AICPA Financial Accounting and Reporting 4

Question 1

A sale-leaseback transaction in which the seller-lessee retains control of the asset is accounted for as:

Accepted Answer

A completed sale with a new operating lease

Answer

If the transfer qualifies as a sale under ASC 606, the seller-lessee derecognizes the asset and recognizes a right-of-use asset and lease liability for the leaseback.

Question 2

Under the direct method of presenting the statement of cash flows, which item appears in operating activities?

Accepted Answer

Cash collected from customers

Answer

Under the direct method, cash collected from customers is reported as an operating activity inflow, representing actual cash receipts from sales.

Question 3

When a company changes from FIFO to LIFO inventory costing, this is accounted for as a:

Accepted Answer

Change in accounting principle requiring retrospective restatement

Answer

A change from FIFO to LIFO is a change in accounting principle that generally requires retrospective application, restating prior periods as if LIFO had always been used.

Question 4

Which of the following would be included in a company's balance sheet as a component of stockholders' equity?

Accepted Answer

Treasury stock at cost (debit balance)

Answer

Treasury stock represents shares repurchased by the company and is presented as a deduction (debit balance) within stockholders' equity on the balance sheet.

Question 5

Under ASC 815, a derivative instrument designated as a fair value hedge is used to hedge against:

Accepted Answer

Changes in the fair value of a recognized asset or liability

Answer

A fair value hedge protects against changes in the fair value of a recognized asset, liability, or firm commitment attributable to a particular risk.

(AICPA) American Institute of Certified Public Accountants Practice Test

(AICPA) American Institute of Certified Public Accountants Practice Test

AICPA Financial Accounting and Reporting 4