MGA 624 Quiz 3 Questions and Answers Latest Update 2025/2026
Scope guidance - Answers indicates which transactions, items, or entities are subject to the
guidance within a topic
scope section may - Answers -list transactions/entities that are not within the scope.
-contain tests to determine what transactions should be
accounted for under a certain topic.
Recognition - Answers describes what, when, and how an item should be recorded in the
financial statements.
- Section 25
Derecognition - Answers (Section 40)
describes when and how an item should be removed from the financial statements.
- Notably, items can also be "removed" from the balance sheet through other means, for
example, through amortization or impairments.
subsequent event - Answers (ASC 855) is an event that takes place after the balance sheet date,
but before financial statements are issued.
- Located under the Broad Transactions area.
Recognized subsequent events ("type 1") - Answers Provide additional evidence about
conditions existing at the balance sheet date, including estimates inherent in preparing the
financial statements.
• Require adjustment to the financial statements.
Unrecognized subsequent events ("type 2") - Answers Provide evidence about conditions that
did not exist at the balance sheet date but arose subsequent to that date.
• Do not require adjustment to the financial statements.
ASC 405-20(Extinguishments of Liabilities) - Answers provides guidance on when it is
appropriate to derecognize a liability.
The debtor pays the creditor and is relieved of its obligation; or
- The debtor is legally released from being the primary obligor under the liability, either judicially
or by the creditor.
ASC 740 - Answers (Income Taxes)applies to taxes that are "based on income".
, - This topic is located in the Expenses area.
ASC 450 - Answers (Contingencies)- must be applied for taxes that are not based on income.
ASC 845 - Answers Non monetary exchanges should be recognized at the fair values of the
assets exchanged.
- But only if the transaction has commercial substance.
- And the transaction cannot be between entities under common control.
ASC 845 is organized into several subsections, each with unique scope requirements: - Answers
- General
- Purchases and sales of inventory with the same counterparty
- Barter transactions
- Exchanges involving monetary consideration
Topic 815 - Answers (Derivatives) requires certain instruments to be carried at fair value and
marked-to-market each period.
What makes a contract a derivative? It must - Answers - Have an underlying and a notional
amount
- Require little or no initial net investment
- Be capable of "net settlement."
Underlying - Answers Generally,means a stated price.
Notional - Answers Generally,means a quantity.
Net settlement Exists if any of the following conditions are present: - Answers - The contract
says it can be settled net (rather than deliver the widgets, you can just pay me cash to settle
this).
- Net settlement is possible through a market mechanism (the contract can be traded on an
exchange).
- Net settlement by delivery of an asset that is readily convertible to cash (if the product under
contract is readily sold, just like cash).
Accounting measurement - Answers •describes at what value (i.e., for how much?) a financial
statement item should be recognized.
-Also referred to as valuation.
Scope guidance - Answers indicates which transactions, items, or entities are subject to the
guidance within a topic
scope section may - Answers -list transactions/entities that are not within the scope.
-contain tests to determine what transactions should be
accounted for under a certain topic.
Recognition - Answers describes what, when, and how an item should be recorded in the
financial statements.
- Section 25
Derecognition - Answers (Section 40)
describes when and how an item should be removed from the financial statements.
- Notably, items can also be "removed" from the balance sheet through other means, for
example, through amortization or impairments.
subsequent event - Answers (ASC 855) is an event that takes place after the balance sheet date,
but before financial statements are issued.
- Located under the Broad Transactions area.
Recognized subsequent events ("type 1") - Answers Provide additional evidence about
conditions existing at the balance sheet date, including estimates inherent in preparing the
financial statements.
• Require adjustment to the financial statements.
Unrecognized subsequent events ("type 2") - Answers Provide evidence about conditions that
did not exist at the balance sheet date but arose subsequent to that date.
• Do not require adjustment to the financial statements.
ASC 405-20(Extinguishments of Liabilities) - Answers provides guidance on when it is
appropriate to derecognize a liability.
The debtor pays the creditor and is relieved of its obligation; or
- The debtor is legally released from being the primary obligor under the liability, either judicially
or by the creditor.
ASC 740 - Answers (Income Taxes)applies to taxes that are "based on income".
, - This topic is located in the Expenses area.
ASC 450 - Answers (Contingencies)- must be applied for taxes that are not based on income.
ASC 845 - Answers Non monetary exchanges should be recognized at the fair values of the
assets exchanged.
- But only if the transaction has commercial substance.
- And the transaction cannot be between entities under common control.
ASC 845 is organized into several subsections, each with unique scope requirements: - Answers
- General
- Purchases and sales of inventory with the same counterparty
- Barter transactions
- Exchanges involving monetary consideration
Topic 815 - Answers (Derivatives) requires certain instruments to be carried at fair value and
marked-to-market each period.
What makes a contract a derivative? It must - Answers - Have an underlying and a notional
amount
- Require little or no initial net investment
- Be capable of "net settlement."
Underlying - Answers Generally,means a stated price.
Notional - Answers Generally,means a quantity.
Net settlement Exists if any of the following conditions are present: - Answers - The contract
says it can be settled net (rather than deliver the widgets, you can just pay me cash to settle
this).
- Net settlement is possible through a market mechanism (the contract can be traded on an
exchange).
- Net settlement by delivery of an asset that is readily convertible to cash (if the product under
contract is readily sold, just like cash).
Accounting measurement - Answers •describes at what value (i.e., for how much?) a financial
statement item should be recognized.
-Also referred to as valuation.
