External Financial Reporting Decisions

Under U.S. GAAP, which inventory costing method is NOT permitted?

Which financial statement reports a company's financial position at a specific point in time?

A company capitalizes a cost that should have been expensed. What is the immediate effect on net income?

Which of the following is classified as an operating activity under the indirect method of the statement of cash flows?

Under IFRS, how are development costs treated?

What is the primary difference between IFRS and U.S. GAAP regarding inventory?

A bond issued at a premium means the stated interest rate is:

Which revenue recognition step involves determining the transaction price?

A company reports other comprehensive income (OCI). Which item would appear in OCI?

Under the acquisition method of business combinations, goodwill is calculated as:

Under U.S. GAAP, which financial statement presents an entity's revenues and expenses for a period of time?

Which of the following is classified as a current liability?

Under IFRS, how are extraordinary items reported in the income statement?

What is the first step in the revenue recognition process under ASC 606?

Under the indirect method of preparing the statement of cash flows, where is interest paid classified under U.S. GAAP?

Which of the following inventory cost flow assumptions results in the highest cost of goods sold during a period of rising prices?

Under U.S. GAAP, which component is NOT included in other comprehensive income (OCI)?

A company issues a bond at face value. Which statement is correct?

Under U.S. GAAP, research costs are:

Which of the following best describes the purpose of the statement of stockholders' equity?

Under ASC 842, a lessee must recognize a right-of-use asset and a lease liability for which type of lease?

Which of the following is a characteristic of a finance lease under ASC 842?

Deferred tax liabilities arise when:

Which accounting standard governs income tax accounting under U.S. GAAP?

Under U.S. GAAP, treasury stock is reported as:

Under IFRS, property, plant, and equipment may be measured after initial recognition using which model(s)?

Which of the following is reported as a financing activity on the statement of cash flows under U.S. GAAP?

When a company declares a stock dividend, what happens to total stockholders' equity?

Under U.S. GAAP, the allowance method is required for estimating bad debts because it satisfies which principle?

Accumulated other comprehensive income is reported on which financial statement?

Under U.S. GAAP, which of the following is NOT a required financial statement for public companies?

What is the accounting treatment for a contingent liability that is probable and can be reasonably estimated?

Under U.S. GAAP, goodwill is:

Which of the following transactions would increase total assets and total liabilities by the same amount?

Under ASC 606, a performance obligation is satisfied when:

An SEC Form 10-K is filed:

Under the fair value hierarchy in ASC 820, Level 1 inputs are:

Which method of depreciation allocates an equal amount of expense to each period of an asset's useful life?

Under U.S. GAAP, the weighted-average number of shares outstanding is used to calculate:

Which of the following is an example of a permanent difference between book income and taxable income?

A company enters into a 5-year lease for office space. The lease does not transfer ownership, does not contain a purchase option, the lease term is not a major part of the asset's economic life, and the present value of payments is not substantially all of the asset's fair value. Under ASC 842, this lease is classified as:

Under ASC 606, a contract modification that adds distinct goods or services at their standalone selling price is accounted for as:

A company has a defined benefit pension plan. The projected benefit obligation (PBO) exceeds the fair value of plan assets. The net amount is reported on the balance sheet as:

Under U.S. GAAP, a company grants stock options to employees. On the grant date, the fair value of each option is $8. The options vest over 4 years. For 1,000 options granted, the annual compensation expense recognized is:

Company A acquires Company B for $5,000,000. The fair value of identifiable net assets acquired is $4,200,000. What amount of goodwill should Company A recognize?

A company has 100,000 shares of common stock outstanding and 10,000 stock options with an exercise price of $20 when the average market price is $25. Using the treasury stock method, the dilutive effect of the options is:

Under IFRS, an investment property is initially measured at cost and may subsequently be measured using:

A company has a $500,000 deferred tax asset and determines that it is more likely than not that only $350,000 will be realized. The valuation allowance should be:

In computing basic EPS, which of the following would be deducted from net income in the numerator?

Under U.S. GAAP, a change in accounting estimate, such as revising the useful life of an asset, is accounted for:

A company sells a product with a one-year warranty. Under ASC 606, if the warranty provides a service beyond assurance that the product meets agreed-upon specifications, the warranty is:

Under ASC 820, fair value is defined as:

A noncontrolling interest in a subsidiary is presented in the consolidated financial statements as:

Under U.S. GAAP, which of the following intangible assets has an indefinite useful life and is not amortized?

A company issues convertible bonds. Under the if-converted method for diluted EPS, the numerator is adjusted by:

Under ASC 606, variable consideration is included in the transaction price to the extent that it is probable (U.S. GAAP) that:

A lessee enters into an operating lease under ASC 842. Over the lease term, the pattern of expense recognition on the income statement is:

When a company recognizes an asset retirement obligation (ARO), the initial journal entry includes:

Under IFRS 16, a lessee accounts for leases by recognizing:

Under U.S. GAAP, a change from FIFO to LIFO inventory valuation is reported as:

A government entity reports activities that are similar to private-sector business operations in which type of fund?

Under U.S. GAAP, the component of pension cost that reflects the increase in the PBO due to the passage of time is called:

Under ASC 606, a significant financing component exists in a contract when:

Which of the following creates a temporary difference that will result in a deferred tax asset?

In a business combination accounted for under the acquisition method, contingent consideration is measured at:

For a nonprofit organization, which financial statement is the equivalent of the income statement?

Under IFRS, inventories are measured at the lower of cost or:

Under ASC 842, which of the following costs is included in the initial measurement of the lease liability?

