Financial Accounting Flashcards
7 cards from real CIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Accounting flashcards as text
A bond is issued when the market interest rate exceeds its stated (coupon) rate. The bond will be issued at:
Answer: A discount
Investors pay less than face value to earn the higher market yield, so the bond sells at a discount.
Under the effective interest method, as a bond discount is amortized, interest expense each period:
Answer: Increases
The carrying value rises toward face value, so interest expense (carrying value × market rate) increases.
A lessee records a finance lease under ASC 842. Which items appear on the lessee's income statement?
Answer: Amortization of the right-of-use asset and interest on the lease liability
Finance leases produce separate amortization and interest expense, front-loading total cost.
A company declares a 10% stock dividend when shares are trading well above par. What is the effect on total stockholders' equity?
Answer: No change
A stock dividend reallocates amounts from retained earnings to paid-in capital without changing total equity.
Treasury stock under the cost method is reported on the balance sheet as:
Answer: A deduction from stockholders' equity
Treasury stock is a contra-equity account reducing total stockholders' equity.
An investor owns 30% of an investee's voting stock and has significant influence. Dividends received from the investee are recorded as:
Answer: A reduction of the investment account
Under the equity method, dividends are a return of investment and reduce its carrying amount.
Which of the following is reported in other comprehensive income under U.S. GAAP?
Answer: Unrealized gains on available-for-sale debt securities
Unrealized holding gains and losses on AFS debt securities bypass net income and go to OCI.