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Exam 24: Full Disclosure in Financial Reporting

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Question 21

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Which of the following is true regarding IFRS and GAAP?

A) Due to the broader range of options available under U.S. GAAP compared to IFRS, note disclosures are generally more expansive under U.S. GAAP than under IFRS.
B) IFRS requires companies to prepare interim reports on a quarterly basis.
C) IFRS requires segment reporting, and uses the management approach to identify reportable segments.
D) U.S. GAAP requires companies to disclose transactions with related parties, including the name of the related party and any doubtful amounts related to outstanding balances for the related party.

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Question 22

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Revenue of a segment includes

A) only sales to unaffiliated customers.
B) sales to unaffiliated customers and intersegment sales.
C) sales to unaffiliated customers and interest revenue.
D) sales to unaffiliated customers and other revenue and gains.

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Question 23

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If the loss on an account receivable results from a customer's bankruptcy after the balance sheet date, the company only discloses this information in the notes to the financial statements.

Companies should disclose all of the following in interim reports except

Interim reports.A few years ago, a publishing company in the fourth quarter had a net profit figure that exceeded sales for that quarter. Such a situation as this suggests that some difficult accounting issues are involved in interim reporting. Instructions (a) What are the major accounting related to interim reports? (b) What problem exists with income taxes in interim reports and how does GAAP recommend that taxes be reported? What does GAAP require? (c) Many academicians have attempted to predict the year's net income after the first quarter's income is reported. These attempts are generally unsuccessful, no matter how sophisticated the prediction model. What might be the reason for this inability to predict?

Which of the following ratios should be used in evaluating the effectiveness with which the company uses its assets?

During 2015, Quirk, Incorporated purchased $3,500,000 of inventory. The cost of goods sold for 2015 was $3,600,000 and the ending inventory at December 31, 2015, was $400,000. What was the inventory turnover for 2015?

In considering interim financial reporting, how does the profession conclude that such reporting should be viewed?

Companies report extraordinary items in interim reports by prorating them over the four quarters.

Accounting policies are the specific accounting principles and methods a company uses and considers most appropriate to present fairly its financial statements.

Use the following information for questions 60 through 63. Information for Ramirez Corp. is given below: Additional information: There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2015, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2015. Assume that preferred dividends for the current year have not been declared. -The rate of return for 2015 based on the year-end common stockholders' equity was

IFRS requires companies to prepare interim reports on a quarterly basis.

The payout ratio is calculated by dividing

A qualified opinion is issued when the exception to the standard opinion is not of sufficient magnitude to invalidate the statements as a whole.

Which of the following facts concerning plant assets should be included in the summary of significant accounting policies?

Which of the following should be disclosed in a Summary of Significant Accounting Policies?

Errors and irregularities are defined as intentional distortions of facts. $\begin{array} { c c } & \text { Errors } & \text { Irregularities } \\\end{array}$ A) $\begin{array} { l c c } & \text { Yes } &&& \text { Yes } \\\end{array}$ B) $\begin{array} { l c c } & \text { Yes } &&& \text { No } \\\end{array}$ C) $\begin{array} { l c c } & \text { No } &&& \text { Yes } \\\end{array}$ D) $\begin{array} { l c c } & \text { No } &&& \text { No }\end{array}$

If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be

The basic limitations associated with ratio analysis include

Use the following information for questions 60 through 63. Information for Ramirez Corp. is given below: Additional information: There are no preferred dividends in arrears, the balances in the Accounts Receivable and Inventory accounts are unchanged from January 1, 2015, and there were no changes in the Bonds Payable, Preferred Stock, or Common Stock accounts during 2015. Assume that preferred dividends for the current year have not been declared. -The number of times interest was earned during 2015 was