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9 Cards in this Set
- Front
- Back
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The usefullness of providing information in Financial Statements is subject to which constraint?
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Cost-Benefit
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Gain contingencies should not be recorded prior to realization as a prudent reaction to the uncertainty surrounding the realization of the gain as reflected of
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Conservatism
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What are the sub-categories of the primary quality: Relevance
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Predictive Value
Feecback Value Timeliness |
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What are the sub-categories of the primary quality: Reliability
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Neutrality
Represenational Faithfulness Verifiability |
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On December 2, 20X1, Flint Corp.'s board of directors voted to discontinue operations of its frozen food division and to sell the division's assets on the open market as soon as possible. The division reported net operating losses of $20,000 in December and $30,000 in January. On February 26, 20X2, sale of the division's assets resulted in a gain of $90,000. Assuming that the frozen foods division qualifies as a component of the business and ignoring income taxes, what amount of gain/loss from discontinued operations should Flint recognize in its income statement for 20X2?
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$60,000
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At December 31, 1998, Off-Line Co. changed its method of accounting for demo costs from writing off the costs over two years to expensing the costs immediately. Off-Line made the change in recognition of an increasing number of demos placed with customers that did not result in sales. Off-Line had deferred demo costs of $500,000 at December 31, 1997, $300,000 of which were to be written off in 1998 and the remainder in 1999. Off-Line's income tax rate is 30%. In its 1998 financial statements, what amount should Off-Line report as cumulative effect of change in accounting principle?
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$0
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The following question is based on the following:
Vane Co.'s trial balance of income statement accounts for the year ended December 31, 2002, included the following: Debit Credit Sales $575,000 Cost of sales $240,000 Administrative expenses 70,000 Loss on sale of equipment 10,000 Sales commissions 50,000 Interest revenue 25,000 Freight out 15,000 Loss on early retirement of long-term debt (unusual & infrequent item) 20,000 Uncollectible accounts expense 15,000 Totals $420,000 $600,000 Other information Finished goods inventory: January 1, 2002 $400,000 December 31, 2002 $360,000 Vane's income tax rate is 30%. In Vane's 2002 multiple-step income statement, what amount should Vane report as income from continuing operations? |
$140,000
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On August 31, 1992, Harvey Co. decided to change from the FIFO periodic inventory system to the weighted average periodic inventory system. Harvey is on a calendar year basis. The cumulative effect of the change is determined:
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As of January 1, 1992.
Rule: The cumulative effect of a change in accounting principle equals the difference between retained earnings at the beginning of the period of the change and what retained earnings would have been if the change was applied to all affected prior periods. |
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Midway Co. had the following transactions during 1992:
• $1,200,000 pretax loss on foreign currency exchange due to a major unexpected devaluation by the foreign government. • $500,000 pretax loss from discontinued operations of a division. • $800,000 pretax loss on equipment damaged by a hurricane. This was the first hurricane ever to strike in Midway's area. Midway also received $1,000,000 from its insurance company to replace a building, with a carrying value of $300,000 that had been destroyed by the hurricane. What amount should Midway report in its 1992 income statement as extraordinary loss before income taxes? |
$100,000
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