AFM341 Study Guide - Final Guide: Certified Public Accountant, Institute Of Internal Auditors, Chartered It Professional

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lemonbeetle804

16 Dec 2018

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM341

Professor

Adeel Mahmood

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Unit 6 GAAP Application-Conceptual Framework of Accounting TheConceptual Framework allows for the systematic adaptation ofaccounting standards to a changing business environment. The FASBuses the conceptual framework to aid in an organized and consistentdevelopment of new accounting standards. The conceptual frameworkoutlines the objectives of financial reporting and the qualities ofgood accounting information, precisely defines commonly used termssuch as asset and revenue, and provides guidance about appropriaterecognition, measurement, and reporting. Understanding theterminology associated with the framework is imperative. Match thenumbered statements below with the lettered terms. An answer(letter) may used more than once, and some terms require more thanone answer (letter). 1. Key ingredients in quality of relevance. 2.Traditional assumptions that influence the FASB's conceptualframework. 3. The idea that information should represent what itpurports to represent. 4. An important constraint relating to costsand benefits. 5. An example of conservatism 6. The availability ofinformation when it is needed. 7. Recording an item in theaccounting records. 8. Determines the threshold for recognition. 9.Implies consensus. 10. Transactions between independent parties. a)Cost-effectiveness b) Representational faithfulness c) Recognitiond) Verifiability e) Time periods f) Unrealized g) Completeness h)Timeliness i) Materiality j) Predictive value k) Economic entity l)Lower-of-cost-or-market rule m) Phrenology n) Arm's-lengthtransactions Now that you have reviewed the terminology, for eachsituation listed below, indicate by letter the appropriatequalitative characteristic(s) or accounting concept(s) applied. Aletter may be used more than once, and more than one characteristicor concept may apply to a particular situation. Explain why youchose your answer.

1. Goodwill is recorded in the accounts only when it arises fromthe purchase of another entity at a price higher than the fairmarket value of the purchased entity's identifiable assets. 2. Landis valued at cost. 3. All payments out of petty cash are debited toMiscellaneous Expense. 4. Plant assets are classified separately asland or buildings, with an accumulated depre-ciation account forbuildings. 5. Periodic payments of $1,500 per month for services ofH. Hay, who is the sole propri-etor of the company, are reported aswithdrawals. 6. Small tools used by a large manufacturing firm are^recorded as expenses when purchased. 7. Investments in equitysecurities are initially recorded at cost. 8. A retail storeestimates inventory rather than taking a complete physical countfor purposes of preparing monthly financial statements. 9. A notedescribing the company's possible liability in a lawsuit isincluded with the financial statements even though no formalliability exists at the balance sheet date. 10. Depreciation onplant assets is consistently computed each year by thestraight-line method. a) Understandability b) Verifiability c)Timeliness d) Representational faithfulness e) Neutrality f)Relevance g) Going concern h) Economic entity i) Historical cost j)Measurability k) Materiality l) Comparability Type your answers ina Word Document, and submit to the Drop Box.

maroonoyster77

GAAP Application-Conceptual Framework of Accounting the ConceptualFramework allows for the systematic adaptation of accountingstandards to a changing business environment. The FASB uses theconceptual framework to aid in an organized and consistentdevelopment of new accounting standards. The conceptual frameworkoutlines the objectives of financial reporting and the qualities ofgood accounting information, precisely defines commonly used termssuch as asset and revenue, and provides guidance about appropriaterecognition, measurement, and reporting. Understanding theterminology associated with the framework is imperative. Match thenumbered statements below with the lettered terms. An answer(letter) may used more than once, and some terms require more thanone answer (letter). 1. Key ingredients in quality of relevance. 2.Traditional assumptions that influence the FASB's conceptualframework. 3. The idea that information should represent what itpurports to represent. 4. An important constraint relating to costsand benefits. 5. An example of conservatism 6. The availability ofinformation when it is needed. 7. Recording an item in theaccounting records. 8. Determines the threshold for recognition. 9.Implies consensus. 10. Transactions between independent parties. a)Cost-effectiveness b) Representational faithfulness c) Recognitiond) Verifiability e) Time periods f) Unrealized g) Completeness h)Timeliness i) Materiality j) Predictive value k) Economic entity l)Lower-of-cost-or-market rule m) Phrenology n) Arm's-lengthtransactions Now that you have reviewed the terminology, for eachsituation listed below, indicate by letter the appropriatequalitative characteristic(s) or accounting concept(s) applied. Aletter may be used more than once, and more than one characteristicor concept may apply to a particular situation. Explain why youchose your answer.

