Discuss AICPA CPA-Financial Exam Topic 2 Question 122

Which of the following information should be included in Melay, Inc.'s 1992 summary of significant accounting policies?

AProperty, plant, and equipment is recorded at cost with depreciation computed principally by the straight-line method.

BDuring 1992, the Delay component was sold.

CBusiness segment 1992 sales are Alay $1M, Belay $2M, and Celay $3M.

DFuture common share dividends are expected to approximate 60% of earnings.

Suggested Answer: A

Choice 'a' is correct. Computing depreciation principally by the straight-line method is a GAAP method of depreciation that should be described in the 'summary of significant accounting policies.'

Choice 'b' is incorrect. Disclosing the sale of a component of a business is required (and is covered in the lecture on 'discontinued operations' in the F1 class) but is not a 'significant accounting policy.'

Choice 'c' is incorrect. Disclosing 'sales' of segments is required, but is not a 'significant accounting policy.'

Choice 'd' is incorrect. 'Estimates of future common share dividends' are not appropriate disclosures for the financial statements. They might be appropriate for the 'presidents letter to shareholders.'

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26 comments · newest first

Laurel 1 month ago

C gives sales breakdown, but A is more significant for policies.

Alesia 1 month ago

B is also relevant. It indicates changes in the company.

Sol 2 months ago

I agree, A is important for understanding depreciation.

Hui 2 months ago

I think A is crucial. It shows how assets are valued.

Alva 2 months ago

C gives sales breakdown, but A is more critical for policies.

Georgiana 2 months ago

B is also important. It indicates changes in the company structure.

Devorah 2 months ago

I agree, A is key for understanding depreciation methods.

Gretchen 2 months ago

I think A is essential. It shows how assets are valued.

Stevie 3 months ago

C gives sales breakdown, but A is more critical for policies.

Armando 3 months ago

B is also important. It indicates changes in the business structure.

Timothy 3 months ago

I agree, A is key. Depreciation method matters for clarity.

Glennis 3 months ago

I think A is essential. It shows how assets are valued.

Launa 3 months ago

Not sure if future dividends should be in there, seems speculative.

Yvonne 4 months ago

C is just basic info, not really significant policy.

Evangelina 5 months ago

Wait, they sold the Delay component? That's surprising!

Merilyn 5 months ago

I think D is also crucial to include.

Rosalind 5 months ago

A is definitely important for the summary!

Noe 6 months ago

C is important too, shows the sales breakdown!

Stevie 6 months ago

Not sure about D, that seems overly optimistic.

Dino 6 months ago

Wait, they sold the Delay component? That's surprising!

Lynelle 6 months ago

I agree, A is essential for clarity.

Jesusita 6 months ago

A is definitely a must-have for the summary!

Myra 6 months ago

I remember discussing the importance of depreciation methods in class, so I’m leaning towards A being the best choice. But I’m not completely confident about the others.

Veda 7 months ago

I feel like option C might be relevant too, but it seems more like operational data rather than a policy. I need to double-check what qualifies as significant accounting policies.

Karol 7 months ago

I'm not so sure about option D. It seems more like a forecast rather than a policy. I remember a practice question where we had to distinguish between policies and projections.

Natalya 7 months ago

I think option A is definitely something that should be included since it talks about the accounting methods used, which is typical for significant accounting policies.

AICPA CPA-Financial Exam - Topic 2 Question 122 Discussion