Financial Reporting & Analysis Flashcards
7 cards from real AICPA 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 Reporting & Analysis flashcards as text
Under ASC 230, which of the following is classified as an investing activity in the statement of cash flows?
Answer: Purchase of equipment for cash
Purchases of property, plant, and equipment are capital expenditures classified as investing activities under ASC 230.
A company uses the percentage-of-completion method. At year-end, the project is 60% complete, total estimated contract revenue is $500,000, and total estimated costs are $400,000. How much revenue should be recognized year-to-date?
Answer: $300,000
Revenue recognized = 60% × $500,000 = $300,000, using the percentage of completion applied to total contract revenue.
Which of the following situations would require a company to recognize a contingent liability under ASC 450?
Answer: A probable loss that can be reasonably estimated
Under ASC 450, a contingent liability must be accrued when a loss is both probable and the amount can be reasonably estimated.
Deferred tax liabilities arise when:
Answer: Tax expense exceeds taxes payable
A deferred tax liability arises when tax expense (based on GAAP income) exceeds taxes currently payable, reflecting temporary differences that will result in taxable amounts in future periods.
Under ASC 360, an impairment loss on long-lived assets held and used is measured as:
Answer: Carrying amount less fair value
Once impairment is triggered (carrying amount exceeds undiscounted cash flows), the impairment loss equals carrying amount minus fair value of the asset.
Which of the following is the correct treatment for research and development costs under U.S. GAAP (ASC 730)?
Answer: Expense as incurred
Under ASC 730, research and development costs must be expensed as incurred under U.S. GAAP, with limited exceptions for software development costs.
The DuPont analysis breaks return on equity (ROE) into three components. Which of the following correctly identifies those components?
Answer: Net profit margin, asset turnover, and financial leverage
DuPont analysis decomposes ROE into net profit margin (profitability) × asset turnover (efficiency) × equity multiplier or financial leverage (capital structure).