FIN 350 Exam 1 (Ch 1-3) Flashcards | Quizlet

What best describes the primary role of financial reporting?

Providing information about the performance and financial position of companies so that users can make economic decisions.

What best describes the primary role of financial statement analysis?

Evaluating a company's financial reports to form expectations about its future performance and financial position for economic decision-making.

Which financial statement is best used to evaluate a company's financial position and shareholder's residual claim on assets?

The balance sheet

Which financial statement is best used to evaluate a company's profitability over a period of time?

The income statement

Where are accounting policies, methods, and estimates used in preparing financial statements most likely found?

In the notes to the financial statements

Where are a company's objectives, strategies, and significant risks most likely to be found?

In the management commentary

An audit exception regarding inventory reporting will most likely result in what type of audit opinion?

A qualified audit opinion

What level of assurance does an independent audit report provide regarding financial statements?

Reasonable assurance that the financial statements are fairly presented

Interim financial reports released by a company are most likely to be in what audit state?

Unaudited

Financial ratios are used as an input into which step of the financial statement analysis framework?

Analyze/interpret the processed data

Which phase in the financial statement analysis framework is most likely to involve producing updated reports and recommendations?

Follow-up

Which entity is currently responsible for developing International Financial Reporting Standards (IFRS)?

The IASB (International Accounting Standards Board)

Which entity is currently responsible for developing US Generally Accepted Accounting Principles (US GAAP)?

The Financial Accounting Standards Board (FASB)

What is the assumption that an entity will continue to operate for the foreseeable future called?

Going concern

What is the assumption that transaction effects are recognized when they occur, not when cash flows occur?

Accrual basis

In what two ways may expenses on the income statement be grouped?

By either function or nature

If Denali Limited reports Revenue of $4,000,000$ and Cost of Goods Sold of $3,000,000$, what is its gross profit?

$$1,000,000$$

If Fairplay had Revenue of $1,000,000$ and Returns of goods sold of $100,000$, how much net revenue is reported under accrual accounting?

$$900,000$$

How much revenue should Apex Consignment report on $2,000,000$ Euros of total consignment sales if it retains a $25\%$ commission?

$500,000$ Euros

Which inventory valuation method is least likely to be used under IFRS?

LIFO

Accent Toys bought 10,000 units at ₤10 each and 5,000 units at ₤11 each, and sold 12,000 units. What is its FIFO cost of goods sold?

₤122,000

What is the 2010 straight-line depreciation for a $600,000$ machine with a 10-year useful life and $50,000$ residual value?

$$55,000$$

Under IFRS, how is a loss from property destruction in a fire classified?

Continuing operations

For a company with no debt or convertible securities, what is the relationship between Basic EPS and Diluted EPS?

Basic EPS equals its diluted EPS

According to accounting standards, when should revenue be recognized?

When the performance obligation is satisfied