In open market transactions, Gold Corp. simultaneously sold its long-term investment in Iron Corp. bonds and purchased its own outstanding bonds. The broker remitted the net cash from the two transactions.Gold's gain on the purchase of its own bonds exceeded its loss on the sale of the Iron bonds. Assume the transaction to purchase its own outstanding bonds is unusual in nature and has occurred infrequently.Gold should report the:
Answer(s): D
Choice "d" is correct, these are two separate transactions because Gold Corp. (1) sold Iron Corp. bonds (an investment) for a loss, and, (2) bought back its own (Gold) Corp. bonds (a debt) for a gain. This is not a "refinancing" (where one would sell new bond debt to buy back old bond debt outstanding).The gain from the purchase of its own bonds is an "extraordinary gain" because it is both unusual in nature and infrequently occurring (per APB Opinion No. 30 and SFAS No. 145). The Iron Corp. transaction is a loss in "income before extraordinary items." Choices "a" and "b" are incorrect. The two transactions are separate and cannot be netted. Choice "c" is incorrect. Just the opposite. The sale of the investment is a loss in "income before extraordinary items," while the purchase of its bond debt is an "extraordinary gain" according to the provisions of APB Opinion No. 30.
Lore Co. changed from the cash basis of accounting to the accrual basis of accounting during 1994. The cumulative effect of this change should be reported in Lore's 1994 financial statements as a:
Answer(s): A
Choice "a" is correct. The cash basis for financial reporting is not a generally accepted accounting basis of accounting (GAAP); therefore, it is an error. Correction of an error from a prior period is a reported as prior period adjustment to retained earnings. Choice "b" is incorrect. Cash basis reporting is not an accounting principle under accrual accounting principles. Thus, the change from cash basis is not reported as a change in accounting principle. In addition, changes in accounting principle are not prior period adjustments; instead, they are treated retrospectively.Choices "c" and "d" are incorrect. Correction of prior period errors has no effect on the current year's income statement.
A material loss should be presented separately as a component of income from continuing operations when it is:
Choice "d" is correct. Gains or losses that are unusual in nature or occur infrequently but not both, are presented as a component of income from continuing operations. Choice "a" is incorrect. Extraordinary items are shown net of tax in a separate section of the income statement after income from continuing operations.Choice "b" is incorrect. Cumulative effects of changes in accounting principle are now shown net of tax as an adjustment to the opening balance of retained earnings in the retained earnings statement. This treatment is called retrospective application. There really are no longer any cumulative effect types of changes in accounting principle. The cumulative effect is merely how the amount of the change is measured.Choice "c" is incorrect. This is the definition of an extraordinary item.
During 1994, Orca Corp. decided to change from the FIFO method of inventory valuation to the weightedaverage method. Inventory balances under each method were as follows:Orca's income tax rate is 30%.Orca should report the cumulative effect of this accounting change as a(n):
Choice "a" is correct. The cumulative effect of a change in accounting principle is shown as an adjustment to beginning retained earnings.Choice "b" is incorrect. The cumulative effect of a change in accounting principle is now presented as a separate category on the retained earnings statement and is not a component of net income. Choice "c" is incorrect. Extraordinary items are unusual and infrequent in nature. Extraordinary items have nothing to do with changes in accounting principle. Choice "d" is incorrect. A change in accounting principle affects retained earnings, not the income statement, under SFAS No. 154.
A transaction that is unusual in nature and infrequent in occurrence should be reported separately as a component of income:
Choice "d" is correct. An extraordinary item (a transaction that is both "unusual in nature" and "infrequent in occurrence") should be reported separately as a component of income after discontinued operations of a segment of a business.The cumulative effect of a change in accounting principle is shown on the retained earnings statement.This is why memorizing the mnemonic "idea" is so important.
Share your comments for AICPA CPA Financial Accounting and Reporting exam with other users:
explained answers
plan to take theaws certified developer - associate dva-c02 in the next few weeks
very helpfull
good questions
help to practice csa exam
nice tip and well documented
i need the exam
please upload
prepping for fsc exam
pd1 with great experience
@t it seems like azure service bus message quesues could be the best solution
helpful to check your understanding.
question 128 the answer should be static not auto
more comments here
great support to appear for exams
useful dumps
making progress
q31 answer should be d i think
is this real?
q10: c and f are also true. q11: this is outdated. you no longer need ownership on a pipe to operate it
good questions with simple explanation
admin guide (windows) respond to malicious causality chains. when the cortex xdr agent identifies a remote network connection that attempts to perform malicious activity—such as encrypting endpoint files—the agent can automatically block the ip address to close all existing communication and block new connections from this ip address to the endpoint. when cortex xdrblocks an ip address per endpoint, that address remains blocked throughout all agent profiles and policies, including any host-firewall policy rules. you can view the list of all blocked ip addresses per endpoint from the action center, as well as unblock them to re-enable communication as appropriate. this module is supported with cortex xdr agent 7.3.0 and later. select the action mode to take when the cortex xdr agent detects remote malicious causality chains: enabled (default)—terminate connection and block ip address of the remote connection. disabled—do not block remote ip addresses. to allow specific and known s
very inciting
question 5, it seems a instead of d, because: - care plan = case - patient = person account - product = product2;
it look like real one
i am taking oracle fcc certification test next two days, pls share question dumps
i need dumps
its time to comptia sec+
question 35 has an answer for a different question. i believe the answer is "a" because it shut off the firewall. "0" in registry data means that its false (aka off).
helpful content
oracle 19c is complex db
helpful for practice
support team is fast and deeply knowledgeable. i appreciate that a lot.
helpful questions
Keeping this site free takes real effort. We constantly battle automated scraping and unauthorized content copying. A quick account helps us protect the community and keep the site free.
To continue studying for your CPA Financial Accounting and Reporting, please sign in or create a free account.