Chapter 1 CA1-1 (FASB and Standard-Setting) Presented below are four statements which you are to identify as true or false. If false‚ explain why the statement is false. 1. GAAP is the term used to indicate the whole body of FASB authoritative literature. 2. Any company claiming compliance with GAAP must comply with most standards and interpretations but does not have to follow the disclosure requirements. 3. The primary governmental body that has influence over the FASB is the SEC. 4. The FASB
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the credits and debits for each area that is accounted for. Some examples that can be used are Cash‚ Service Revenue‚ Expenses‚ and Unearned Revenue. The journal and ledger are then used to generate several financial statements. . (Kimmel‚ Weygandt‚ and Kieso‚ 2011) The first of these financial statements is the income statement. The income statement is used to provide a summary of the revenue earned verses the expenses incurred for a company. . (Kimmel‚ Weygandt‚ and Kieso‚ 2011) This is an indication
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one of its clients. What is the total amount of assets after all the above transactions have been completed? Answer: $14‚800 2. An adjusting entry that debits Accounts receivable is an example of a(n): Answer: accrued revenue. 3. Which of the following is NOT an example of a source document? Answer: Journal 4. ABC Services reported the following transactions for September‚ 2013. A) The owner opened the business with a capital contribution of $23‚500 cash.
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What ’s your favorite financial statement and why?" The question was spoken quickly and with a tinge of annoyance‚ as my interviewer eyed me disdainfully from his cushy black leather chair. The investment banker had little time to conduct these ridiculously long interviews that are standard fare for analyst candidates. I shifted uncomfortably in my seat and scanned my frazzled brain for the "right" answer. "Well‚ of course all three financial statements should be studied in conjunction
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the balance sheet is to _____. a. decrease assets and increase liabilities b. increase owner’s equity and decrease liabilities c. increase assets and increase liabilities d. increase assets and increase owner’s equity 5. When revenues are recognized as earned and expenses are recognized as incurred‚ a company is using _____. a. the accrual basis of accounting b. the cash basis of accounting c. both of these d. neither of these
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stockholder’s equity would increase by net capitalized software costs and the income by the deceasing amount of software costs expensed. 3. What effect did Microsoft’s revenue recognition policy have on its financial statements? a) If not adopted revenue recognition Year Unearned Revenue Ending Balance Change Reported Revenue Adjusted revenue % Increase 1995 0 - - - - 1996 560 560 9‚050 9‚610 6.19% 1997 1‚418 858 11‚936 12‚794 7.19% 1998 2‚888 1‚470 15‚262 16‚732 9.63% 1999
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The membership fees recorded as revenue when received in Costco’s financial statement in 1998 according to the cash accounting. * Was this correct? If not‚ what accounting principle does it violate? No. It violates the revenue recognition principle because they did not provide services to members when they pay the membership fee during this fiscal year. It can only record this item as unearned revenue under the liabilities and change them into revenue at the end of the year. * How did
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Do not represent a revenue because b. It not represents revenue to the firm during the month of May‚ because the receivable was originated in August. c. d. e. Yes‚ represent revenue in May‚ because the services were rendered in May. Brief Exercise 3.8‚ page 121. a. The purchase of the copying machine is an Expense‚ because is going to be used uo in the process of earning revenue. b. It is an expense‚ because the delivery would help to do the job and have revenue. c. It is an expense
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executives and finance and accounting executives to participate in activities that result in inaccurate reporting of revenues? Most people in sales tend to get a bonus or higher pay if they meet their quota at the end of the term or month. In some cases if they are unable to do so they can loose their job. In the past‚ why was it argued that Apple should spread the recognition of iPhone revenue over a two-year period‚ rather than recording it upfront? Apple made a promise when selling the phones that
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recognize revenue at the point of sale based upon the time of shipment because the books are sold f.o.b. shipping point. Because of the return policy one might argue in favor of the cash collection basis. Because the returns can be estimated‚ one could argue for shipping point less estimated returns. (b) Based on the available information and lack of any information indicating that any of the criteria in FASB Statement No. 48 were not met‚ the correct treatment is to report revenue at the time
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