3/28/2024


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Course # 171043
Full Disclosure In Financial Reporting
based on the electronic .pdf file(s):

Full Disclosure In Financial Reporting
by: Delta CPE, 2014, 77 pages


4 CPE Credit Hours
Accounting

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Chapter 0 - Course Material

1.    The full disclosure principle, as adopted by the accounting profession, is best described by which of the following?   
All information related to an entity's business and operating objectives is required to be disclosed in the financial statements.
Information about each account balance appearing in the financial statements is to be included in the notes to the financial statements.
Enough information should be disclosed in the financial statements so a person wishing to invest in the stock of the company can make a profitable decision.
Disclosure of any financial facts significant enough to influence the judgment of an informed reader.
2.    Which of the following should be disclosed in a Summary of Significant Accounting Policies?   
Types of executory contracts.
Amount for cumulative effect of change in accounting principle.
Claims of equity holders.
Depreciation method followed.
3.    An example of an inventory accounting policy that should be disclosed in a Summary of Significant Accounting Policies is the   
Amount of income resulting from the involuntary liquidation of LIFO.
Major backlogs of inventory orders.
Method used for pricing inventory.
Composition of inventory into raw materials, work-in-process, and finished goods.
4.    The focus of ASC 235-10-05 and 50-3, Notes to Financial Statements: Overall (APB Opinion No. 22, Disclosure of Accounting Policies) is on the disclosure of accounting policies. This information is important to financial statement readers in determining   
Net income for the year.
Whether accounting policies are consistently applied from year to year.
The value of obsolete items included in ending inventory.
Whether the working capital position is adequate for future operations.
5.    Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies?   
Composition of the fixed assets, but not the depreciation method
Both the depreciation method and the composition
The depreciation method, but not the composition
Neither the depreciation method nor the composition
6.    A segment of a business enterprise is to be reported separately when the revenues of the segment exceed 10 percent of the   
Total combined revenues of all segments reporting profits.
Total revenues of all the enterprise's industry segments.
Total export and foreign sales.
Combined net income of all segments reporting profits.
7.    Terra Co.'s total revenues from its three operating segments were as follows: Lion sold $70K to external customers and had $30K of intersegment sales; Monk sold $22K to external customers, and $4K of intersegment sales; Nevi sold $8K to external customers and had $16K of intersegment sales. Total revenue for Terra Co was $150K. Which operating segment(s) is(are) deemed to be (a) reportable segment(s)?   
None.
Lion only.
Lion and Monk only.
Lion, Monk, and Nevi.
8.    Correy Corp. and its divisions are engaged solely in manufacturing operations. The following data (consistent with prior years' data) pertain to the industries in which operations were conducted for the year ended December 31, Year 2: SEGMENT A = $10M revenue, $1.75M profit, and $20M in assets; SEGMENT B = $8M revenue, $1.4M profit, and $17.5M in assets; SEGMENT C = $6M in revenue, $1.2M in profit and $12.5M in assets; SEGMENT D = $3M revenue, $.550M in profit, and $7.5M in assets; SEGMENT E has $4.25 in revenue, $.675 in profit, and $7M in assets; SEGMENT F = $1.5M revenue, $.25 in profit, and $3M in assets. Total Revenue = $32.75M, Total Profit = $5.8M, and Total Assets = $67.5M. In its segment information for Year 2, how many reportable segments does Correy have?   
Three.
Four.
Five.
Six.
9.    In presenting segment information, which of the following items must be reconciled to the entity's consolidated financial statements?   
Revenue, Operating Profit (Loss) and Identifiable Assets
Operating Profit (Loss) and Identifiable Assets, but not Revenue
Revenue and Identifiable Assets, but not Operating Profit (Loss)
Revenue and Operating Profit (Loss), but not Identifiable Assets
10.    Lemu Co. and Young Co. are under the common management of Ego Co. Ego can significantly influence the operating results of both Lemu and Young. While Lemu had no transactions with Ego during the year, Young sold merchandise to Ego under the same terms given to unrelated parties. In the notes to their respective financial statements, should Lemu and Young disclose their relationship with Ego?   
