Accounting Fundamentals & Financial Reporting Concepts –
Journal Entries, Financial Statement Classification, and FASB
Framework (Q&A Format)
What two primary qualitative characteristics make accounting information useful? ✔✔Faithful
representation and relevance
According to the FASB Conceptual Framework, financial information is considered faithfully
represented if it is? ✔✔Complete, neutral, and free from error
During 2017, customers purchased gift cards from LatteBucks, all of which expire on December
31, 2019. At the end of 2018, some of the gift cards still have not been redeemed. How should
the unredeemed gift cards be reported on LatteBucks's 2018 year-end financial statements?
✔✔As a current liability on the balance sheet
Unique Aged Cheeses, Inc. specializes in producing two varieties of cheese which require a 1-
month setup process to procure and prepare the necessary raw materials, then an 18-month
aging process before the products are ready for sale to customers, who typically pay within 30
days. These two cheeses are Unique's only products. For the purpose of classifying assets and
liabilities on the balance sheet, what will be the length of the time period used to draw the
current vs. noncurrent distinction? ✔✔20 months
During the year ended December 31, 2018, Dalgliesh Co. had sales of $1,500, cost of goods sold
of $800, and sales, general and administrative expenses of $200. In addition, Dalgiesh is
involved in a restructuring process expected to last several years, and incurred restructuring
costs in 2018 of $125. During the year the company also sold various investments for a net pre-
tax gain of $125, and received $40 in dividends from investments. The effective tax rate is 40%.
What amount of operating and nonoperating income will Dalgiesh present in its 2018 income
statement? ✔✔375 operating 165 non operating
Consistency and feedback relate most closely to which two of the following accounting
concepts, respectively? ✔✔Predictive value and confirmatory value
On December 31, 2018, Supremo Co., paid in advance for a 3-year insurance policy, covering
the years 2019 through 2021. The policy cost was $1,200. If the policy had been purchased on a
year-to-year basis, the total cost would have been $1,800 at current rates. Supremo Co.'s
normal operating cycle is 9 months long. How will the $1,200 be reported on Supremo's
balance sheet dated December 31, 2018? ✔✔$400 as a current asset, $800 as a noncurrent
asset
Journal Entries, Financial Statement Classification, and FASB
Framework (Q&A Format)
What two primary qualitative characteristics make accounting information useful? ✔✔Faithful
representation and relevance
According to the FASB Conceptual Framework, financial information is considered faithfully
represented if it is? ✔✔Complete, neutral, and free from error
During 2017, customers purchased gift cards from LatteBucks, all of which expire on December
31, 2019. At the end of 2018, some of the gift cards still have not been redeemed. How should
the unredeemed gift cards be reported on LatteBucks's 2018 year-end financial statements?
✔✔As a current liability on the balance sheet
Unique Aged Cheeses, Inc. specializes in producing two varieties of cheese which require a 1-
month setup process to procure and prepare the necessary raw materials, then an 18-month
aging process before the products are ready for sale to customers, who typically pay within 30
days. These two cheeses are Unique's only products. For the purpose of classifying assets and
liabilities on the balance sheet, what will be the length of the time period used to draw the
current vs. noncurrent distinction? ✔✔20 months
During the year ended December 31, 2018, Dalgliesh Co. had sales of $1,500, cost of goods sold
of $800, and sales, general and administrative expenses of $200. In addition, Dalgiesh is
involved in a restructuring process expected to last several years, and incurred restructuring
costs in 2018 of $125. During the year the company also sold various investments for a net pre-
tax gain of $125, and received $40 in dividends from investments. The effective tax rate is 40%.
What amount of operating and nonoperating income will Dalgiesh present in its 2018 income
statement? ✔✔375 operating 165 non operating
Consistency and feedback relate most closely to which two of the following accounting
concepts, respectively? ✔✔Predictive value and confirmatory value
On December 31, 2018, Supremo Co., paid in advance for a 3-year insurance policy, covering
the years 2019 through 2021. The policy cost was $1,200. If the policy had been purchased on a
year-to-year basis, the total cost would have been $1,800 at current rates. Supremo Co.'s
normal operating cycle is 9 months long. How will the $1,200 be reported on Supremo's
balance sheet dated December 31, 2018? ✔✔$400 as a current asset, $800 as a noncurrent
asset
