FA Financial Reporting & Analysis 3

Question 1

Which of the following represents a key difference between IFRS and US GAAP regarding inventory accounting?

Accepted Answer

US GAAP allows LIFO; IFRS does not

Answer

IFRS allows LIFO; US GAAP does not

Answer

IFRS requires FIFO exclusively; GAAP requires weighted average

Answer

Both IFRS and US GAAP prohibit LIFO

Question 2

Under US GAAP, interest paid and interest received on the cash flow statement are classified as:

Accepted Answer

Operating activities

Answer

Financing activities

Answer

Investing activities

Answer

Non-cash supplemental disclosures

Question 3

When preparing a cash flow statement using the indirect method, the starting point is:

Accepted Answer

Net income from the income statement

Answer

Cash received from customers

Answer

Total operating cash inflows

Answer

Gross revenues for the period

Question 4

In accounting, goodwill is best defined as:

Accepted Answer

The excess of acquisition price paid over the fair value of identifiable net assets

Answer

The difference between a company's market capitalization and its book value

Answer

The estimated brand value assigned to a company's products

Answer

The premium charged above par value on a stock issuance

Question 5

Which trend in a company's financial ratios would most likely indicate deteriorating operational efficiency?

Accepted Answer

Increasing inventory days (days inventory outstanding)

Answer

Increasing current ratio over three years

Answer

Decreasing days payable outstanding

Answer

Decreasing debt-to-equity ratio

Question 6

Comprehensive income differs from net income in that it also includes:

Accepted Answer

Unrealized gains and losses on certain investments and foreign currency translations

Answer

Revenue recognized from all business segments

Answer

Dividends declared and paid to common shareholders

Answer

Depreciation and amortization of fixed assets

Question 7

Under ASC 606, the revenue recognition standard, revenue is recognized when:

Accepted Answer

Control of the promised goods or services is transferred to the customer

Answer

Cash payment is received from the customer

Answer

A binding contract is signed with the customer

Answer

The invoice is issued to the customer