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The standalone selling price of a performance obligation in a contract with a customer may not be directly observable. Alternatives for estimating the standalone selling price include

Estimation of the Pricein the Seller's Market. Residual Approach. Expected cost plus an appropriate margin

What gross margin equals to? (inventory topic)

Gross margin equals sales minus cost of goods sold. If it is 20% of sales, cost of goods sold equals $220,000 [$275,000 × (1.0 - .20)]

The correction of an error in the financial statements of a prior period should be reported, net of applicable income taxes, in the current?

Retained earnings statement as an adjustment of the opening balance. Prior-period adjustments of single-period statements must be reflected net of applicable income taxes as changes in the opening balance in the statement of retained earnings of the current period. In comparative financial statements, all prior periods affected by the prior-period adjustment should be restated to reflect the adjustment.

When are share options considered to be dilutive?

Share options are considered to be dilutive if the average market price for the period exceeds the exercise price.

Where are the unrealized holdings gain and losses reported?

Unrealized holding gains and losses on trading debt securities are included in earnings and are therefore reported in the income statement.

According to the FASB's conceptual framework, which of the following items would cause net income to differ from comprehensive income?

Unrealized holding loss on available-for-sale debt securities. Comprehensive income includes earnings (net income) but also such other nonowner changes in equity as holding gains and losses on available-for-sale debt securities and foreign currency translation adjustments.

Under ASC 606, which of the following methods, if any, are acceptable for estimating the amount of variable consideration in contracts with customers?

The most likely amount method in the range of possible amounts is an acceptable means of estimating the amount of variable consideration

Under ASC 606, the transaction price generally should be adjusted for the effect of the time value of money when

The selling price of the product and the consideration promised in the contract differ significantly. The transaction price should be adjusted for the effect of the time value of money when the contract includes a significant financing component. A significant difference between (1) the selling price of the product and (2) the consideration promised in the contract may indicate that the financing component is significant.

Should the general improvements to the leased property be capitalized?

General improvements ( like landscaping costs) to leased property should be capitalized as leasehold improvements and amortized in accordance with the straight-line method over the shorter of their expected useful life or the lease term. However, if the useful life of the asset extends beyond the lease term and renewal of the lease is reasonably certain, the amortization period may include all or part of the renewal period. If renewal is uncertain, the useful life is the remaining term, and the salvage value is the amount, if any, to be paid by the lessor to the lessee at the expiration of the lease.

Is Available-for-sale debt securities an asset?

Yes

Is Investment in trading debt securities a current asset?

Yes

Is land help for resale a current asset?

Yes

Under SFAC 8, the ability, through consensus among measurers, to ensure that information represents what it purports to represent is an example of the concept of?

Verifiability.

If purchased bonds at a discount on the open market as an investment and has the intent and ability to hold these bonds to maturity. Absent an election of the fair value option, how you should account for the bonds at?

Without an election of the fair value option, investments in debt securities that the investor has the ability and positive intent to hold until maturity must be classified as held-to-maturity and measured at amortized cost.

Should the expenditures that increase the quality or quantity of a machine's output should be capitalized?

Yes. Expenditures that increase the quality or quantity of a machine's output should be capitalized whether or not its useful life is extended.

What is the formula for the cost of goods manufactured?

equals cost of sales, minus beginning finished goods, plus ending finished goods. Cost of goods sold equals cost of goods manufactured, plus beginning finished goods inventory, minus ending finished goods inventory

What are the necessary elements of a present value measurement?

following are the necessary elements of a present value measurement: Estimates of future cash flows, Expected variability of their amount and timing, The time value of money (risk-free interest rate), The price of uncertainty inherent in an asset or liability, and Other factors, such as liquidity or market imperfections.

How do the investments in equity securities should be reported?

investment in equity securities that does not result in significant influence or control over the investee is reported at fair value, and unrealized holding gains and losses are included in earnings.

