B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: FAR 2

Question 1

Under ASC 842, how does a lessee classify a lease where the lease term is 80% of the asset's remaining economic life?

Accepted Answer

Finance lease

Answer

Under ASC 842, a lease is classified as a finance lease if the lease term is for the major part (generally 75% or more) of the remaining economic life of the underlying asset.

Question 2

A company uses the weighted-average cost method. Beginning inventory is 100 units at $10, purchases are 200 units at $13. If 150 units are sold, what is the cost of goods sold?

Accepted Answer

$1,800

Answer

Weighted-average cost = (100×$10 + 200×$13) / 300 = $3,600/300 = $12 per unit; COGS = 150 × $12 = $1,800.

Question 3

Which statement best describes the modified accrual basis of accounting used in governmental fund accounting?

Accepted Answer

Both B and C

Answer

Modified accrual recognizes revenues when measurable and available (typically within 60 days), and records expenditures when the liability is incurred.

Question 4

A bond with a face value of $1,000,000 is issued at 98. Using the straight-line method, annual amortization of the bond discount over 10 years is:

Accepted Answer

$2,000

Answer

Bond discount = $1,000,000 × 2% = $20,000; annual amortization = $20,000 / 10 years = $2,000.

Question 5

Under the equity method of accounting, which event requires the investor to reduce the carrying value of its investment?

Accepted Answer

Investee declares a cash dividend

Answer

Under the equity method, cash dividends received reduce the investment's carrying value because they represent a return of capital, not income.

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: FAR 2