Financial Statement Analysis
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Questions and Answers

What type of financial statement is usually identified as a statement of changes in stockholders’ equity?

  • Balance sheet
  • Cash flow statement
  • Income statement
  • Statement of changes in stockholders’ equity (correct)

    • Where should changes in equity that are identified as “other comprehensive income” be reported according to GAAP?

  • In the balance sheet
  • In a financial statement (correct)
  • In the notes
  • In the income statement

    • What is the primary purpose of the supplemental and note disclosures in financial statements?

  • To provide a forecast of future financial performance
  • To replace the financial statements
  • To expand and supplement the information included in all of the financial statements (correct)
  • To provide a summary of the financial statements

    • What is the balance sheet primarily used to represent?

    <p>The position of the enterprise at a point in time</p> Signup and view all the answers

    What is the primary purpose of the other financial statements (excluding the balance sheet)?

    <p>To explain the financial impact of various activities occurring throughout the year</p> Signup and view all the answers

    What is the format of the comparative balance sheet for Tiger Co. presented in the example?

    <p>Account form</p> Signup and view all the answers

    What is the name of the company presented in the comparative balance sheet?

    <p>Tiger Co.</p> Signup and view all the answers

    What is the total net working capital and noncurrent assets for Tiger Co. in 20X2?

    <p>$4,739</p> Signup and view all the answers

    Under what condition is the offsetting of assets and liabilities in the balance sheet allowed?

    <p>When a right of setoff exists</p> Signup and view all the answers

    What is the total stockholders' equity for Tiger Co. in 20X1?

    <p>$3,234</p> Signup and view all the answers

    What is the condition for the right of setoff to exist where the reporting entity intends to set off?

    <p>The reporting entity intends to set off</p> Signup and view all the answers

    What is the amount of noncurrent liabilities for Tiger Co. in 20X2?

    <p>$1,264</p> Signup and view all the answers

    What is the primary purpose of disclosing quantitative information about derivative instruments?

    <p>To provide a more complete picture of an entity's activities</p> Signup and view all the answers

    What is the definition of a foreign currency?

    <p>Any currency that is not the functional currency of an organization</p> Signup and view all the answers

    How are monetary assets and liabilities denominated in foreign currency remeasured at each subsequent balance sheet date?

    <p>Using the current exchange rate at the end of each reporting period</p> Signup and view all the answers

    Where are foreign currency transaction gains or losses reported?

    <p>In the income statement</p> Signup and view all the answers

    How are nonmonetary assets and liabilities initially measured in a foreign currency transaction?

    <p>Using the exchange rate on the transaction date</p> Signup and view all the answers

    What is the exchange rate used to remeasure nonmonetary assets and liabilities at each subsequent balance sheet date?

    <p>The same exchange rate as the one used on the initial transaction date</p> Signup and view all the answers

    What is a type of cash inflow from investing activities?

    <p>Cash receipts from sales of equity securities of other enterprises</p> Signup and view all the answers

    What is a type of cash outflow from financing activities?

    <p>Cash payments of dividends or other distributions to owners</p> Signup and view all the answers

    What is a type of cash inflow from financing activities?

    <p>Cash proceeds from issuing bonds, mortgages, notes, and other short‐ and long‐term debt instruments</p> Signup and view all the answers

    What is a category of cash outflows from investing activities?

    <p>Cash payments for loans made by the enterprise and payments to acquire debt instruments of other entities</p> Signup and view all the answers

    What is a type of cash inflow from investing activities?

    <p>Cash receipts from sales of equity securities of other enterprises</p> Signup and view all the answers

    What is a type of cash outflow from financing activities?

    <p>Cash repayments of amounts borrowed</p> Signup and view all the answers

    When an excess occurs, how should the current-period distribution up to the excess be classified?

    <p>As a return of investment and classified as cash inflows from investing activities</p> Signup and view all the answers

    On what basis should distributions received be classified according to the nature of the distribution approach?

    <p>Based on the nature of the activity or activities of the investee that generated the distribution</p> Signup and view all the answers

    What should an entity report if it elects to apply the nature of the distribution approach, but lacks information to apply that approach?

    <p>A change in accounting principle</p> Signup and view all the answers

    What is not addressed by this amendment?

    <p>Equity method investments measured using the fair value option</p> Signup and view all the answers

    How should a transferor’s beneficial interest obtained in a securitization of financial assets be disclosed?

    <p>As a noncash activity</p> Signup and view all the answers

    What disclosure is required when an entity changes its accounting principle due to the lack of available information?

    <p>Disclosure that a change in accounting principle has occurred with respect to the affected investee(s)</p> Signup and view all the answers

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