Exam Code: FINANCIAL-ACCOUNTING-AND-REPORTING
Exam Name: Certified Public Accountant (Financial Accounting & Reporting)
Updated: May 09, 2024
Q&As: 163
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In 1992, hail damaged several of Toncan Co.'s vans. Hailstorms had frequently inflicted similar damage to Toncan's vans. Over the years, Toncan had saved money by not buying hail insurance and either paying for repairs, or selling damaged vans and then replacing them. In 1992, the damaged vans were sold for less than their carrying amount. How should the hail damage cost be reported in Toncan's 1992 financial statements?
A. The actual 1992 hail damage loss as an extraordinary loss, net of income taxes.
B. The actual 1992 hail damage loss in continuing operations, with no separate disclosure.
C. The expected average hail damage loss in continuing operations, with no separate disclosure.
D. The expected average hail damage loss in continuing operations, with separate disclosure.
Envoy Co. manufactures and sells household products. Envoy experienced losses associated with its small appliance group. Operations and cash flows for this group can be clearly distinguished from the rest of Envoy's operations. Envoy plans to sell the small appliance group with its operations. What is the earliest point at which Envoy should report the small appliance group as a discontinued operation?
A. When Envoy classifies it as held for sale.
B. When Envoy receives an offer for the segment.
C. When Envoy first sells any of the assets of the segment.
D. When Envoy sells the majority of the assets of the segment.
A change from the cost approach to the market approach of measuring fair value is considered to be what type of accounting change?
A. Change in accounting estimate.
B. Change in accounting principle.
C. Change in valuation technique.
D. Error correction.
In 1990, Brighton Co. changed from the individual item approach to the aggregate approach in applying the lower of FIFO cost or market to inventories. The cumulative effect of this change should be reported in Brighton's financial statements as a:
A. Retrospective adjustment on the retained earnings statement, with separate disclosure.
B. Component of income from continuing operations, with separate disclosure.
C. Component of income from continuing operations, without separate disclosure.
D. Component of income after continuing operations, with separate disclosure.
On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with
Quo's president and outside accountants, made changes in accounting policies, corrected several errors
dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List B represents the general accounting treatment
required for these transactions. These treatments are:
•
Cumulative effect approach - Include the cumulative effect of the adjustment resulting from the accounting change or error correction in the 1993 financial statements, and do not restate the 1992 financial statements.
•
Retroactive or retrospective restatement approach - Restate the 1992 financial statements and adjust 1992 beginning retained earnings if the error or change affects a period prior to 1992.
•
Prospective approach - Report 1993 and future financial statements on the new basis but do not restate 1992 financial statements.
Item to Be Answered Quo manufactures heavy equipment to customer specifications on a contract basis. On the basis that it is preferable, accounting for these long-term contracts was switched from the completed-contract method to the percentage-of-completion method.
List B (Select one)
A. Cumulative effect approach.
B. Retroactive or retrospective restatement approach.
C. Prospective approach.
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