CPA Financial Accounting & Reporting 4

Question 1

Which financial statement reconciles the beginning and ending balances of stockholders' equity?

Accepted Answer

Statement of changes in stockholders' equity

Answer

The statement of changes in stockholders' equity shows all transactions affecting equity, reconciling beginning and ending balances for each component.

Question 2

When a company changes from LIFO to FIFO inventory method, how is the change reported under US GAAP?

Accepted Answer

As a cumulative-effect adjustment to retained earnings in the current period

Answer

A change in inventory accounting method is treated as a change in accounting principle reported as a cumulative-effect adjustment to beginning retained earnings.

Question 3

Under ASC 320, trading securities are measured at fair value with unrealized gains and losses recognized:

Accepted Answer

In the income statement

Answer

Unrealized gains and losses on trading securities flow through the income statement in the period they arise.

Question 4

A company issues 1,000 shares of $1 par value common stock for $15 per share. What is the credit to additional paid-in capital (APIC)?

Accepted Answer

$14,000

Answer

APIC equals the excess of issue price over par: ($15 − $1) × 1,000 shares = $14,000.

Question 5

Under ASC 480, which of the following is classified as a LIABILITY rather than equity?

Accepted Answer

Mandatory redeemable preferred stock

Answer

Mandatorily redeemable preferred stock must be classified as a liability because the issuer is obligated to transfer assets on a fixed or determinable date.

(CPA) Certified Practicing Accountant Practice Test

(CPA) Certified Practicing Accountant Practice Test

CPA Financial Accounting & Reporting 4