FAR Simulated Exam 2 with all Correct & 100% Verified
Answers |Latest Version |Already Graded A+
(F2) The December 31, Year 1, financial statements of Frank Corp. were first available to be issued
and were, in fact, actually issued on February 23, Year 2. The financial statements were then reissued
on March 18, Year 2, to reflect the recognition of a subsequent event that occurred on January 9,
Year 2. Which of the following events would require recognition by Frank Corp. through a second
reissuance of the December 31, Year 1, financial statements? ✔Correct Answer-The bankruptcy on
February 15, Year 2, of a major customer that owed a significant amount to Frank Corp
(F4) For a finance lease, the amount recorded initially by the lessee as a liability should normally:
____. ✔Correct Answer-equal the present value of the minimum lease payments at the beginning
of the lease
(F1) How are discontinued operations that occur at midyear initially reported? ✔Correct Answer-
Included in net income and disclosed in the notes to interim financial statements
(F2) A company receives an advance payment for special order goods that are to be manufactured
and delivered within six months. The advance payment should be reported in the company's balance
sheet as a: ____. ✔Correct Answer-current liability
(F6) In hospital accounting, restricted funds are: ___. ✔Correct Answer-restricted as to use by the
donor, grantor, or other source of the resources
(F2) Which of the following MUST be present in order to require the disclosure of the estimated
effect of a change in an estimate used in the preparation of financial statements? ✔Correct
Answer-"It is reasonably possible that the estimate will change in the near term" and "The effect of a
change in the estimate would be material"
(F2) For which of the following methods of determining fair value would an entity's discount rate be
MOST important? ✔Correct Answer-Income approach
(F4) Douglas Co. leased machinery with an economic useful life of six years. For tax purposes, the
depreciable life is seven years. The lease is for five years, and Douglas can purchase the machinery at
fair value at the end of the lease, and Douglas is likely to exercise this option. What is the depreciable
life of the leased machinery for financial reporting? ✔Correct Answer-Five years
(F5) Which of the following assets are financial instruments? ✔Correct Answer-Investment in
bonds
(F3) Milton Co. pledged some of its accounts receivable to Good Neighbor Financing Corporation in
return for a loan. Which of the following statements is correct? ✔Correct Answer-Milton will retain
control of the receivables
(F6) The Cats and Dogs League was organized as a nongovernmental not-for-profit organization. The
League received a pledge of $10,000 to be used to build an addition to the kennel. This donation will
NOT be received for three years. How should this pledge be recorded? ✔Correct Answer-As
support with donor restrictions of the present value of $10,000
Answers |Latest Version |Already Graded A+
(F2) The December 31, Year 1, financial statements of Frank Corp. were first available to be issued
and were, in fact, actually issued on February 23, Year 2. The financial statements were then reissued
on March 18, Year 2, to reflect the recognition of a subsequent event that occurred on January 9,
Year 2. Which of the following events would require recognition by Frank Corp. through a second
reissuance of the December 31, Year 1, financial statements? ✔Correct Answer-The bankruptcy on
February 15, Year 2, of a major customer that owed a significant amount to Frank Corp
(F4) For a finance lease, the amount recorded initially by the lessee as a liability should normally:
____. ✔Correct Answer-equal the present value of the minimum lease payments at the beginning
of the lease
(F1) How are discontinued operations that occur at midyear initially reported? ✔Correct Answer-
Included in net income and disclosed in the notes to interim financial statements
(F2) A company receives an advance payment for special order goods that are to be manufactured
and delivered within six months. The advance payment should be reported in the company's balance
sheet as a: ____. ✔Correct Answer-current liability
(F6) In hospital accounting, restricted funds are: ___. ✔Correct Answer-restricted as to use by the
donor, grantor, or other source of the resources
(F2) Which of the following MUST be present in order to require the disclosure of the estimated
effect of a change in an estimate used in the preparation of financial statements? ✔Correct
Answer-"It is reasonably possible that the estimate will change in the near term" and "The effect of a
change in the estimate would be material"
(F2) For which of the following methods of determining fair value would an entity's discount rate be
MOST important? ✔Correct Answer-Income approach
(F4) Douglas Co. leased machinery with an economic useful life of six years. For tax purposes, the
depreciable life is seven years. The lease is for five years, and Douglas can purchase the machinery at
fair value at the end of the lease, and Douglas is likely to exercise this option. What is the depreciable
life of the leased machinery for financial reporting? ✔Correct Answer-Five years
(F5) Which of the following assets are financial instruments? ✔Correct Answer-Investment in
bonds
(F3) Milton Co. pledged some of its accounts receivable to Good Neighbor Financing Corporation in
return for a loan. Which of the following statements is correct? ✔Correct Answer-Milton will retain
control of the receivables
(F6) The Cats and Dogs League was organized as a nongovernmental not-for-profit organization. The
League received a pledge of $10,000 to be used to build an addition to the kennel. This donation will
NOT be received for three years. How should this pledge be recorded? ✔Correct Answer-As
support with donor restrictions of the present value of $10,000
