Practice Test Geeks(AICPA) American Institute of Certified Public Accountants Practice Test
← All AICPA Flashcard Decks

Financial Accounting and Reporting Flashcards

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

Read the first 7 Financial Accounting and Reporting flashcards as text

  1. Under ASC 842, how should a lessee classify a lease where the lease term is for the major part of the remaining economic life of the underlying asset?

    Answer: Finance lease

    Under ASC 842, a lease is classified as a finance lease when the lease term covers the major part of the remaining economic life of the underlying asset.

  2. A company issues bonds at a premium. How is the premium amortized under the effective interest method?

    Answer: Debited to premium on bonds payable and credited to interest expense

    Under the effective interest method, bond premium amortization reduces the carrying value of the bonds by debiting premium on bonds payable and crediting interest expense.

  3. Which inventory cost flow assumption generally results in the lowest net income during a period of rising prices?

    Answer: LIFO

    LIFO results in the highest cost of goods sold (most recent, higher-cost items expensed first) and therefore the lowest net income during periods of rising prices.

  4. Under ASC 606, when should revenue from a contract be recognized if performance obligations are satisfied over time?

    Answer: As progress toward completion is measured

    When a performance obligation is satisfied over time, revenue is recognized by measuring progress toward complete satisfaction of that obligation.

  5. A deferred tax liability arises when:

    Answer: Book income exceeds taxable income creating a future taxable amount

    A deferred tax liability arises when book income exceeds taxable income due to temporary differences that will result in taxable amounts in future periods.

  6. When a parent company acquires a subsidiary and the purchase price exceeds the fair value of net identifiable assets, the excess is recorded as:

    Answer: Goodwill

    The excess of purchase price over the fair value of net identifiable assets acquired in a business combination is recorded as goodwill.

  7. Which of the following is NOT a component of other comprehensive income (OCI)?

    Answer: Dividends declared to shareholders

    Dividends declared are a distribution of retained earnings and are not a component of other comprehensive income.