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Corporate Financial Statements Flashcards

7 cards from real CSC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Corporate Financial Statements flashcards as text

  1. A company writes down inventory from $80,000 to its net realizable value of $60,000. How does this affect the financial statements?

    Answer: Decreases assets and increases expenses

    An inventory write-down reduces the inventory asset on the balance sheet and increases cost of goods sold (an expense) on the income statement, reducing net income.

  2. What is the primary purpose of an auditor's report accompanying financial statements?

    Answer: To provide an independent opinion on whether the financial statements are fairly presented

    An independent auditor's report expresses an opinion on whether the financial statements present fairly, in all material respects, the financial position of the company in accordance with applicable accounting standards.

  3. Which of the following transactions increases total assets without affecting net income?

    Answer: Issuing common shares for cash

    Issuing common shares for cash increases both cash (an asset) and share capital (equity), with no effect on the income statement or net income.

  4. On the balance sheet, a bond payable with a face value of $1,000,000 maturing in 8 years is classified as:

    Answer: A non-current (long-term) liability

    Debt maturing beyond one year from the balance sheet date is classified as a non-current (long-term) liability.

  5. Which accounting treatment applies when a company acquires a controlling interest in another company under IFRS?

    Answer: Consolidation with full acquisition method

    Under IFRS 3 and IFRS 10, when a parent acquires control of a subsidiary, it must prepare consolidated financial statements using the acquisition method.

  6. A company has net income of $150,000 and declares dividends of $40,000. Beginning retained earnings were $200,000. What are ending retained earnings?

    Answer: $310,000

    Ending retained earnings = Beginning retained earnings + Net income − Dividends = $200,000 + $150,000 − $40,000 = $310,000.

  7. Which of the following best describes the 'going concern' assumption in financial reporting?

    Answer: The company is expected to continue operating for the foreseeable future

    The going concern assumption presumes a company will continue to operate indefinitely, which justifies historical cost valuation and deferring expenses over future periods.