FAR CPA Module 1-3

U.S. GAAP includes a very large set of accounting guidance. Choose the correct statement. A) The FASB Accounting Standards Codification includes guidance about items that are not under the purview of the Generally Accepted Accounting Principles, such as the income tax basis of accounting. B) Authoritative guidance from FASB Statements adopted before the FASB Accounting Standards Codification does not appear in the Codification. C) There is an implied hierarchy within the FASB Accounting Standards Codification, with FASB Statements assuming the top level. D) International accounting standards are not included in the FASB Accounting Standards Codification.

D) International accounting standards are not included in the FASB Accounting Standards Codification.

The purpose of financial accounting is to provide information primarily for which of the following groups? A) Government. B) Internal Revenue Service. C) Financial Accounting Standards Board. D) Investors and creditors.

D) Investors and creditors.

Which of the following statements concerning the fair value hierarchy used in ascertaining fair value is/are correct? I. Quoted market prices should be adjusted for a "blockage factor" when a firm holds a sizable portion of the asset being valued. II. Quoted market prices in markets that are not active, because there are few relevant transactions, cannot be used. A) I only. B) II only. C) Both I and II. D) Neither I nor II.

D) Neither I nor II.

A company performing its long-lived asset impairment testing is reviewing the fair value of equipment. Each of the following valuation techniques may be appropriate for measuring the fair value of the equipment except the A) Market approach. B) Income approach. C) Cost approach. D) Net realizable value approach.

D) Net realizable value approach.

Under IFRS for SMEs, which of the following, if any, must be disclosed in financial statements? Earnings per Share (EPS) Information by Segment A) Yes Yes B) Yes No C) No Yes D) No No

D) No No

Which of the following should be included in general and administrative expenses? Interest Advertising A) Yes Yes B) Yes No C) No Yes D) No No

D) No No

Andro Co. has a $10 million note payable that is due three months after year end. The note payable was refinanced when long-term bonds were issued one month after year end for $11 million. The December 31 financial statements were issued two months after year end. How should Andro classify and disclose the note? Classification of liability Note disclosure required A) Current No B) Current Yes C) Noncurrent No D) Noncurrent Yes

D) Noncurrent Yes

Mend Co. purchased a three-month U.S. Treasury bill. Mend's policy is to treat all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. How should this purchase be reported in Mend's Statement of Cash Flows? A) As an outflow from operating activities B) As an outflow from investing activities C) As an outflow from financing activities D) Not reported

D) Not reported

According to the conceptual framework, the process of reporting an item in the financial statements of an entity is: A) Allocation. B) Matching. C) Realization. D) Recognition.

D) Recognition.According to the FASB conceptual

The Statement of Changes in Equity: A) Is one of the required financial statements under U.S. GAAP B) Includes accounts such as the retained earnings and common share accounts but not other comprehensive income items. C) Is used only if a corporation frequently issues common shares D) Reconciles all of the beginning and ending balances in the equity accounts.

D) Reconciles all of the beginning and ending balances in the equity accounts.

Which of the following characteristics of accounting information primarily allows users of financial statements to generate predictions about an organization? A) Reliability. B) Timeliness. C) Neutrality. D) Relevance.

D) Relevance.

According to the conceptual framework, the objectives of financial reporting for business enterprises are based on: A) The need for conservatism. B) Reporting on management's stewardship. C) Generally Accepted Accounting Principles. D) The needs of the users of the information.

D) The needs of the users of the information.

What is the primary objective of financial reporting? A) To provide economic information that is comprehensible to all users. B) To provide management with an accurate evaluation of their financial performance. C) To provide forecasts for future cash flows and financial performance. D) To provide information that is useful for economic decision making.

D) To provide information that is useful for economic decision making.

According to the FASB conceptual framework, predictive value is an ingredient of: Relevance Faithful representation A) No No B) Yes Yes C) No Yes D) Yes No

D) Yes No

For a firm that elects to use fair value to measure eligible financial assets and financial liabilities, specific disclosures are required for which of the following financial statements? Quarterly Financial Statements Annual Financial Statements A) No No B) No Yes C) Yes No D) Yes Yes

D) Yes Yes

Marco has an investment that is traded in two different markets, Front market and Side market. Marco has equal access to each market. In order to determine the fair value of its investment, Marco has obtained the following per share information for the securities as of the close of business December 31, the end of its fiscal year: Front Market Side Market Selling Price $52/sh $50/sh Transaction Cost $ 6/sh $ 1/sh If Front market is the principal market for the security for Marco, using the market approach, which one of the following would be the per share amount used for measuring the investment at fair value? A) $52/sh B) $50/sh C) $49/sh D) $46/sh

A) $52/sh

The FASB amends the Accounting Standards Codification through the issuance of A) Accounting Standards Updates. B) Statements of Financial Accounting Standards. C) Technical Bulletins. D) Staff Accounting Bulletins.

A) Accounting Standards Updates.

Which of the following accounts is a contra account? A) Accumulated depreciation, equipment. B) Depreciation expense, office equipment. C) Dividends. D) Unearned revenue.

A) Accumulated depreciation, equipment.

