Financial Accounting & Reporting Flashcards
7 cards from real ABA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Accounting & Reporting flashcards as text
A company reports basic EPS of $3.00 and has outstanding stock options. If the options are dilutive, how will diluted EPS compare to basic EPS?
Answer: Diluted EPS will be lower than $3.00
Dilutive securities increase the denominator (shares) more than the numerator (income), which reduces EPS below the basic figure.
Which financial statement reconciles net income to cash provided by operating activities under the indirect method?
Answer: Cash Flow Statement
The indirect method in the Cash Flow Statement starts with net income and adjusts for non-cash items and working capital changes to arrive at operating cash flows.
Under the percentage-of-completion method for long-term contracts, revenue is recognized based on:
Answer: Costs incurred to date relative to estimated total costs
The percentage-of-completion method measures progress by dividing costs incurred to date by total estimated contract costs to determine the revenue earned.
A contingent liability should be accrued on the balance sheet when it is:
Answer: Probable and amount is reasonably estimable
Under ASC 450, a contingent liability is accrued only when the loss is both probable and the amount can be reasonably estimated.
Goodwill arising from a business combination is tested for impairment:
Answer: Annually and when triggering events occur
ASC 350 requires goodwill to be tested for impairment at least annually and whenever a triggering event indicates potential impairment.
Which depreciation method allocates the largest depreciation expense in the first year of an asset's useful life?
Answer: Double-declining balance
Double-declining balance applies twice the straight-line rate to the beginning book value, producing the highest charge in year one.
A retail company uses the gross method to record purchases. A $10,000 purchase is made with terms 2/10, net 30. If payment is made within the discount period, the journal entry includes a credit to:
Answer: Purchase Discounts for $200
Under the gross method, the $200 discount taken is credited to Purchase Discounts, reducing cost of goods purchased.