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CPA Exam (Becker F1) 2024/2025 Detailed Questions And Expert Answers
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Who has the legal authority to establish U.S. GAAP? - ANS>The SEC The SEC was established by the _________________. - ANS>Securities Exchange Act of 1934 How many board members does the FASB have? How long can they serve on the board? - ANS>The FASB has seven full-time members who serve for five-year terms and may be reappointed to one additional five- year term. What is the Committee on Accounting Procedures (CAP)? - ANS>The CAP was a part-time committee of the AICPA that promulgated Accounting Research Bulletins (ARBs), which determined GAAP from 1939 - 1959. What is the Accounting Principles Board? - ANS>The APB was a part- time committee of the AICPA that issued opinions (APBOs) and interpretations (APBIs), which determine GAAP from 1959 - 1973. What is the FASB? - ANS>The FASB is an independent full-time organization that was established in 1973 and has determine GAAP since then.
T or F: If it's not in the FASB Accounting Standards Codification, it's not GAAP. - ANS>T The codification is comprised of the following literature (hint: FEDPRIA):
In addition to the IASB, the IFRS Foundation sponsors the ______________. - ANS>International Financial Reporting Interpretations Committee (IFRIC). What does the IFRIC do? - ANS>The IFRIC provides guidance on newly identified financial reporting issues not addressed in the IFRSs and assists the IASB in achieving international convergence of accounting standards. What does the term International Financial Reporting Standards encompass? - ANS>International Financial Reporting Standards, International Accounting Standards, and Interpretations developed by the IFRIC and the former SIC. The IASB is developing the Conceptual Framework for Financial Reporting, which does what? - ANS>The Conceptual Framework for Financial Reporting describes the basic concepts that underlie the preparation and presentation of financial statements for EXTERNAL USERS. What was the goal of the international convergence of accounting standards between the IASB and the FASB? - ANS>The goal was a single set of high-quality, international accounting standards that companies could use for both domestic and cross-border financial reporting.
An IFRS must be approved by at least __________ members of the ___________. - ANS>9, IASB T or F: Both the IFRS Conceptual Framework and U.S. GAAP Conceptual Framework can and should be applied to specific accounting issues. - ANS>F: Under IFRS, entities should consider applicability of the Framework. Under U.S. GAAP, the Framework CANNOT be applied to specific accounting issues. The Conceptual Frameworks Underlying Financial Accounting are also known as ____________. - ANS>basic reasoning Who created the conceptual framework underlying financial accounting in the U.S.? - ANS>The FASB What is the purpose of the conceptual framework created by the FASB?
To be relevant, financial information must have _____________ and/or ______________, and must be ______________. - ANS>predictive value, confirming value, material What three characteristics does faithful representation require? - ANS>1. Completeness
What is the presentation order of the major components of an income and retained earnings statement (hint: IDEA)? - ANS>1. INCOME (or loss) from continuing operations
What three items are included in the (normally) loss from discontinued operations? - ANS>1. Impairment loss
What is the difference between a business and a nonprofit activity? - ANS>A business is conducted and managed for the purpose of providing a return to investors. A nonprofit activity is conducted and managed for the purpose of providing benefits, OTHER THAN goods or services at a profit, to fulfill an entity's purpose or mission. What criteria must be met for a component to be classified as "held for sale?" - ANS>1. Mgmt. commits to a plan to sell the component
Review pg. 23 LECTURE - ANS>OK T or F: Assets within a component that is held for sale are depreciated/amortized until the component is sold. - ANS>F: Assets within a component that is held for sale are no longer depreciated or amortized. Review example on pg. 24 (listen to lecture and read) - ANS>OK When are anticipated gains/losses from the sale of a component recognized? - ANS>Anticipated gains/losses are recognized when they occur. How is a component classified as held for sale measured and valued? - ANS>It is measured at the LOWER OF its CARRYING VALUE or FAIR VALUE LESS COSTS TO SELL. Another term for "fair value less costs to sell" is ________________. - ANS>net realizable value Downsizing is considered a(n) ____________ or ___________ activity. - ANS>exit, disposal
Closing a hub is considered a(n) __________ or ______________ activity. - ANS>exit, disposal U.S. GAAP requires recognition of a liability for the costs associated w/ an exit or disposal activity. How is this liability measured? - ANS>PV of future payments (exit/disposal costs) List three common exit and disposal costs. - ANS>1. Involuntary employee termination benefits
Give four common examples of extraordinary items. - ANS>1. Infrequent earthquake or infrequent flood
T or F: Long-term debt extinguishments are always reported in extraordinary items, net of tax. - ANS>F: LT debt extinguishments are ONLY reported in extraordinary items if SPECIFICALLY IDENTIFIED AS UNUSUAL AND INFREQUENT. Otherwise, they are reported in continuing operations, gross of tax. Where are items that are unusual but not infrequent, reported on the income statement? - ANS>As a separate non-operating item in continuing operations, gross of tax. Where are items that are infrequent but not unusual, reported on the income statement? - ANS>As a separate non-operating item in continuing operations, gross of tax. T or F: Under IFRS, extraordinary items are reported after income (or loss) from discontinued operations. - ANS>F: Under IFRS, there is no such thing as extraordinary items. T or F: Extraordinary losses should be reported net of insurance proceeds related to the extraordinary losses. - ANS>T What are the three classifications of accounting changes? - ANS>1. Change in accounting estimate