According to the IASB Framework, the financial statement element that is defined as increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants, is A) Revenue. B) Income. C) Profits. D) Gains.

B) Income.

When valuing certain financial instruments, a company that has elected the fair value measurement option must apply the accounting measurement based on which of the following criteria? A) A portion of an asset or liability B) Instrument-by-instrument basis C) Type-by-type basis D) At the entity level

B) Instrument-by-instrument basis

According to the IASB Framework for the Preparation and Presentation of Financial Statements, the qualitative characteristic of faithful representation includes A) Timeliness, predictive value, and feedback value. B) Neutrality, completeness, and free from error. C) Predictive value, confirmatory value, and materiality. D) Comparability and consistency.

B) Neutrality, completeness, and free from error.

According to the conceptual framework, the quality of information that helps users increase the likelihood of correctly forecasting the outcome of past or present events is called: A) Confirmatory value. B) Predictive Value. C) Representational faithfulness. D) Faithful representation.

B) Predictive Value.

When referring to IFRS, which of the following are NOT included? A) IASs. B) SEC. C) IFRICs. D) IFRS Interpretations.

B) SEC.

Which of the following statements includes the most useful guidance for practicing accountants concerning the FASB Accounting Standards Codification. A) The Codification includes only FASB Statements. B) The Codification is the sole source of U.S. GAAP, for nongovernmental entities. C) The Codification significantly modified the content of GAAP when it became effective. D) An accountant can be sure that all SEC rules are included in the Codification.

B) The Codification is the sole source of U.S. GAAP, for nongovernmental entities.

In reference to proposed accounting standards, the term "negative economic consequences" includes: A) The cost of complying with GAAP. B) The inability to raise capital. C) The cost of government intervention when not in compliance with GAAP. T D) The failure of internal control systems.

B) The inability to raise capital.

The objectives of financial reporting stem from which of the following sources? A) The need for conservatism. B) The needs of the external users of the information. C) Reporting on management's consistency. D) Reporting on management's stewardship.

B) The needs of the external users of the information.

Which of the following will best protect investors against fraudulent financial reporting by corporations? A) Criminal statutes. B) The requirement that financial statements be audited. C) The fact that all firms must report the same way. D) The integrity of management.

B) The requirement that financial statements be audited.

Identify which of the following is an assumption(s) underlying the preparation and presentation of financial statements under the IASB Framework. Accrual Basis Going Concern A) Yes No B) Yes Yes C) No Yes D) No No

B) Yes Yes

For which of the following circumstances is the guidance for determining fair value as provided in the fair value framework presented in ASC 820, "Fair Value Measurement," least likely to apply? A) Determination of the fair value to be assigned to land acquired in a business combination B) Determination of the fair value of a bond liability for applying the fair value option C) Determination of the fair value of legal services received in exchange for an entity's common stock D) Determination of the fair value of a production facility when assessing whether or not an impairment loss has occurred

C) Determination of the fair value of legal services received in exchange for an entity's common stock

During the period when an enterprise is under the direction of a particular management, its financial statements will directly provide information about: A) Both enterprise performance and management performance. B) Management performance but does not directly provide information about enterprise performance. C) Enterprise performance but not directly provide information about management performance. D)Neither enterprise performance nor management performance.

C) Enterprise performance but not directly provide information about management performance.

Which one of the following is not a purpose of the fair value framework as set forth in ASC 820, "Fair Value Measurement"? A) Provide a uniform definition of "fair value" for GAAP purposes. B) Provide a framework for determining fair value for GAAP purposes. C) Establish new measurement requirements for financial instruments. D) Establish expanded disclosures about fair value when it is used.

C) Establish new measurement requirements for financial instruments.

Which of the following is included in other comprehensive income? A) Unrealized holding gains and losses on equity securities carried at fair value B) Unrealized holding gains and losses that result from a debt security being transferred into the trading category from the held-to-maturity category C) Foreign currency translation adjustments D) The difference between the accumulated benefit obligation and the fair value of pension plan assets

C) Foreign currency translation adjustments

Which one of the following is a characteristic of accounting under IFRS for SMEs? A) Interest incurred during construction must be capitalized. B) Earnings per share must be provided in the financial statements. C) Goodwill must be amortized. D) The LIFO cost flow assumption can be used in valuing inventories.

C) Goodwill must be amortized.

In determining the fair value of a nonfinancial asset, assessing the highest and best use of the asset must take into account all but which one of the following? A) What is physically possible B) What is financially feasible C) How the reporting entity would use the asset D) What is legally permissible

C) How the reporting entity would use the asset

Each of the following would be considered a Level 2 observable input that could be used to determine an asset or liability's fair value, except A) Quoted prices for identical assets and liabilities in markets that are not active. B) Quoted prices for similar assets and liabilities in markets that are active. C) Internally generated cash flow projections for a related asset or liability. D) Interest rates that are observable at commonly quoted intervals.

C) Internally generated cash flow projections for a related asset or liability.

Choose the correct statement about GAAP. A) GAAP are laws. B) Only publicly traded companies must comply with GAAP. C) It is a violation of SEC regulations for publicly traded companies to depart from GAAP. D) Firms may not restate financial statements previously issued.