What account does uncollectible receivable account affects?

uncollectible receivables affects the allowance account but not gross accounts receivable.

Ending inventory is equal to?

Ending inventory is equal to goods available for sale minus cost of goods sold.

What is regulation S-B ?

Regulation S-B applies to smaller reporting companies (small business issuers and nonaccelerated filers).

What is regulation S-K?

Regulation S-K provides integrated disclosure standards, many of which are nonfinancial. It does not state requirements for financial statements.

What is regulation S-T?

Regulation S-T governs the types of documents the SEC requires to be filed electronically.

What is Regulation S-X?

Regulation S-X applies to the reporting of financial statements, including notes and schedules

When is the contract modification accounted as a separate contract?

A contract modification exists when the parties approve a change in the scope or price of a contract. A contract modification is accounted for as a separate contract if (1) it results in the addition to the contract of promised goods or services that are distinct and (2) the price for these additional goods or services is their standalone selling price.

How material event or transaction that is unusual in nature or infrequent in occurrence must be reported?

A material event or transaction that is unusual in nature or infrequent in occurrence must be reported as a separate component of income from continuing operations. Such items must not be reported on the face of the income statement net of income taxes.

How should the material event or transaction that is unusual in nature or infrequent in occurrence must be reported?

A material event or transaction that is unusual in nature or infrequent in occurrence must be reported as a separate component of income from continuing operations. Such items must not be reported on the face of the income statement net of income taxes.

How to calculate the dollar-value LIFO inventory?

A price index for the current year may be calculated by dividing the ending inventory at current-year cost by the ending inventory at base-year cost. This index is then applied to the current-year inventory layer stated at base-year cost

How to calculate the price index used to compute dollar-value LIFO inventory layer?

A price index for the current year may be calculated by dividing the ending inventory at current-year cost by the ending inventory at base-year cost. This index is then applied to the current-year inventory layer stated at base-year cost.

What is factoring of AR?

Accounts receivable are factored when they are sold outright to a third party. This sale may be with or without recourse.

What does Accrued interest receivable equal to ?

Accrued interest receivable is always equal to the face amount times the nominal rate for the period of the accrual.

How the incurred interest is being handled when the company is constructing an asset for its own use?

An asset constructed for an entity's own use qualifies for capitalization of interest if (1) relevant expenditures have been made, (2) activities necessary to prepare the asset for its intended use are in progress, and (3) interest is being incurred. The capitalized amount is determined by applying an interest rate to the average qualifying expenditures accumulated during the period. These expenditures in any given period include those incurred in that period plus those incurred in the construction of the asset in all previous periods. If the result exceeds the total amount of interest incurred, the interest amount incurred (given) is the maximum amount of interest that can be capitalized.

What are the measurement alternative for an investment in equity securities?

An entity may elect the measurement alternative for an investment in equity securities without a readily determinable fair value. This alternative is cost minus impairment (if any), plus or minus changes resulting from observable price changes for the identical or a similar investment of the same issuer.

What is assignment?

Assignment occurs when specifically named accounts receivable are pledged as collateral for a loan. The accounts receivable remain those of the assignor. However, when cash is collected from these accounts receivable, the cash must be remitted to the assignee.

An investor purchased a bond classified as a long-term investment between interest dates at a discount. At the purchase date, the carrying amount of the bond is

At the date of purchase, the carrying amount of the bond equals its face amount minus the discount. The cash paid equals the initial carrying amount plus accrued interest. Hence, the initial carrying amount is less than the cash paid by the amount of the accrued interest.

A gain or loss from a transaction that is unusual in nature or infrequent in occurrence should be reported separately as a component of income

Before results of discontinued operations. A material event or transaction that is unusual in nature, infrequent in occurrence, or both must be reported as a separate component of income from continuing operations. Such items must not be reported net of income taxes.

What items are required disclosures in a summary of significant accounting policies?

