CIA Financial Reporting 2

Question 1

Under ASC 606, when should revenue be recognized for a contract that includes both a product delivery and a two-year maintenance service?

Accepted Answer

Allocated to each performance obligation and recognized as each is satisfied

Answer

ASC 606 requires the transaction price to be allocated to distinct performance obligations and recognized as each obligation is satisfied.

Question 2

Which financial statement best shows a company's ability to meet short-term obligations?

Accepted Answer

Statement of cash flows

Answer

The statement of cash flows, especially the operating section, reveals actual cash generated to cover short-term obligations.

Question 3

A company issues 10,000 shares of $1 par value stock at $15 per share. What is credited to Additional Paid-In Capital?

Accepted Answer

$140,000

Answer

APIC equals proceeds above par: ($15 - $1) × 10,000 = $140,000.

Question 4

Under GAAP, how are unrealized gains on available-for-sale (AFS) debt securities reported?

Accepted Answer

In other comprehensive income (OCI)

Answer

Unrealized gains and losses on AFS securities flow through OCI, not net income, until the securities are sold.

Question 5

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

Accepted Answer

Double-declining balance

Answer

Double-declining balance applies twice the straight-line rate to the book value, producing the steepest early-year expense.

(CIA) Certified Industrial Accountant Practice Test