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
When a company repurchases its own shares and records them as treasury stock using the cost method, the treasury stock account is shown on the balance sheet as:
Answer: A contra-equity account at cost
Treasury stock recorded under the cost method appears as a deduction (contra-equity) in stockholders' equity at the purchase price.
Which of the following would NOT be included in the cost of a self-constructed asset?
Answer: General administrative overhead unrelated to the asset
General and administrative overhead not directly related to construction is expensed as incurred and is not capitalizable.
A company sells $500,000 of goods and grants customers the right to return products within 30 days. Under ASC 606, the company should:
Answer: Recognize only the revenue it expects not to be returned, with a refund liability for expected returns
ASC 606 requires recognition of revenue only for the portion not expected to be returned, with a refund liability established for expected returns.
Under the lower of cost or net realizable value (LCNRV) rule for inventory, net realizable value is defined as:
Answer: Estimated selling price less costs to complete and sell
Net realizable value equals the estimated selling price in the ordinary course of business minus costs to complete and sell the inventory.
On the statement of cash flows, proceeds from issuing long-term bonds are classified as:
Answer: Financing activities
Proceeds from borrowing, including bond issuances, are classified as financing activities on the cash flow statement.
A company's acid-test (quick) ratio is calculated using which of the following components?
Answer: (Cash + Marketable Securities + Accounts Receivable) ÷ Current Liabilities
The quick ratio uses liquid current assets (cash, marketable securities, and receivables) divided by current liabilities, excluding inventory and prepaid items.
Which accounting concept requires that the same accounting methods be used from one period to the next unless a change is justified?
Answer: Consistency
The consistency principle requires companies to apply the same accounting methods across periods to ensure comparability of financial statements.