Corporate Accounting Flashcards
7 cards from real CA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Corporate Accounting flashcards as text
A company issues $1,000,000 of 8% bonds at 96. What is the carrying value of the bonds at issuance and how is the $40,000 discount treated over the bond's life?
Answer: Carrying value $960,000; discount added to interest expense each period
Bonds issued at a discount have a carrying value below face; the discount is amortized, increasing total interest expense over the bond's life.
Under the effective-interest method, interest expense in period 1 on a $500,000 bond issued at $478,000 with a stated rate of 6% and effective rate of 7% equals:
Answer: $33,460
Interest expense = Carrying value × Effective rate = $478,000 × 7% = $33,460.
Which of the following is classified as a financing activity on the statement of cash flows?
Answer: Payment of dividends to shareholders
Dividend payments to shareholders are financing activities because they represent transactions with equity providers.
A company has total assets of $2,000,000, total liabilities of $800,000, and 50,000 shares outstanding at a market price of $40. What is the book value per common share?
Answer: $24.00
Book value per share = (Total assets – Total liabilities) ÷ Shares = $1,200,000 ÷ 50,000 = $24.00.
Under ASC 842, an operating lease with a lease term of 5 years requires the lessee to record on the balance sheet:
Answer: A right-of-use asset and a lease liability
ASC 842 requires lessees to recognize a right-of-use asset and a corresponding lease liability for virtually all leases with terms exceeding 12 months.
A deferred tax liability arises when:
Answer: Tax expense exceeds taxes currently payable
A deferred tax liability occurs when taxable income is less than book income now but will be higher in a future period, creating a future tax obligation.
Which segment of the statement of cash flows would reflect proceeds from selling long-term investments in marketable equity securities?
Answer: Investing activities
Buying and selling long-term investments are investing activities because they involve the acquisition and disposal of long-term assets.