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AICPA Exam CPA-Financial Topic 1 Question 83 Discussion

Actual exam question for AICPA's CPA-Financial exam
Question #: 83
Topic #: 1
[All CPA-Financial Questions]

Deficits accumulated during the development stage of a company should be:

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Suggested Answer: B

Choice 'b' is correct. Deficits accumulated during the development stage of a company should be reported as a part of stockholders' equity.

Rule: Development stage enterprises should present FS in accordance with GAAP and make additional disclosures such as: cumulative net losses, cumulative deficit (as part of equity), cumulative sales & expenses (part of I/S), cumulative statement of cash flows and supplementary 'shareholders equity.'

Choices 'a', 'c', and 'd' are incorrect, per the rule above.


by James at Mar 21, 2024, 06:01 PM

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Lashawn
8 months ago
It's interesting to hear different perspectives on how deficits should be handled in the accounting process.
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Lai
8 months ago
I see your point, but I still think reporting them as organization costs upfront is the most straightforward approach.
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Denna
8 months ago
That's a valid point. Capitalizing and amortizing over a longer period could provide a more accurate representation of the costs incurred.
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Gearldine
8 months ago
But what about capitalizing and amortizing them over a five year period? Wouldn't that spread out the impact on financial statements?
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Lashawn
8 months ago
I agree with that, it makes sense to treat them as costs incurred during the development phase.
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Lai
9 months ago
I think deficits accumulated during the development stage of a company should be reported as organization costs.
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Dick
9 months ago
I would go with option D, capitalizing and amortizing deficits over a five year period.
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Magdalene
9 months ago
I believe capitalizing and writing off deficits in the first year of principal operations is more appropriate.
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Corrie
9 months ago
But what about option B, reporting deficits as a part of stockholders' equity?
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Rodolfo
9 months ago
I agree with Fletcher, it makes sense to report them as organization costs.
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Fletcher
10 months ago
I think deficits accumulated during development should be reported as organization costs.
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