Financial Accounting & Reporting Flashcards
7 cards from real CPA 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 & Reporting flashcards as text
Which financial statement reconciles the beginning and ending balances of stockholders' equity?
Answer: Statement of changes in stockholders' equity
The statement of changes in stockholders' equity shows all transactions affecting equity, reconciling beginning and ending balances for each component.
When a company changes from LIFO to FIFO inventory method, how is the change reported under US GAAP?
Answer: As a cumulative-effect adjustment to retained earnings in the current period
A change in inventory accounting method is treated as a change in accounting principle reported as a cumulative-effect adjustment to beginning retained earnings.
Under ASC 320, trading securities are measured at fair value with unrealized gains and losses recognized:
Answer: In the income statement
Unrealized gains and losses on trading securities flow through the income statement in the period they arise.
A company issues 1,000 shares of $1 par value common stock for $15 per share. What is the credit to additional paid-in capital (APIC)?
Answer: $14,000
APIC equals the excess of issue price over par: ($15 − $1) × 1,000 shares = $14,000.
Under ASC 480, which of the following is classified as a LIABILITY rather than equity?
Answer: Mandatory redeemable preferred stock
Mandatorily redeemable preferred stock must be classified as a liability because the issuer is obligated to transfer assets on a fixed or determinable date.
Which of the following items is presented as a component of operating activities in the indirect method statement of cash flows?
Answer: Decrease in accounts payable
A decrease in accounts payable is subtracted in the operating section under the indirect method because it represents cash paid in excess of accrued expenses.
Goodwill arising from a business combination is:
Answer: Tested for impairment at least annually and not amortized under US GAAP
Under ASC 350, goodwill is not amortized but must be tested for impairment at least annually at the reporting unit level.