CNA Financial Reporting and Analysis 2

Question 1

Depreciation is recorded to comply with which accounting principle?

Accepted Answer

Matching principle

Answer

Revenue recognition principle

Answer

Full disclosure principle

Answer

Consistency principle

Question 2

When a company uses the straight-line depreciation method, what remains constant each period?

Accepted Answer

The amount of depreciation expense

Answer

The book value of the asset

Answer

The accumulated depreciation rate

Answer

The market value of the asset

Question 3

Which of the following items would be found in the financing activities section of the Statement of Cash Flows?

Accepted Answer

Payment of dividends

Answer

Purchase of equipment

Answer

Collection of interest income

Answer

Sale of inventory

Question 4

What is the formula for calculating the debt-to-equity ratio?

Accepted Answer

Total Liabilities ÷ Total Equity

Answer

Total Assets ÷ Total Equity

Answer

Net Income ÷ Total Debt

Answer

Total Equity ÷ Total Liabilities

Question 5

Under ASC 842, operating leases are now required to be recorded on a lessee's balance sheet as what?

Accepted Answer

A right-of-use asset and a lease liability

Answer

Only a footnote disclosure

Answer

A deferred revenue item

Answer

An off-balance-sheet contingency

Question 6

Which inventory method typically results in the highest net income during a period of rising prices?

Accepted Answer

FIFO

Answer

LIFO

Answer

Weighted Average

Answer

Specific Identification

Question 7

A contingent liability should be accrued on the balance sheet when it is probable and the amount can be what?

Accepted Answer

Reasonably estimated

Answer

Estimated and immaterial

Answer

Precisely calculated

Answer

Determined by legal counsel only