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 change from the FIFO to the weighted-average inventory method is accounted for as a:
Answer: Change in accounting principle, applied retrospectively
Switching between GAAP-acceptable inventory methods is a change in principle requiring retrospective application.
A company revises the estimated useful life of a machine from 10 to 8 years. How should this be accounted for?
Answer: Prospectively, in the current and future periods
Changes in accounting estimates are applied prospectively.
Which situation gives rise to a deferred tax liability?
Answer: Accelerated depreciation for tax and straight-line for books
Higher early tax deductions create future taxable amounts, producing a deferred tax liability.
Inventory under FIFO is measured at the lower of cost and net realizable value. Cost is $80,000, NRV is $72,000. What is the reported inventory amount?
Answer: $72,000
Inventory is written down to the lower amount, $72,000 NRV.
Net income is $200,000, preferred dividends are $20,000, and weighted-average common shares outstanding are 90,000. What is basic EPS?
Answer: $2.00
($200,000 − $20,000) ÷ 90,000 = $2.00.
Which event occurring after the balance sheet date but before issuance requires adjustment of the financial statements (recognized subsequent event)?
Answer: A major customer's bankruptcy due to deteriorating conditions that existed at year-end
Events providing evidence about conditions existing at the balance sheet date require adjustment.
Inventory turnover is cost of goods sold divided by average inventory. COGS is $600,000, beginning inventory is $100,000, and ending inventory is $140,000. What is inventory turnover?
Answer: 5.0 times
Average inventory is $120,000, and $600,000 ÷ $120,000 = 5.0.