CSC Corporate Financial Statements 4

Question 1

Under accrual accounting, revenue is recognized when:

Accepted Answer

The performance obligation is satisfied, regardless of cash receipt

Answer

Under IFRS 15 and accrual accounting, revenue is recognized when (or as) a performance obligation is satisfied, not necessarily when cash is received.

Question 2

A deferred revenue balance on a balance sheet indicates that a company has:

Accepted Answer

Collected cash for services not yet performed

Answer

Deferred revenue (unearned revenue) is a liability representing cash received before the company has fulfilled its obligation to the customer.

Question 3

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

Accepted Answer

Double-declining balance method

Answer

The double-declining balance method is an accelerated depreciation method that applies twice the straight-line rate to the asset's book value, producing higher expense in early years.

Question 4

Which item would appear in the investing activities section of the cash flow statement?

Accepted Answer

Purchase of a manufacturing plant

Answer

Purchasing property, plant, and equipment (PP&E) is a capital expenditure and is classified as an investing activity in the cash flow statement.

Question 5

What does a company's EBITDA measure?

Accepted Answer

Earnings before interest, taxes, depreciation, and amortization

Answer

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, commonly used as a proxy for operating cash generation.

CSC - Canadian Securities Course Practice Test

CSC - Canadian Securities Course Practice Test

CSC Corporate Financial Statements 4