Financial Accounting and Reporting 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 Accounting and Reporting flashcards as text
Under the allowance method, when a specific account receivable is written off as uncollectible, the entry:
Answer: Has no effect on net accounts receivable
Writing off a specific account reduces both accounts receivable and the allowance for doubtful accounts by equal amounts, leaving net accounts receivable unchanged.
A company using the equity method records its share of an investee's net income by:
Answer: Debiting the investment account and crediting investment income
Under the equity method, the investor debits the investment account and credits investment income for its proportionate share of the investee's net income.
Which depreciation method allocates cost based on actual usage or output rather than time?
Answer: Units-of-production
The units-of-production method allocates depreciation based on actual output or usage, making it activity-based rather than time-based.
A contingent liability should be accrued when it is:
Answer: Probable and can be reasonably estimated
Under ASC 450, a contingent liability is accrued only when the loss is probable and the amount can be reasonably estimated.
When computing earnings per share (EPS), preferred dividends on cumulative preferred stock are:
Answer: Deducted from net income whether declared or not
For cumulative preferred stock, preferred dividends are deducted from net income in the EPS numerator whether or not they have been declared.
Under ASC 330, inventories are reported at the lower of cost or net realizable value (NRV). NRV is defined as:
Answer: Estimated selling price less costs to complete and sell
Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion and selling.
Which statement about goodwill impairment testing under U.S. GAAP is correct?
Answer: Goodwill is not amortized but is tested for impairment at the reporting unit level at least annually
Under ASC 350, goodwill is not amortized but must be tested for impairment at the reporting unit level at least annually or when a triggering event occurs.