CGA Financial Accounting & Reporting 3

Question 1

Which financial statement presents information about cash receipts and cash payments during a period?

Accepted Answer

Statement of cash flows

Answer

The statement of cash flows classifies and reports cash inflows and outflows from operating, investing, and financing activities.

Question 2

Under the equity method of accounting, how does the investor record dividends received from the investee?

Accepted Answer

Decrease the investment account

Answer

Under the equity method, dividends received reduce the carrying value of the investment because they represent a return of the investor's capital.

Question 3

A contingent liability should be accrued when the likelihood of loss is probable AND the amount can be:

Accepted Answer

Reasonably estimated

Answer

ASC 450 requires accrual when a loss is probable and the amount can be reasonably estimated, even if not precisely known.

Question 4

Which depreciation method allocates the highest depreciation expense in the early years of an asset's life?

Accepted Answer

Double-declining balance

Answer

Double-declining balance applies a fixed rate (2× straight-line rate) to the declining book value, generating the most depreciation in early years.

Question 5

When a company restates prior-period financial statements due to an error, the correction is reported as an adjustment to:

Accepted Answer

Beginning retained earnings of the earliest period presented

Answer

Prior-period error corrections are reported as adjustments to the opening retained earnings balance of the earliest period presented in comparative statements.

(CGA) Certified General Accountant Practice Test

(CGA) Certified General Accountant Practice Test

CGA Financial Accounting & Reporting 3