1. Goodwill is recorded in the accounts only when it arises fromthe purchase of another entity at a price higher than the fairmarket value of the purchased entity's identifiable assets. 2. Landis valued at cost. 3. All payments out of petty cash are debited toMiscellaneous Expense. 4. Plant assets are classified separately asland or buildings, with an accumulated depreciation account forbuildings. 5. Periodic payments of $1,500 per month for services ofH. Hay, who is the sole proprietor of the company, are reported aswithdrawals. 6. Small tools used by a large manufacturing firm are^recorded as expenses when purchased. 7. Investments in equitysecurities are initially recorded at cost. 8. A retail storeestimates inventory rather than taking a complete physical countfor purposes of preparing monthly financial statements. 9. A notedescribing the company's possible liability in a lawsuit isincluded with the financial statements even though no formalliability exists at the balance sheet date. 10. Depreciation onplant assets is consistently computed each year by thestraight-line method. a) Understandability b) Verifiability c)Timeliness d) Representational faithfulness e) Neutrality f)Relevance g) Going concern h) Economic entity i) Historical cost j)Measurability k) Materiality l) Comparability

redtoad313

Which of the following tends to insulate management somewhat from the financial results of poor financial planning? (Pick the best answer.)

A. Capitated rates

B. Cost reimbursement

C. Bundled services

D. Charge payment

5 points

Question 2

The cash budget focuses on which of the following major activities:

A. Purchasing of resources

B. Collection

C. Production/sale of service

D. All of the above

5 points

Question 3

Which of the following is an element of budgeted financial requirements that is not included in budgeted expenses?

A. Interest expense

B. Increases in working capital

Question 4

A department manager most often uses his or her hospitalsâ financial information for which of the following uses:

A. Assess the financial condition of the hospital

B. Assess the efficiency of operations

C. Evaluate the hospitalâs stewardship

D. Assess the effectiveness of operations

5 points

Question 5

18. You have just advance refunded $50 million of outstanding tax-exempt revenue bonds with $40 million of new debt, which created a gain after considering reimbursement effects of $5.0 million. What could account for this?

A. Higher interest rate on the refunding issue

B. Lower interest rate on the refunding issue

C. Positive arbitrage on the refunding issue

D. None of the above

5 points

Question 6

A not-for profit nursing home has total expenses of $20 million. Sales tax in the state is 7%. Expenses are broken down into salaries ($12 million), supplies ($6 million), and pharmacy ($2 million). The benefit received by the nursing home from the sales tax exemption assuming that pharmacy items are exempt from state sales tax is?

Question 7

Which of the following is not one of the four critical questions that must be answered for dashboard reporting?

A. What is the firmâs strategic vision?

B. What is most important to the firmâs success?

C. What are the critical drivers that influence performance attainment?

D. What are the most relevant measures that reflect critical driver relationships?

5 points

Question 8

What of the following is not one of the characteristics of long-term debt financing?

Question 9

The controller in a hospital is usually responsible for which of the following activities (choose all that apply):

A. Collection of accounts receivable

B. Developing budgets

C. Filing Medicare cost reports

D. Arranging hospital loans

5 points

Question 10

The heading of every financial statement should contain the:

A. name, title, and place of business

B. name, title, and specific date of statement

C. name, title, specific date of statement, and unit of measurement

D. title, name, type of ownership, and unit of measurement

5 points

Question 11

The Catholic Healthcare Association recognizes which of the following as legitimate areas of community benefit?

A. Bad Debts

B. Unreimbursed Medicare Costs

C. Both A and B

D. Neither A nor B

5 points

Question 12

The following is an example of a _____________ budget: âThe budget for the radiology department is different at 90 percent occupancy than at 80 percent occupancy.â

Question 13

Which of the following is not a âprincipleâ of financial accounting?

A. Historical cost

B. Revenue recognition

C. Continuity

D. Matching

5 points

Question 14

Accounts receivable (net) increased by $500,000 during the year. This increase has what effect on cash flow?

Question 15

What should be a firmâs primary long-term financial objective?

Question 16

A statement that reports inflows and outflows of cash during the accounting period in the categories of operations, investing, and financing, is called a(an):

A. Income statement

B. Statement of retained earnings

C. Balance sheet

D. Statement of cash flows

5 points

Question 17

Strategic planning should _________ financial planning.

A. follow

B. precede

C. be contemporaneous with

D. None of the above

5 points

Question 18

The statistics budget:

A. forecasts operating revenues that will be earned during the budget period

B. identifies the amount of service that will be provided by departmental area

C. represents an organization's expected cash inflows and outflows based on the previous years' cash flows

D. identifies operating expenses that are expected to be incurred during the budget period

5 points

Question 19

What is net working capital?

A. Current assets less long-term liabilities

B. Current assets less current liabilities

C. The amount of permanent financing required to finance working capital or current assets.

D. Both B and C

5 points

Question 20

The working capital cycle looks at which of the following:

A. Obtaining cash

B Turning cash into resources and paying bills

C. billing and collecting revenues earned

D. All of the above

5 points

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AFM341 Study Guide - Final Guide: Certified Public Accountant, Institute Of Internal Auditors, Chartered It Professional

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