IBA Accounting Fundamentals 3

Question 1

Goodwill as an intangible asset arises when:

Accepted Answer

A company acquires another company for more than the fair value of its net assets

Answer

A company earns above-average profits for two consecutive years

Answer

A company registers its brand trademark

Answer

A company develops a new product internally

Question 2

Which financial statement reports the inflows and outflows of cash during an accounting period?

Accepted Answer

Statement of Cash Flows

Answer

Income Statement

Answer

Balance Sheet

Answer

Statement of Changes in Equity

Question 3

Under the lower of cost or net realizable value (LCNRV) rule, inventory is written down when:

Accepted Answer

The inventory's net realizable value falls below its recorded cost

Answer

Market demand for the product increases significantly

Answer

The company switches from FIFO to LIFO

Answer

Annual inflation exceeds 3%

Question 4

Which of the following best describes the purpose of a trial balance?

Accepted Answer

To verify that total debits equal total credits in the ledger

Answer

To summarize cash inflows and outflows for the period

Answer

To calculate net income before taxes

Answer

To reconcile bank statements with company records

Question 5

Accounts receivable on the balance sheet represent:

Accepted Answer

Amounts owed to the company by customers for goods or services delivered

Answer

Cash owed by the company to its suppliers

Answer

Long-term investments in other companies

Answer

Revenue that has been collected but not yet earned

Question 6

The debt-to-equity ratio is used to evaluate a company's:

Accepted Answer

Financial leverage and capital structure

Answer

Profitability relative to shareholder investment

Answer

Short-term liquidity position

Answer

Efficiency of asset utilization

Question 7

Which of the following is an example of a contra-asset account?

Accepted Answer

Accumulated depreciation

Answer

Accounts payable

Answer

Deferred revenue

Answer

Common stock