Question

1*Using the AICPA Professional Code of Conduct, as a reference, which one do you consider to be related to the preparation of the financial statements? Do you consider that these standards are sufficient or need to be updated?

2*Using as a reference the FASB coding system as a reference, in what way are the contingencies recorded for gains and losses? Do you agree with this way of handling the accounts? or would you suggest another system to record these transactions?

3*If the company has a 51% chance that one of your consumers will win the damages lawsuit against you, for a value between $ 5- $ 15 million, how will you recognize this under GAAP and IFRS?

a*Under GAAP, a liability would not be recognized as a liability but under IFRS it would be recognized as a liability.

b*Under GAAP, it will not be recognized as a liability, nor under IFRS would it be recognized

c*Under GAAP, a liability will be recognized as a liability and under IFRS a liability will be recognized

4*A bond issue of $ 500,000 sold for 98. So, the bonds:

a*They were sold at a discount, which is recorded as a debit to the Cash account and a credit to the Bonds Payable accounts.

b*They were sold at premium (premium), which is recorded as a debit to the Cash account and a credit to the Bonds Payable accounts

c*They were sold with premium (premium), which is recorded as a debit to the Bonus Payable account and a credit to the Cash accounts

Answer 1

Answer 1

As per Statement On Standards for Accounting and Review Services 21, Section 70 applies when an accountant is engaged in the preparation of financial information or prospective financial information.

These statements and standards need to be revised and updated for the better clarification in regard to pace with time and changes in the accounting system.

Answer 2

FAS 5: Accounting for Contingencies desribes the treatment and accounting for contingencies.a contingency is defined as an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur. Resolution of the uncertainty may confirm the acquisition of an asset or the reduction of a liability or the loss or impairment of an asset or the incurrence of a liability.

Answer 3. (C)

As per US GAAP, a liability will be recognized as a liability and under IFRS a liability will be recognized. It is probable event which is the higher threshold than more likely than not.

Answer 4. (A)

They were sold at a discount, which is recorded as a debit to the Cash account and a credit to the Bonds Payable accounts.

Journal entry:

Cash A/C Dr

Discount A/C Dr

TO Bonds Payable