Certified Public Accountant (Financial Accounting & Reporting) 5

Question 1

Which financial statement reports a company's financial position at a specific point in time?

Accepted Answer

Balance sheet

Answer

The balance sheet (statement of financial position) presents assets, liabilities, and equity as of a specific date.

Question 2

Under ASC 805, how are acquisition-related costs (e.g., legal and advisory fees) treated in a business combination?

Accepted Answer

Expensed in the period incurred

Answer

ASC 805 requires that direct transaction costs in a business combination be expensed as incurred, not capitalized.

Question 3

A company reports comprehensive income of $150,000 and net income of $120,000. What is the amount of other comprehensive income?

Accepted Answer

$30,000

Answer

Other comprehensive income = Comprehensive income − Net income = $150,000 − $120,000 = $30,000.

Question 4

Under the indirect method of presenting operating cash flows, depreciation expense is:

Accepted Answer

Added back to net income because it is a non-cash charge

Answer

Depreciation is added back to net income under the indirect method because it reduced net income without using cash.

Question 5

Which of the following events occurring after the balance sheet date but before the financial statements are issued would require adjustment to the financial statements?

Accepted Answer

Settlement of a lawsuit that existed at year-end for an amount different from the accrual

Answer

A subsequent event that provides evidence of conditions that existed at the balance sheet date requires adjustment to the financial statements.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant (Financial Accounting & Reporting) 5