Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
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Question
Chapter 1, Problem 1.48Q
To determine
The principle that would be violated if the business is headed for certain bankruptcy and if it is evident that its liabilities greatly exceed its assets.
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Students have asked these similar questions
1. Define and briefly discuss a loss
contingency.
2. What are the similarities and differences of
the accounting treatment and financial
statement reporting of a loss contingency
between U.S. GAAP and IFRS?
3. As a manager, would you like to report a
debt as a current or non-current liability if you
had a choice? Explain. And under what kind of
circumstances could a short-term obligation
be reported as a non-current liability?
Assume that a business is headed for certain bankruptcy and it is evident that its liabilities greatly exceed its assets. Which principle would be violated if its financial statements wereprepared using standard U.S. GAAP?a. Entity assumptionb. Continuity assumptionc. Historical cost principled. Stable-monetary-unit assumption
Which statement is incorrect regarding classification of financial assets?
a. An entity can classify financial assets that meet the amortized cost criteria as at FVPL if doing so eliminates or reduces an accounting mismatch.
B. In order to be classified at fair value through OCI, a debt instrument needs to have either simple principal and interest cash flows or be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives.
C. An investment in equity instrument may not be classified as financial asset subsequently measured at amortized cost.
D. Reclassifications of financial assets are only permitted on the change of an entity’s business model and are expected to occur only infrequently.
Chapter 1 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Ch. 1 - Financial statements can be used by which of the...Ch. 1 - Prob. 2QCCh. 1 - Hoot Enterprises buys a warehouse for 590,000 to...Ch. 1 - Prob. 4QCCh. 1 - Prob. 5QCCh. 1 - The accounting equation can be expressed as a....Ch. 1 - Prob. 7QCCh. 1 - Alliance Corporation holds cash of 8,000 and owes...Ch. 1 - During the year, ChemClean Corporation has 280,000...Ch. 1 - Prob. 10QC
Ch. 1 - Dynasty Company has current assets of 50,000 and...Ch. 1 - Which financial statement would show how well a...Ch. 1 - On which financial statement would the ending...Ch. 1 - What item flows from the income statement to the...Ch. 1 - What item flows from the income statement to the...Ch. 1 - Prob. 16QCCh. 1 - LO 5 (Learning Objective 5: Identify ethical...Ch. 1 - Prob. 1.1SCh. 1 - Prob. 1.2SCh. 1 - Prob. 1.3SCh. 1 - LO 3 (Learning Objective 3: Apply the accounting...Ch. 1 - LO 3 (Learning Objective 3: Apply the accounting...Ch. 1 - LO 3 (Learning Objective 3: Identify assets,...Ch. 1 - LO 3 (Learning Objective 3: Accounting equation)...Ch. 1 - LO 4 (Learning Objective 4: Identify income...Ch. 1 - LO 4 (Learning Objective 4: Identify appropriate...Ch. 1 - LO 4 (Learning Objective 4: Explain aspects of...Ch. 1 - Prob. 1.11SCh. 1 - LO 4 (Learning Objective 4: Construct an income...Ch. 1 - (Learning Objective 4: Construct a statement of...Ch. 1 - (Learning Objective 4: Construct a balance sheet)...Ch. 1 - LO 4 (Learning Objective 4: Solve for retained...Ch. 1 - Prob. 1.16SCh. 1 - Prob. 1.17SCh. 1 - Prob. 1.18SCh. 1 - LO 1.2, 3, 4. 5 (Learning Objectives 1, 2, 3, 4,...Ch. 1 - Group A LO 3, 4 (Learning Objectives 3, 4: Apply...Ch. 1 - Which company appears to have the strongest...Ch. 1 - LO 3, 4 (Learning Objectives 3, 4: Apply the...Ch. 1 - LO 4 (Learning Objective 4: Identify financial...Ch. 1 - LO 4 (Learning Objective 4: Construct a balance...Ch. 1 - LO 3,4 (Learning Objectives 3, 4: Apply the...Ch. 1 - LO 4 (Learning Objective 4: Construct an income...Ch. 1 - LO 4 (Learning Objective 4: Construct an income...Ch. 1 - LO 4 (Learning Objective 4: Construct a balance...Ch. 1 - Prob. 1.29AECh. 1 - Prob. 1.30AECh. 1 - Prob. 1.31AECh. 1 - Prob. 1.32BECh. 1 - Which company appears to have the strongest...Ch. 1 - LO 3,4 (Learning Objectives 3, 4: Apply the...Ch. 1 - LO 4 (Learning Objective 4: Identify financial...Ch. 1 - LO 4 (Learning Objective 4: Construct a balance...Ch. 1 - (Learning Objectives 3, 4: Apply the accounting...Ch. 1 - Prob. 1.38BECh. 1 - LO 4 (Learning Objective 4: Construct an income...Ch. 1 - LO 4 (Learning Objective 4: Construct a balance...Ch. 1 - LO 4 (Learning Objective 4: Construct a statement...Ch. 1 - Prob. 1.42BECh. 1 - LO 4 (Learning Objective 4: Construct an income...Ch. 1 - An organizations investors and creditors will...Ch. 1 - Prob. 1.45QCh. 1 - Prob. 1.46QCh. 1 - Assets are usually reported at their a. appraised...Ch. 1 - Prob. 1.48QCh. 1 - Prob. 1.49QCh. 1 - Prob. 1.50QCh. 1 - Prob. 1.51QCh. 1 - All of the following are current assets except a....Ch. 1 - Prob. 1.53QCh. 1 - Prob. 1.54QCh. 1 - Prob. 1.55QCh. 1 - Prob. 1.56QCh. 1 - Net income appears on which financial...Ch. 1 - Cash paid to purchase a building appears on the...Ch. 1 - The stockholders equity of Kowalski Company at the...Ch. 1 - Prob. 1.60QCh. 1 - Which of the following factors should influence...Ch. 1 - LO 3, 4 (Learning Objectives 3, 4: Apply the...Ch. 1 - Prob. 1.63APCh. 1 - LO 2, 3, 4 (Learning Objectives 2, 3, 4: Apply...Ch. 1 - LO 3,4 (Learning Objectives 3, 4: Evaluate...Ch. 1 - LO 3, 4 (Learning Objectives 3,4: Evaluate...Ch. 1 - LO 4 (Learning Objective 4: Construct financial...Ch. 1 - Group B LO 3, 4 (Learning Objectives 3, 4: Apply...Ch. 1 - LO 3,4 (Learning Objectives 3, 4: Apply the...Ch. 1 - Prob. 1.70BPCh. 1 - LO 3,4 (Learning Objectives 3, 4: Evaluate...Ch. 1 - LO 3, 4 (Learning Objectives 3,4: Evaluate...Ch. 1 - Prob. 1.73BPCh. 1 - Prob. 1.74SCCh. 1 - Decision Cases LO 1, 4 (Learning Objectives 1, 4:...Ch. 1 - LO 3, 4 (Learning Objectives 3, 4: Evaluate...Ch. 1 - Prob. 1.77EIC
