AICPA Financial Accounting and Reporting 2

Question 1

Under ASC 842, how should a lessee classify a lease where the lease term is for the major part of the remaining economic life of the underlying asset?

Accepted Answer

Finance lease

Answer

Operating lease

Answer

Short-term lease

Answer

Sale-leaseback transaction

Question 2

A company issues bonds at a premium. How is the premium amortized under the effective interest method?

Accepted Answer

Debited to premium on bonds payable and credited to interest expense

Answer

Credited to interest expense each period

Answer

Debited to interest expense each period

Answer

Credited to bond payable each period

Question 3

Which inventory cost flow assumption generally results in the lowest net income during a period of rising prices?

Accepted Answer

LIFO

Answer

FIFO

Answer

Weighted-average

Answer

Specific identification

Question 4

Under ASC 606, when should revenue from a contract be recognized if performance obligations are satisfied over time?

Accepted Answer

As progress toward completion is measured

Answer

At contract inception

Answer

When payment is received

Answer

Ratably over the contract period regardless of progress

Question 5

A deferred tax liability arises when:

Accepted Answer

Book income exceeds taxable income creating a future taxable amount

Answer

Book income exceeds taxable income due to permanent differences

Answer

Taxable income exceeds book income creating a future deductible amount

Answer

Tax expense exceeds taxes currently payable

Question 6

When a parent company acquires a subsidiary and the purchase price exceeds the fair value of net identifiable assets, the excess is recorded as:

Accepted Answer

Goodwill

Answer

Bargain purchase gain

Answer

Additional paid-in capital

Answer

Minority interest premium

Question 7

Which of the following is NOT a component of other comprehensive income (OCI)?

Accepted Answer

Dividends declared to shareholders

Answer

Unrealized gains on available-for-sale securities

Answer

Foreign currency translation adjustments

Answer

Pension prior service costs