cash cycle?

IFRS identifies a number of criteria to determine whether an asset can be classified as current. Satisfying any one of these criteria is sufficient. For the following list of criteria, identify whether each one is relevant for the classification of an asset as current instead of non-current.

Why is determining the "cut-off" point critical in the accrual basis of accounting?

Fundamentals of Financial Accounting Theory

Conceptual Frameworks for Financial Reporting

Revenue Recognition

Cash and Receivables

Inventories

Financial Assets

Property, Plant, and Equipment

Intangible Assets, Goodwill, Mineral Resources, and Government Grants

Applications of Fair Value to Non-Current Assets

Filters