Practice Test Geeks(CA) Certified Accountant Practice Test
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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

  1. A company has net income of $600,000, 200,000 basic shares, and 20,000 dilutive stock options with an exercise price of $10 when the average market price is $25. What is the diluted share count using the treasury stock method?

    Answer: 208,000

    Treasury stock method: Options proceeds = 20,000 × $10 = $200,000; shares repurchased = $200,000 ÷ $25 = 8,000; net dilutive shares = 20,000 – 8,000 = 12,000; diluted = 200,000 + 12,000 = 212,000.

  2. Under the allowance method, when a specific customer account is written off as uncollectible, the journal entry is:

    Answer: Debit Allowance for Doubtful Accounts; Credit Accounts Receivable

    Writing off a specific account debits the Allowance (reducing the contra-asset) and credits Accounts Receivable.

  3. Which of the following best describes the concept of 'legal capital' for a corporation?

    Answer: The minimum amount of contributed capital that cannot be distributed to shareholders

    Legal capital, typically equal to par value of issued shares, is the minimum equity cushion that state law protects from distribution.

  4. A company records a prior period error correction that increases net income by $50,000 (after tax). Where is this adjustment reported in the financial statements?

    Answer: Opening retained earnings in the statement of changes in equity

    Under ASC 250, prior period error corrections are reported as an adjustment to opening retained earnings in the earliest period presented, not through current income.

  5. In a liquidating dividend, what is the accounting treatment that differs from an ordinary cash dividend?

    Answer: The portion exceeding retained earnings is charged to Additional Paid-In Capital

    When a dividend exceeds available retained earnings, the excess is treated as a return of capital and charged to APIC rather than retained earnings.

  6. Which ratio measures a company's ability to pay all current liabilities if they came due at once, using only the most liquid assets?

    Answer: Cash ratio

    The cash ratio (cash + cash equivalents ÷ current liabilities) is the most conservative liquidity measure, excluding receivables and inventory.

  7. A corporation's charter authorizes 500,000 shares; 300,000 are issued; 50,000 are held as treasury stock. How many shares are outstanding?

    Answer: 250,000

    Outstanding shares = Issued shares – Treasury shares = 300,000 – 50,000 = 250,000.