AICPA Financial Accounting and Reporting 5

Question 1

Under ASC 360, a long-lived asset group held for use is tested for impairment when the carrying amount exceeds which of the following?

Accepted Answer

The sum of undiscounted future cash flows expected from the asset

Answer

The asset's fair value

Answer

The asset's net realizable value

Answer

The present value of future cash flows

Question 2

Which method of accounting for investments results in the investor recognizing dividends received as income?

Accepted Answer

Cost method (for non-marketable securities)

Answer

Equity method

Answer

Consolidation method

Answer

Fair value through OCI

Question 3

A company issues 1,000 shares of $1 par value stock for $15 per share. The journal entry includes:

Accepted Answer

Debit cash $15,000; Credit common stock $1,000 and additional paid-in capital $14,000

Answer

Debit cash $15,000; Credit common stock $15,000

Answer

Debit common stock $1,000; Credit cash $15,000

Answer

Debit cash $1,000; Credit additional paid-in capital $15,000

Question 4

Under ASC 958, which type of net asset classification is used by not-for-profit entities?

Accepted Answer

Net assets with donor restrictions and net assets without donor restrictions

Answer

Restricted and unrestricted

Answer

Current and noncurrent

Answer

Capital and revenue

Question 5

Which of the following best describes a 'qualifying asset' under ASC 835-04 for capitalization of interest?

Accepted Answer

An asset that requires a substantial period of time to get ready for its intended use

Answer

Any asset that generates revenue for the company

Answer

An asset purchased with borrowed funds specifically for that purpose

Answer

Any inventory item manufactured for external sale

Question 6

Under U.S. GAAP, research and development (R&D) costs are generally:

Accepted Answer

Expensed as incurred

Answer

Capitalized and amortized over the project's useful life

Answer

Capitalized only if they have future economic benefits

Answer

Deferred until the related product generates revenue

Question 7

When preparing consolidated financial statements, intercompany sales of inventory between a parent and its subsidiary require which elimination?

Accepted Answer

Elimination of the intercompany sales, cost of sales, and any unrealized profit in ending inventory

Answer

Elimination of the subsidiary's retained earnings only

Answer

Elimination of the parent's investment account only

Answer

Elimination of dividends paid by the subsidiary to the parent