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
Under ASC 958, which basis of accounting do not-for-profit organizations use to report net assets?
Answer: Net assets without donor restrictions and net assets with donor restrictions
ASC 958 requires not-for-profit entities to classify net assets into two categories: without donor restrictions and with donor restrictions.
What does the current ratio measure?
Answer: The ability to meet short-term obligations with short-term assets
The current ratio (current assets ÷ current liabilities) measures a company's ability to pay its short-term liabilities with its short-term assets.
A company capitalizes $500,000 of costs to internally develop a software product for sale. Under ASC 985-20, capitalization begins:
Answer: Once technological feasibility has been established
ASC 985-20 requires capitalization of software costs for products to be sold once technological feasibility is established, typically when a working model is complete.
Which of the following correctly describes the accounting treatment for a contingent liability that is probable and the amount can be reasonably estimated?
Answer: Accrue and disclose
Under ASC 450, a contingent liability that is both probable and reasonably estimable must be accrued as a liability and disclosed in the notes.
Under ASC 230, which of the following is classified as an INVESTING activity in the statement of cash flows?
Answer: Purchase of long-term investments in equity securities
Purchasing long-term investments is an investing activity because it involves acquiring assets expected to generate future economic benefits beyond one year.
Which of the following is the correct formula for the debt-to-equity ratio?
Answer: Total liabilities ÷ total equity
The debt-to-equity ratio equals total liabilities divided by total stockholders' equity, measuring the degree to which a company is financed by debt versus equity.
Under the percentage-of-completion method for long-term contracts, revenue is recognized based on:
Answer: Costs incurred to date relative to total estimated costs
The most common input measure for percentage-of-completion uses costs incurred to date divided by total estimated costs to determine the degree of progress.