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Similar questions
- If a company has declared bankruptcy, its financial statements likely violate: Multiple Choice O O O O The stable monetary unit assumption. The fair value measurement approach. The going concern assumption. The present value measurement approach.arrow_forwardUnder what cisrcumstances under PFRS 9 can an entity classify financial assets that meet the amortized cost criteria as at FVTPL? A. where the business model approach is adopted B. where the financial asset passes the contractual cash flow characteristics test C. where the instrument is held to maturity D. if doing so eliminates or reduces an accounting mismatcharrow_forwardWhich of the following is correct about subsequent measurement of financial asset at fair value? a. the financial asset shall be measured at fair value if the business model is not to collect contractual cash flows on specified dates and the contractual cash flow ae not solely payment of principal and interest. b. An entity may designate a finacncial asset as measured at fair value through profit or loss even if the financial asset satisfies the amortized cost measurement. c. both are correct d. both are incorrectarrow_forward
- impairments on financial instruments are ? A) recognized as a realized loss if the impairment is judged to be temporary B) based on discounted cash flows for securities C) based on fair value for available-for-sale investments and negotiated values for hel-to-maturity investments D) evaluated using the CECL model similiar to receivablesarrow_forwardA statement of affairs measures a deficiency – traceable to unsecured creditors without priority – as the difference between the estimated net realizable value of the assets and the amount due those creditors True or Falsearrow_forwardFair value is used to value which of the following balance sheet accounts? a. Prepaid expenses; patents; property, plant, and equipment b. Capital lease obligations, bonds payable c. Receivables net of allowance for doubtful accounts d. Debtsecurities available for sale, trading securitiesarrow_forward
- 2. Which of the following statement is correct about the statement of affairs? I. Net free assets are the excess of liquidation value of assets pledged to fully secured creditors over the amount of fully secured liabilities plus free assets less unsecured liabilities with priority. II. The estimated deficiency to unsecured creditors is total unsecured liabilities less total Net free assets III.Total unsecured liabilities includes unsecured liability with priority [A] I only [B] I and II only [C] II and III only [D] I, II and III 3. S1: For a joint venture, rights pertains to the rights and obligations associated with individual assets and liabilities, whereas with a joint the right operation, the rights and obligations pertains to the net assets. S2: Where the joint operators have designed the joint arrangement so that its activities primarily aim to provide the parties with an output it will be classified as joint venture. [A]Both statements are correct [B]Both statements are…arrow_forwardWhich of the following statements about Loss Contingencies is TRUE? According to the practice of accounting conservatism, contingency losses do not have to be accrued until they are confirmed, while contingency gains have to be recorded when the event confirming their receipt is probable. Remote Losses do not require disclosure. According to the U.S. GAAP, a loss contingency must be accrued by a charge to income if any of the two conditions is met: 1) it is probable that an asset has been impaired, or a liability has been incurred at the date of the financial statements; 2) the amount of the loss can be reasonably estimated. If a loss is probable but cannot be estimated, it shall not be disclosed in the financial statements.arrow_forwardA basic difference between loss contingencies and “real”liabilities is: a. Liabilities stem from past transactions; loss contingen-cies stem from future events. b. Liabilities always are recorded in the accountingrecords, whereas loss contingencies never are.c. The extent of uncertainty involved. d. Liabilities can be large in amount, whereas loss contin-gencies are immaterial.arrow_forward
- What does the Conceptual Framework state about derecognition?arrow_forwardMatch 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.arrow_forwardWhich of the following is a characteristic of a current liability but not a long-term liability? a. Liquidation is reasonably expected to require use of existing resources classified as current assets or create other current liabilities. b. Unavoidable obligation. c. Transaction or other event creating the liability has already occurred. d. Present obligation that entails settlement by probable future transfer or use of cash, goods, or services.arrow_forward
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