Correct Answer: B

Choice "b" is correct. Actual hail damage must be reported. Since the hailstorms are frequent, the damage

is not considered an extraordinary gain/loss. Thus, the damages would be shown in continuing operations.

No separate disclosure is necessary since hail damage is a common occurrence.

Choice "a" is incorrect. Hailstorms are not unusual and infrequent so the loss could not be classified as

extraordinary. APB 30 para. 20 Choice "c" is incorrect. Actual hail damage must be reported. Estimated

hail damage may be probable but is not estimable; so it should not be included in income calculations.

Choice "d" is incorrect. Estimated hail damage may be probable but is not estimable; so it should not be

included in income calculations.

Correct Answer: A

Choice "a" is correct. The earliest period that a component of an entity can be reported in discontinued operations is when the component meets the following "held for sale" criteria:

1.

Management commits to a plan to sell the component.

2.

The component is available for immediate sale in its present condition.

3.

An active program to locate a buyer has been initiated.

4.

The sale of the component is probable and the sale is expected to be completed within one year.

5.

The sale of the component is being actively marketed.

6.

It is unlikely that significant change to the plan to sell will be made or that the plan will be withdrawn. Choices "b", "c", and "d" are incorrect, per the Explanation: above.

Correct Answer: A

Choice "a" is correct. Recognition.

According to the FASB's conceptual framework, the process of reporting an item in the financial

statements of an entity is recognition.

Correct Answer: A

Choice "a" is correct. A change in the composition of the elements of cost such as changing from the individual item approach to the aggregate approach in applying the lower of FIFO cost or market to inventories (LCM is covered in F4) is an example of a change in accounting principle. The cumulative effect of the change in accounting principle should now be shown on the retained earnings statement as an adjustment to the beginning balance of retained earnings, in what is called retrospective application. Choices "b", "c", and "d" are incorrect. The cumulative effect of a change in accounting principle is now reported on the retained earnings statement, not the income statement. Most of these types of changes (changes in accounting principle) used to be reported on the income statement. SFAS No. 154 changed that.

Correct Answer: A

Choice "a" is correct. Financial reporting by a development stage enterprise differs from financial reporting

for an established operating enterprise in regard to (more extensive) footnote disclosures only.

Choices "b", "c", and "d" are incorrect. Revenue and expense recognition principles are the same.

Rule: Development stage enterprises should present financial statements in accordance with GAAP and

make additional disclosures such as: cumulative net losses, cumulative deficit (as part of equity),

cumulative sales and expenses (as part of the income statement), cumulative statement of cash flows and

supplementary "shareholders equity."