Certain items are commonly required disclosures in a summary of significant accounting policies: (1) the basis of consolidation, (2) depreciation methods, (3) amortization of intangibles, (4) inventory pricing, (5) recognition of revenue from contracts with customers, and (6) recognition of revenue from franchising and leasing operations.

According to the FASB's conceptual framework, the expected cash flow (ECF) approach to measuring present value

Considers all possible estimated cash flows

Subsequent events affecting the realization of assets ordinarily will require recognition in the financial statements because such events typically represent the

Culmination of conditions that existed at the balance sheet date. Subsequent events affecting the realization of assets typically represent the culmination of conditions that existed at year end.

Earnings-per-share data must be reported on the face of the income statement for?

EPS data for income from continuing operations and net income must be reported on the face of the income statement. EPS data for a discontinued operation may be disclosed on the face of the income statement or in a note.

Are the Gains and losses on derivatives designated and qualifying as cash flow hedges recognized in OCI?

Gains on derivatives designated and qualifying as cash flow hedges are recognized in OCI.

are recognized in OCI.

Gains on derivatives designated and qualifying as cash flow hedges are recognized in OCI.

What to do with declared dividends and accumulated dividends when calculating the BEPS numerator?

Income in the BEPS numerator is reduced by dividendsDeclared in the current period on preferred stock (whether or not paid)andAccumulated for the current period on cumulative preferred stock (whether or not declared). They are removed.

What is Interest income (revenue) for a bond issued at a discount?

Interest income for a bond issued at a discount is equal to the sum of the periodic cash flows and the amount of bond discount amortized during the interest period.

Under ASC 606, adjustment of the transaction price to reflect the time value of money results in?

Interest income or expense that is presented in the income statement separately from revenue

How is FIFO measured?

Inventory accounted for using the FIFO method (or any cost method other than LIFO or retail) is measured at the lower of cost or net realizable value (NRV).

Are the leases eligible for the fair value option FVO?

Leases are not eligible for the fair value option. The fair value option does not apply to financial assets and liabilities under leases.

How are discontinued operations and material unusual or infrequently occurring items that occur at midyear initially reported?

Material unusual or infrequent items, and gains or losses from disposal of a component of an entity are (1) separately disclosed in the interim statements, (2) included in interim-period net income, and (3) not prorated over the year.

An investor purchased a bond as a long-term investment between interest dates at a premium. At the purchase date, the cash paid to the seller is

More than the face amount of the bond.. At the date of purchase, the cash paid to the seller is equal to interest accrued since the last interest date, plus the face amount of the bonds, plus the premium. The carrying amount of the bonds (face amount plus the premium) is equal to the present value of the cash flows associated with the bond discounted at the market rate of interest (yield).

What is NRV?

NRV is the estimated selling price in the ordinary course of business, minus reasonably predictable costs of completion, disposal, and transportation.

BEPS Basic earnings per share formula?

Net Income-Preferred Stock Dividends/Weighted avg# of outstanding common shares

Realized gain on sale of available-for-sale securities are part of net income or OCI?

Net income

What Net realizable value approach is used for?

Net realizable value is used to measure inventory and not items of property, plant, and equipment.

Is Deferred tax liability arising from depreciation a current liability?

No

Is cash dividend reported as dividend revenue under the equity method?

No, A cash dividend is not reported as dividend revenue under the equity method

Is stock dividend reported as dividend revenue under the fair value method or equity method?

No, A stock dividend is not reported as dividend revenue under (1) the fair value method, or (2) the equity method

Are the gains from extinguishment of debt classified as other comprehensive income (OCI)?

No, gains from extinguishment of debt are included in earnings.

What is observable input?

Observable inputs are based on market data obtained from independent sources

Which of the following items is not subject to the application of intraperiod income tax allocation?

Operating income.

Which accounting change should be applied prospectively?

Straight-line method of depreciation for previously recorded assets to the double-declining-balance method.

