B. Acy Bachelor of Accountancy Bachelor of Science in Accountancy: FAR 4

Question 1

Which of the following best describes a Type I subsequent event?

Accepted Answer

An event that provides evidence about conditions that existed at the balance sheet date

Answer

Type I (recognized) subsequent events provide additional evidence about conditions existing at the balance sheet date and require adjustment to the financial statements.

Question 2

A company capitalizes a $120,000 asset with a 5-year life and no salvage value using double-declining balance. What is depreciation expense in year 2?

Accepted Answer

$28,800

Answer

Year 1 DDB: $120,000 × 40% = $48,000; Book value end of year 1 = $72,000; Year 2: $72,000 × 40% = $28,800.

Question 3

When a company issues convertible bonds, how are the proceeds allocated under U.S. GAAP (ASC 470-20)?

Accepted Answer

Entirely to debt; no allocation to equity

Answer

Under U.S. GAAP, convertible bonds that are not required to be bifurcated are recorded entirely as debt; no portion is allocated to equity at issuance.

Question 4

In a business combination accounted for under ASC 805, goodwill is measured as:

Accepted Answer

The excess of fair value of consideration over fair value of net identifiable assets acquired

Answer

Under ASC 805, goodwill equals the total consideration transferred plus any noncontrolling interest, minus the fair value of identifiable net assets acquired.

Question 5

A company has a loss contingency that is probable and the amount can be reasonably estimated. Under ASC 450, the company should:

Accepted Answer

Accrue the liability and disclose

Answer

When a loss is both probable and reasonably estimable, ASC 450 requires that a liability be accrued and the nature of the contingency disclosed.

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 4