A company has an uncertain tax position. Under ASC 740-10, the company must first determine whether the tax position is 'more likely than not' to be sustained upon examination. If it is, the company measures the benefit at:

Under the acquisition method of accounting for business combinations, in-process research and development (IPR&D) acquired is:

An SEC registrant must file which form to report significant events such as entering into a material agreement or a change in auditors?

Under U.S. GAAP, a loss contingency that is reasonably possible but not probable should be:

Under IFRS, borrowing costs directly attributable to the acquisition, construction, or production of a qualifying asset are:

Under U.S. GAAP, when a company reclassifies a debt security from held-to-maturity to available-for-sale, the security is transferred at:

Under ASC 350, the goodwill impairment test compares:

Under U.S. GAAP, a government uses the modified accrual basis of accounting for which type of funds?

Which of the following best describes a variable interest entity (VIE)?

When a lessee measures the right-of-use asset at the commencement date under ASC 842, the initial measurement includes all of the following EXCEPT:

Under ASC 606, which of the following is NOT one of the five steps in the revenue recognition model?

Under U.S. GAAP, a company applies the equity method of accounting for an investment in which it holds 30% ownership and has significant influence. In the current year, the investee reports net income of $1,000,000 and pays dividends of $200,000. What is the impact on the investor's income statement and investment account?

Company X acquires 80% of Company Y for $4,000,000. The fair value of Company Y's identifiable net assets is $4,500,000. The fair value of the noncontrolling interest is $1,100,000. Under the full goodwill method, what amount of goodwill is recognized?

A company has a defined benefit pension plan with the following data: Service cost $200,000; Interest cost $150,000; Expected return on plan assets $120,000; Amortization of prior service cost $30,000; Amortization of net actuarial loss $10,000. What is the net periodic pension cost?

A company sells equipment for $100,000 and simultaneously leases it back for 5 years. The equipment had a carrying value of $80,000 and a fair value of $100,000. The lease is classified as an operating lease under ASC 842. At inception, how much gain does the seller-lessee recognize?

A company has the following securities: $200,000 of convertible bonds (each $1,000 bond convertible into 25 shares, interest rate 6%, tax rate 25%) and 5,000 stock options (exercise price $30, average market price $40). Net income is $500,000 with 100,000 weighted-average shares. What is diluted EPS?

Under ASC 740, a company has pretax book income of $1,000,000, which includes $50,000 of tax-exempt municipal bond interest and $80,000 of nondeductible fines. The statutory tax rate is 21%. What is the total income tax expense?

A company enters into a lease for specialized equipment with a fair value of $500,000. Annual lease payments are $90,000, payable at the end of each year for 7 years. The lessee's incremental borrowing rate is 6%, and the implicit rate in the lease (known to the lessee) is 5%. The present value of an ordinary annuity of $1 for 7 periods at 5% is 5.7864 and at 6% is 5.5824. What is the initial lease liability?

Under IFRS, a company revalues its building upward by $200,000. In a subsequent period, the building experiences an impairment of $250,000. How should the $250,000 impairment be allocated?

A company has a foreign subsidiary whose functional currency is the euro. At year-end, the subsidiary's financial statements must be translated into U.S. dollars. Under ASC 830, which exchange rate is used to translate the subsidiary's revenues?

Under ASC 606, a company enters into a contract to deliver three distinct products for a total transaction price of $300,000. The standalone selling prices are: Product A $120,000, Product B $100,000, Product C $80,000. How much revenue is allocated to Product B?

A company has the following debt: Senior secured notes at $2,000,000 (fair value $2,100,000) and subordinated debentures at $1,500,000 (fair value $1,350,000). Under ASC 820 Level 2 fair value measurement, the total fair value of debt reported in the disclosures is:

A company issues 10,000 restricted stock units (RSUs) to employees on January 1, Year 1. The RSUs vest over 3 years (cliff vesting). The grant-date fair value is $50 per unit. On December 31, Year 1, the company estimates that 10% of the RSUs will be forfeited. What is the compensation expense for Year 1?

Under ASC 805, a bargain purchase occurs when the fair value of identifiable net assets acquired exceeds the consideration transferred. How is the resulting gain treated?

A company has a foreign operation that is deemed to be a highly inflationary economy. Under ASC 830, the financial statements of this foreign operation are remeasured as though:

Under ASC 842, a lessor classifies a lease as a sales-type lease if any one of the five classification criteria is met. The lessor has a carrying amount of $300,000 for the leased asset and the present value of lease payments and residual value guarantee is $380,000. The lessor recognizes:

A nonprofit organization receives a conditional promise to give $1,000,000 contingent upon matching funds. The organization has raised $400,000 in matching funds by year-end. How much contribution revenue should the nonprofit recognize?

Under ASC 326 (CECL), a company must estimate expected credit losses on financial assets measured at amortized cost using:

A company enters into a contract that contains a lease component (equipment rental) and a non-lease component (maintenance service). Under ASC 842, if the lessee elects the practical expedient to not separate components, how are the combined payments treated?

Under U.S. GAAP, a company reports segment information in accordance with ASC 280. An operating segment must be reported separately if it meets any one of the quantitative thresholds. Which of the following is a correct threshold?

A company has intercompany sales from a parent to a subsidiary of $500,000 with a gross profit margin of 40%. At year-end, the subsidiary still holds $100,000 of the inventory purchased from the parent. In the consolidated financial statements, the unrealized intercompany profit to be eliminated is:

Under ASC 815, a derivative designated as a cash flow hedge has a gain of $50,000 for the period. The hedged forecasted transaction has not yet occurred. How is the gain reported?