Companies report accounts receivable at:
Answer(s): A
The net realizable value of the accounts receivable is equal to the total amount receivable less an allowance for uncollectible items. In practice, companies report accounts receivable at their net realizable value.
A firm is purchased for more than the fair market value of its assets. The excess is:
Answer(s): C
Goodwill is defined as the price paid in excess of the fair market value of the assets of the target firm. Under US GAAP, only Goodwill generated during acquisitions is capitalized; it does not allow capitalization of internally generated Goodwill. The capitalized Goodwill is amortized over a period which can range from a few years to as long as 40 years.
Which type of revenue recognition method(s) is used when there is uncertainty regarding the amount or collectibility of future cash flows?
The installment method recognizes gross profit in proportion to cash collections. The cost recovery method requires that all cash receipts be first accounted for as a recovery of costs. Only after all costs are recovered can profit be recognized.
A loss contingency should be accrued on a company's records only if it is
Answer(s): E
Loss contingencies should be accrued when information available prior to the issuance of financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated.
If an auditor issues an "adverse opinion" qualification in her opinion, she is referring to the fact that:
An adverse opinion is rendered in cases where financial statements are not prepared in accordance with accepted accounting principles, and this has a material effect on the fair presentation of the statements.
Post your Comments and Discuss CFA CFA I exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the CFA I content, but please register or login to continue.