CFC Financial Reporting & Analysis 2

Question 1

Under ASC 842, how must a lessee classify a lease that transfers ownership of the asset to the lessee by the end of the lease term?

Accepted Answer

Finance lease

Answer

Transfer of ownership is one of the five criteria that automatically classify a lease as a finance lease under ASC 842.

Question 2

Which financial statement reconciles net income to cash provided by operating activities under the indirect method?

Accepted Answer

Statement of cash flows

Answer

The indirect method starts with net income and adjusts for non-cash items and working capital changes to arrive at operating cash flow.

Question 3

A company reports a current ratio of 0.8. What does this indicate?

Accepted Answer

The company may struggle to meet short-term obligations

Answer

A current ratio below 1.0 means current liabilities exceed current assets, signaling potential short-term liquidity risk.

Question 4

Under IFRS 15, revenue is recognized when a performance obligation is:

Accepted Answer

Satisfied by transferring control to the customer

Answer

IFRS 15 requires revenue recognition when (or as) the entity satisfies a performance obligation by transferring control of the promised good or service.

Question 5

Which inventory costing method reports the highest cost of goods sold during a period of rising prices?

Accepted Answer

LIFO

Answer

LIFO assigns the most recently purchased (highest-cost) inventory to COGS first, producing the highest COGS in an inflationary environment.

(CFC) Certified Financial Controller Practice Test

(CFC) Certified Financial Controller Practice Test

CFC Financial Reporting & Analysis 2