What do the commonly required disclosures in a summary of significant accounting policies include?

The commonly required disclosures in a summary of significant accounting policies include (1) the basis of consolidation, (2) depreciation methods, (3) amortization of intangible assets, (4) inventory pricing, (5) recognition of profit on long-term construction-type contracts, (6) recognition of revenue from franchising and leasing operations, and (7) the policy for defining cash equivalents.

How the correction of error occurred in the prior period should be accounted for?

The correction of an error occurring in a prior period should be accounted for as a prior-period adjustment. It should be charged or credited net of tax to retained earnings and reported as an adjustment in the statement of equity. It is not included in net income for the current period.

What is cost approach?

The cost approach is based on current replacement cost.

calculating the gross profit recognized under the input method based on costs incurred to measure progress toward completion of the contract

The cost-to-cost method recognizes revenues, costs, and gross profit depending on the progress made on the contract. Gross profit recognized in the last year of the contract equals the contract price, minus actual total costs, minus gross profit previously recognized.

What is the the entry to record credit loss expense under the allowance method?

The entry to record credit loss expense under the allowance method is to debit credit loss expense and credit the allowance for credit losses account. When a specific account is then written off, the allowance for credit losses is debited and gross accounts receivable credited.

When is the equity method used and how is it calculated?

The equity method of accounting is used when the investor has significant influence over the investee (investment is at least 20% but not more than 50% of the voting interests) and the FVO was not elected. Equity method goodwill is the difference between the cost of the investment and the investor's equity in the fair value of the investee's net assets

In the determination of a present value, which of the following relationships is true?

The higher the discount rate and the longer the discount period, the lower the present value. As the discount rate increases, the present value decreases. Also, as the discount period increases, the present value decreases

What is income approach?

The income approach uses valuation methods based on current market expectations about future amounts, e.g., earnings or cash flows. It converts future amounts to one present discounted amount. Examples are present value methods and option-pricing models.

What is the income approach?

The income approach uses valuation methods based on current market expectations about future amounts, e.g., earnings or cash flows. It converts future amounts to one present discounted amount. Examples are present value methods and option-pricing models.

What is market approach?

The market approach is based on information from market transactions involving identical or comparable items.

According to SFAC 7, the elements of a present value measurement are?

(1) estimates of future cash flows; (2) expected variability of their amount and timing; (3) the time value of money based on the risk-free interest rate; (4) the price of uncertainty inherent in an asset or liability; and (5) other factors, such as lack of liquidity or market imperfections.

According to the FASB's conceptual framework, recognition is the process of formally incorporating an element into the financial statements of an entity. Recognition criteria include all of the following except?

Comparability.

What are the Trading debt securities?

Trading debt securities are bought and held primarily for sale in the near term. They are purchased and sold frequently. They are initially recorded at cost but are remeasured at fair value at each balance sheet date, with the unrealized holding gains or losses recognized in earnings.

In computing the loss per share of common stock, cumulative preferred dividends not earned should be

Added to the loss for the year. When preferred stock is cumulative, the dividend, whether earned or not, is deducted from income from continuing operations and net income, or added to any loss for the year, in computing earnings or loss, per share of common stock. When preferred stock is noncumulative, an adjustment is made for dividends declared. If the dividend is cumulative only if earned, no adjustment is necessary except to the extent of available income; that is, the preferred dividends accumulate only to the extent of net income.

According to the FASB's conceptual framework, the expected cash flow (ECF) approach to measuring present value?

Considers all possible estimated cash flows. The ECF approach emphasizes explicit assumptions about the possible estimated cash flows and their probabilities.

In the period of rising prices, what inventory cost method has higher inventory?

In a period of rising prices, FIFO inventory is higher than LIFO inventory. FIFO assumes that the latest and therefore the highest priced goods purchased are in inventory. But LIFO assumes that these goods were the first to be sold.

