Exam 22: Accounting Corrections and Error Analysis

Volutia Corporation's comparative financial statements included the following amounts for the current year: Prepare the operating activities section of the statement of cash flows using the indirect.

There are four types of accounting changes - principles,estimates,entities and errors.

Which of the following includes cash flows that relate to the acquisition and disposal of noncurrent assets?

Which of the following is an advantage of leasing an asset for the lessee? A)There are lower overall costs for the asset. B)Ownership automatically passes to the lessee at the end of the lease. C)The lessee absorbs the risk of obsolescence. D)Some leases are not disclosed on the lessee's balance sheet.

Gains from equity method adjustments must be added to net income to determine cash flows from operations.

The CFO must disclose the reason for the error correction,include a reconstruction of the income statements and balance sheets indicating the change in income before taxes,income taxes,net income,and earnings per share.Comparative income statements and balance sheets should be retrospectively adjusted to reflect the corrected data.

Bronco Construction,Inc.decided to change from completed-contract method of accounting to percentage-of-completion method.The following information is available for net income.Ignore income tax effects: Required:

Tandoor Inc.financial statements included the following amounts for the current year: Based on this information,what is the amount of net cash flows from investing activities? A)$23,000 net inflow B)$21,000 net inflow C)$22,000 net outflow D)$42,000 net outflow

List five ways that the statement of cash flows assists the users of financial statements?

Under the indirect method,subtract any bond discount amortization from net income to arrive at operating cash flows.

An acquisition of a plant asset financed by the issuance of long-term debt is not incorporated in the body of the statement of cash flows.

The conceptual model for the statement of cash flows is based on the accounting income statement equation.

Changes in accounting principles may be handled prospectively if insufficient information is available to properly account for the change.

For a lease to be classified as a capital lease,the present value of the minimum lease payments must be greater than or equal to ________.

A change in reporting entity must be treated retrospectively for a maximum of two prior years.

Which of the following is not a cash flow disclosure required by IFRS?

For the lessee,an unguaranteed residual value is the same as no residual value in terms of computing the minimum lease payments.

If a mandatory accounting change requires too much work for a firm to use the retrospective approach,then the firm can choose to use the prospective approach.

When using the discounted cash flow approach to lease capitalization,how is the off-balance sheet lease obligation estimated?

Under a sales-type capital lease,a dealer's profit is measured as the difference between the property's fair value and its carrying value.