Certified Public Accountant (Financial Accounting & Reporting) 3

Question 1

Under ASC 360, an asset group is tested for impairment when events indicate the carrying amount may not be recoverable. The impairment loss equals:

Accepted Answer

Carrying amount minus fair value

Answer

Once it is determined that carrying amount exceeds undiscounted future cash flows, the impairment loss is measured as carrying amount minus fair value.

Question 2

Which of the following is reported as a component of other comprehensive income (OCI)?

Accepted Answer

Unrealized gain on available-for-sale debt securities

Answer

Unrealized gains and losses on available-for-sale debt securities are recorded in OCI until the securities are sold or impaired.

Question 3

A company declares a 10% stock dividend when it has 200,000 shares outstanding at $5 par and a market price of $18. The credit to paid-in capital in excess of par is:

Accepted Answer

$260,000

Answer

Stock dividend shares = 20,000; market value = $360,000; par credited = $100,000; excess = $360,000 − $100,000 = $260,000.

Question 4

Under ASC 606, the core principle requires revenue to be recognized:

Accepted Answer

To depict the transfer of promised goods or services in an amount that reflects the consideration the entity expects to receive

Answer

ASC 606's core principle is to recognize revenue in a manner that depicts the transfer of goods or services for the consideration the entity expects to be entitled to.

Question 5

When a company changes from LIFO to FIFO inventory costing, the change is reported as:

Accepted Answer

A prior period adjustment net of tax to retained earnings

Answer

A change in inventory method is an accounting principle change that requires retrospective application, with a cumulative catch-up adjustment to opening retained earnings.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant (Financial Accounting & Reporting) 3