/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Question 1ISTQ 1. Which of the following statem... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 5: Question 1ISTQ (page 262)

1. Which of the following statements about IFRS and GAAP accounting and reporting requirements for the balance sheet is not correct?

(a) Both IFRS and GAAP distinguish between current and non-current assets and liabilities.

(b) The presentation formats required by IFRS and GAAP for the balance sheet are similar.

(c) Both IFRS and GAAP require that comparative information be reported.

(d) One difference between the reporting requirements under IFRS and those of the GAAP balance sheet is that an IFRS balance sheet may list long-term assets first.

Short Answer

Expert verified

The correct option is (b) The presentation format required by IFRS and GAAP for balance sheet are similar.

Step by step solution

01

Definition of GAAP

GAAP defines the principles and rules that must be followed in reporting financial information of the business entity in financial statements. It fully expanded as a generally accepted accounting principle.

02

The explanation for the correct options

The balance sheet format is different under IFRS and GAAP because GAAP requires current assets to be reported first while business entity using IFRS reports non-current assets first.

03

The explanation for incorrect options

(a) Yes, balance sheet prepared either under GAAP or IFRS, the assets and liabilities are classified as current and non-current.

(c) The business entity is required to prepare a comparative financial statement under both GAAP and IFRS.

(d) Yes, under IFRS, the sequence of reporting items is reversed. Under IFRS, long-term assets are reported first, and under GAAP, current assets are reported first.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

E5-8 (L02) (Current vs. Long-term Liabilities) Frederic Chopin Corporation is preparing its December 31, 2017, balance sheet. The following items may be reported as either a current or long-term liability.

1. On December 15, 2017, Chopin declared a cash dividend of \(2.50 per share to stockholders of record on December 31. The dividend is payable on January 15, 2018. Chopin has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury.

2. At December 31, bonds payable of \)100,000,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of \(25,000,000 every September 30, beginning September 30, 2018.

3. At December 31, 2016, customer advances were \)12,000,000. During 2017, Chopin collected \(30,000,000 of customer advances; advances of \)25,000,000 should be recognized in income.

Instructions For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability if any.

Perez Company reported an increase in inventories in the past year. Discuss the effect of this change on the current ratio (current assets 梅 current liabilities). What does this tell a statement user about Perez Company鈥檚 liquidity?

Discuss at least two situations in which estimates could affect the usefulness of the information in the balance sheet.

Lowell Company鈥檚 December 31, 2017, trial balance includes the following accounts: Inventory \(120,000, Buildings \)207,000, Accumulated Depreciation鈥擡quipment \(19,000, Equipment \)190,000, Land (held for investment) \(46,000, Accumulated Depreciation鈥擝uildings \)45,000, Land \(71,000, and Timberland \)70,000. Prepare the property, plant, and equipment section of the balance sheet

Lansbury Inc. had the following balance sheet on December 31, 2016.

LANSBURY INC.

BALANCE SHEET

DECEMBER 31, 2016

Cash

\(20,000

Account payable

\)30,000

Accounts receivables

21,200

Note payable

41,000

Investment

32,000

Common stock

100,000

Plant assets (net)

81,000

Retained earnings

23,200

Land

40,000

\(194,200

\)194,200

During 2017, the following occurred.

1. Lansbury Inc. sold part of its debt investment portfolio for \(15,000. This transaction resulted in a gain of \)3,400 for the firm. The company classifies these investments as available for sale.

2. A tract of land was purchased for \(13,000 cash.

3. Long-term notes payable in the amount of \)16,000 were retired before maturity by paying \(16,000 cash.

4. An additional \)20,000 in common stock was issued at par.

5. Dividends of \(8,200 were declared and paid to stockholders.

6. Net income for 2017 was \)32,000 after allowing for depreciation of \(11,000.

7. Land was purchased through the issuance of \)35,000 in bonds.

8. At December 31, 2017, Cash was \(37,000, Accounts Receivable was \)41,600, and Accounts Payable remained at $30,000.

Instructions

(a) Prepare a statement of cash flows for 2017.

(b) Prepare an unclassified balance sheet as it would appear at December 31, 2017.

(c) How might the statement of cash flows help the user of the financial statements? Compute two cash flow ratios.
See all solutions

Recommended explanations on Business Studies Textbooks

Business Development

Read Explanation

Managerial Economics

Read Explanation

Strategic Analysis

Read Explanation

Influences On Business

Read Explanation

Change Management

Read Explanation

Sales in Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.