B1-29 Reporting change in fair value Obj.2 Explain how a change in fair value of an equity investment with less than 20% ownership is reported on the investor's (a) income statement and (b) balance sheet.
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- Match the correct term with its definition. A. cost principle i. if uncertainty in a potential financial estimate, a company should err on the side of caution and report the most conservative amount B. full disclosure principle ii. also known as the historical cost principle, states that everything the company owns or controls (assets) must be recorded at their value at the date of acquisition C. separate iii. (also referred to as the matching principle) matches expenses with associated revenues in the period in which the revenues were generated. D. monetary iv. business must report any business activities that could affect what is reported on the financial statements E. conservatism v. system of using a monetary unit by which to value the transaction, such as the US dollar. F. revenue vi. period of time in which you performed the service or gave the customer the product is the period in which revenue is recognized. G. expense vii. business may only report activities on financial statements that are specifically related to company operations, not those activities that affect the owner personally.| Owner's equity Select one: O a. The resulting amount when total revenue are subtracted from total cost of sales O b. When total liabilities are added to total assets c. None of Them d. The resulting amount when total liabilities are subtracted from total assets95 Conceptual Framework Information that is capable of making a difference in the decisions made by users has this qualitative characteristic. a. Relevance b. Faithful representation 2. c. Timeliness d. Verifiability 3. When making materiality judgments, the overriding consideration is a. the ability of the item being judged to influence users' decisions. b. the size of the impact of the item being judged. the characteristics of the item being judged. C. d. cand d 4. This qualitative characteristic is unique in the sense that it necessarily requires at least two items. a. Verifiability b. Faithful representation c. Timeliness d. Comparability 5. Which of the following enhances the comparability of information? a. Making unlike things look alike. b. Making like things look different. c. Using different methods to account for similar transactions from period to period. d. Consistent application of accounting policies from period to period. 6. Information has this qualitative…
- What is the default classification for an equity investment? A Fair value through profit or loss B Fair value through other comprehensive income C Amortised cost D Net proceedsWhich should be subtracted from the net income when using the indirectmethod? A. Loss on sale of investmentB. Amortization of patentC. Increase in accounts receivableD. Increase in accounts payableReturn on Capiatal employed = O a. Return on Total Assets O b. Return on Equity Oc. Return on Investment O d. Return on Equity Capital
- Owner's equity Select one: a. The resulting amount when total liabilities are subtracted from total assets b. When total liabilities are added to total assets c. None of Them d. The resulting amount when total revenue are subtracted from total cost of salesWhich of the following will cause owner's capital to decrease?Select one:a. Capitalb. Profitc. Drawingsd. LiabilityCapitalizing a cost involves increasing what type of account?a. Liabilityb. Expensec. Stockholders’ equityd. Asset
- Chapter 17-Financial Statement Analysis Any “off-balance-sheet" arrangements such as leases not included directly on the financial 951 statements. PTS: KEY: Bloom's: Knowledge DIF: Moderate OBJ: LO: 17-04 NAT: BUSPROG: Analytic MATCHING Match each ratio to its use. Items may be used more than oncer To assess the profitability of the assets. b. a. To assess the effectiveness in the use of assets. c. To indicate the ability to meet currently maturing obligations. d. To indicate the margin of safety to creditors. To indicate instant debt-paying ability. e. f. To assess the profitability of the investment by common stockholders. To indicate future earnings prospects. g. h. To indicate the extent to which earnings are being distributed to common stockholders. 1. Price-Earnings (P/E) Ratio Working Capital 2. Rate Earned on Total Assets 3. Ratio of Liabilities to Stockholders' Equity 4. 5. Quick Ratio Rate Earned on Common Stockholders' Equity 6. 7. Current Ratio Ratio of Net Sales to Assets…What have been the possible reasons for the changes in Return of Equity (ROEs )? •Decompose the ROE into the main components: ROA and EM (Equity Multiplier) •Analyse the sources of Return of Asset (ROA) : Asset Utilisation (AU) and Profit Margin ratios.(PM) •Identify the sources of the changes in Asset Utilisation and Profit Marginourses irst exar Time lef Profitability refers to Select one: O a. Earnings after interest and tax O b, Earnings before interest and tax O C. Sales of products and services O d. None of the options O e. Cost of products and services Nex
