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

An impairment loss is recognized only if the carrying amount exceeds the sum of the undiscounted expected future cash flows; the loss is then measured as the excess over fair value.

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

Under the cost method, dividends received from the investee are recognized as investment income by the investor.

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

Proceeds are split between par value ($1 × 1,000 = $1,000 to common stock) and the excess ($14 × 1,000 = $14,000 to additional paid-in capital).

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

ASC 958 requires not-for-profit entities to classify net assets as either 'with donor restrictions' or 'without donor restrictions.'

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

A qualifying asset is one that requires a substantial period of time to bring to its intended use or sale, such as self-constructed property or certain discrete projects.

(AICPA) American Institute of Certified Public Accountants Practice Test

(AICPA) American Institute of Certified Public Accountants Practice Test

AICPA Financial Accounting and Reporting 5