Both Lemu and Young should disclose their relationship with Ego.
Only Lemu needs to disclose its relationship with Ego.
Only Young needs to disclose its relationship with Ego.
Neither Lemu nor Young need to disclose their relationship with Ego.
11.    Dex Co. has entered into a joint venture with an affiliate to secure access to additional inventory. Under the joint venture agreement, Dex will purchase the output of the venture at prices negotiated on an arm's-length basis. Which of the following is(are) required to be disclosed about the related party transaction: I) The amount due to the affiliate at the balance sheet date; II) The dollar amount of the purchases during the year.   
I only.
II only.
Both I and II.
Neither I nor II.
12.    Which of the following payments by a company should be disclosed in the notes to the financial statements as a related party transaction? I) Royalties paid to a major shareholder as consideration for patents purchased from the shareholder; or II) Officers' salaries.   
I only.
II only.
Both I and II.
Neither I nor II.
13.    GAAP pertaining to disclosure of long-term obligations does not apply to an unconditional purchase obligation that is cancelable under which of the following conditions?   
Upon the occurrence of a remote contingency.
With the permission of the other party.
Under a replacement agreement signed by the same parties.
Upon payment of a nominal penalty.
14.    If an unconditional purchase obligation is NOT presented in the balance sheet, certain disclosures are required. A disclosure that is NOT required is   
The nature and term of the obligation.
The variable components of the obligation.
The imputed interest necessary to reduce the unconditional purchase obligation to its present value.
The amounts purchased under the obligation for each period an income statement is presented.
15.    Whether recognized or unrecognized in an entity's financial statements, disclosure of the fair values of the entity's financial instruments, such as derivatives, is required when   
It is feasible to estimate those values and aggregated fair values are material to the entity.
The entity maintains accurate cost records and aggregated fair values are material to the entity.
Aggregated fair values are material to the entity and credit risk has been appropriately hedged.
Individual fair values are material to the entity or any of the instruments are accounted for as derivatives.
16.    Which of the following subsequent events would require adjustment of the accounts before issuance of the financial statements?   
Loss of plant as a result of fire
Changes in the quoted market prices of securities held as an investment
Loss on an uncollectible account receivable resulting from a customer's major flood loss
Loss on a lawsuit, the outcome of which was deemed uncertain at year end.
17.    Zero Corp. suffered a loss that would have a material effect on its financial statements on an uncollectible trade account receivable due to a customer's bankruptcy. The bankruptcy occurred suddenly due to a natural disaster 10 days after Zero's balance sheet date but 1 month before the issuance of the financial statements. Under these circumstances, which of the following must occur:   
The loss must be recognized in the financial statements, and the event requires a financial disclosure.
The loss must be recognized in the financial statements, but the event does NOT require a financial disclosure.
The loss is NOT recognized in the financial statements, and the event does NOT require a financial disclosure.
The event requires a financial disclosure, but the loss is not recognized in the financial statements.
18.    Conceptually, interim financial statements can be described as emphasizing   
Timeliness over reliability.
Reliability over relevance.
Relevance over comparability.
Comparability over neutrality.
19.    For interim financial reporting, an extraordinary gain occurring in the second quarter should be   
Recognized ratably over the last three quarters.
Recognized ratably over all four quarters with the first quarter being restated.
Recognized in the second quarter.
Disclosed by note only in the second quarter.
20.    Because of a decline in market price in the second quarter, Petal Co. incurred an inventory loss, but the market price was expected to return to previous levels by the end of the year. At the end of the year, the decline had not reversed. When should the loss be reported in Petal's interim income statements?   
Ratably over the second, third, and fourth quarters.
Ratably over the third and fourth quarters.
In the second quarter only.
In the fourth quarter only.

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