When the fair value of an investment in debt securities exceeds its amortized cost, how should held to maturity and available for sale debt securities be measured at the end of the year, given no election of the fair value option?

Investments in debt securities must be classified as held-to-maturity and measured at amortized cost in the balance sheet if the reporting entity has the positive intent and ability to hold them to maturity. Debt securities that are not expected to be sold in the near term and that are not held-to-maturity should be classified as available-for-sale. Available-for-sale debt securities should be reported at fair value, with unrealized holding gains and losses (excess of fair value over amortized cost).

What are three levels of inputs to determine the fair value of an asset or liability?

Level 1 inputs under the fair value hierarchy are the most reliable. They are unadjusted quoted prices in active markets for identical (not similar) assets or liabilities that the entity can access at the measurement date. Level 2 inputs include (1) quoted prices for similar items in active markets, (2) quoted prices in markets that are not active, and (3) observable inputs that are not quoted prices. Level 3 inputs are unobservable inputs that are used given no observable inputs. They should be based on the best available information in the circumstances.

what do potential common stock include?

Potential common stocks include options, warrants, convertible preferred stock, convertible debt, and contingent stock agreements.

For the purpose of a fair value measurement (FVM) of an asset or liability, a transaction is assumed to occur in the?

Principal market if one exists. If no such market exists, the transaction is assumed to occur in the most advantageous market.

According to the FASB's conceptual framework, which of the following is not an element describing transactions, events, and circumstances during intervals of time?

Rational allocation procedures.

State and local governmental financial reports should have the qualitative characteristic of?

Reliability

The correction of an error in the financial statements of a prior period should be reported, net of applicable income taxes, in the current

Retained earnings statement as an adjustment of the opening balance. Prior-period adjustments of single-period statements must be reflected net of applicable income taxes as changes in the opening balance in the statement of retained earnings of the current period. In comparative financial statements, all prior periods affected by the prior-period adjustment should be restated to reflect the adjustment.

How are the sales recognized?

Sales are recognized only in the amount of consideration to which the entity expects to be entitled. Thus, no sales are recognized for the products expected to be returned.

When the sales commissions should be realized as an expense?

Sales commissions should be recognized as an expense when the related revenues are earned.

The advantage of the last-in, first-out inventory method is based on the assumption that?

The most recently incurred costs should be allocated to the cost of goods sold. Under the LIFO method, the most recent costs of acquiring or producing inventory are expensed as part of cost of goods sold. Given inflation, this method results in the highest cost of goods.

What is the moving-average method of inventory?

The moving-average system is only applicable to perpetual inventories. It requires that a new weighted average be computed after every purchase. This moving average is based on remaining inventory held and the new inventory purchased.

What are the Statements of Financial Accounting Concepts intended to establish?

The objectives and concepts for use in developing standards of financial accounting and reporting. SFACs do not establish accounting and reporting requirements. They are nonauthoritative guidance for nongovernmental entities. SFACs describe the objectives, qualitative characteristics, elements, and other fundamental concepts that guide the FASB in developing sound accounting principles.

When are the segments reportable?

The segment is reportable if its reported revenue (including sales to external customers and intersegment sales or transfers) is at least 10% of the combined revenue (external and internal) of all operating segments, its assets are at least 10% of the combined assets of all operating segments, or the absolute amount of reported profit or loss is at least 10% of the greater, in absolute amount, of either the combined reported profit of all operating segments that did not report a loss or the combined reported loss of all operating segments that did report a loss.

Under ASC 606, the transaction price generally should be adjusted for the effect of the time value of money when?

The selling price of the product and the consideration promised in the contract differ significantly.

Can trading debt securities be classified as current?

Trading debt securities are expected to be sold in the near term, so they are likely to be classified as current.

How trading debt securities and available for sale debt securities should be reported?

Trading debt securities are measured at fair value. Available-for-sale debt securities also are measured at fair value.