C) It is a violation of SEC regulations for publicly traded companies to depart from GAAP.

Which of the following levels of the fair value hierarchy is the highest and which is the lowest in terms of desirability for use in determining fair value? Highest Level Lowest Level A) Level 3 Level 1 B) Level 1 Level 4 C) Level 1 Level 3 D) Level 4 Level 1

C) Level 1 Level 3

Which of the following assumptions means that money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis? A) Going concern. B) Periodicity. C) Monetary unit. D) Economic entity.

C) Monetary unit.

On December 31, 20X2, Brooks Co. decided to end operations and dispose of its assets within three months. At December 31, 20X2, the net realizable value of the equipment was below historical cost. What is the appropriate measurement basis for equipment included in Brooks' December 31, 20X2, Balance Sheet? A) Historical cost. B) Current reproduction cost. C) Net realizable value. D) Current replacement cost.

C) Net realizable value.

The FASB has maintained that: A) The interests of the reporting firms will be a primary consideration when developing new GAAP. B) GAAP should have little or no cost of compliance. C) New GAAP should be neutral and not favor any particular reporting objective. D) GAAP should result in the most conservative possible financial statements.

C) New GAAP should be neutral and not favor any particular reporting objective.

In determining the fair value of an asset in the most advantageous market, the market-based exit price should be adjusted for Transaction Cost Transportation Cost A) Yes Yes B) Yes No C) No Yes D) No No

C) No Yes

Which of the following information should be disclosed as supplemental information in the statement of cash flows? Cash flow per share Conversion of debt to equity A) Yes Yes B) Yes No C) No Yes D) No No

C) No Yes

Which of the following items would appear on the Statement of Owner's Equity? Notes payable Treasury stock Advertising expense R/E A) Yes Yes Yes Yes B) No Yes Yes Yes C) No Yes No Yes D) No No No No

C) No Yes No Yes

Which of the following items would best enable Driver Co. to determine whether the fair value of its investment in Favre Corp. is properly stated in the balance sheet? A) Discounted cash flow of Favre's operations. B) Quoted market prices available from a business broker for a similar asset. C) Quoted market prices on a stock exchange for an identical asset. D) Historical performance and return on Driver's investment in Favre.

C) Quoted market prices on a stock exchange for an identical asset.

Which of the following is a fundamental (primary) qualitative characteristic of useful financial information included in IASB's Framework? A) Comparability. B) Timeliness. C) Relevance. D) Understandability.

C) Relevance.

When an entity uses the fair value option for eligible financial assets and liabilities, which one of the following is not an expected outcome of the disclosures required of that entity? A) Users being able to understand management's reasons for using the fair value option B) Users being able to understand how changes in fair value affect net income C) Replace the kind and amount of information that would have been provided if the fair value option had not been used with information related to fair value D) Users being able to understand the difference between fair value and cash flows

C) Replace the kind and amount of information that would have been provided if the fair value option had not been used with information related to fair value

Which of the following sets of financial statements generally cannot be prepared directly from the adjusted trial balance? A) Income Statement, Balance Sheet, Statement of Cash Flows B) Income Statement, Statement of Cash Flows C) Statement of Cash Flows D) Balance Sheet and Statement of Cash Flows

C) Statement of Cash Flows

The primary purpose of a statement of cash flows is to provide relevant information about A) Differences between net income and associated cash receipts and disbursements. B) An enterprise's ability to generate future positive net cash flows. C) The cash receipts and cash disbursements of an enterprise during a period. D) An enterprise's ability to meet cash operating needs.

C) The cash receipts and cash disbursements of an enterprise during a period.

What is the conceptual framework intended to establish? A) Generally Accepted Accounting Principles in financial reporting by business enterprises. B) The meaning of "present fairly in accordance with Generally Accepted Accounting Principles." C) The objectives and concepts for use in developing standards of financial accounting and reporting. D) The hierarchy of sources of Generally Accepted Accounting Principles.

C) The objectives and concepts for use in developing standards of financial accounting and reporting.

Which of the following is a level three input to valuation techniques used to measure the fair value of an asset? A) Quoted prices in active markets for identical assets. B) Quoted prices for similar assets in active markets. C) Unobservable inputs for the asset. D) Inputs other than quoted prices that are observable for the asset.

C) Unobservable inputs for the asset.

Under IFRS for SMEs, which of the following cost flow assumptions can be used for inventory valuation purposes? FIFO LIFO Weighted Average Cost A) Yes Yes Yes B) Yes Yes No C) Yes No Yes D) Yes No No

C) Yes No Yes

For a firm that elects to measure certain of its financial assets and financial liabilities at fair value, required financial statement disclosures are intended to facilitate which of the following comparisons? I. Comparisons between entities that use different measurement methods for similar assets and liabilities. II. Comparisons between assets and liabilities of a single entity that uses different measurement methods for similar assets and liabilities. A) Neither I nor II. B) I only. C) II only. D) Both I and II.

D) Both I and II.

Which of the following characteristics relates to both accounting relevance and faithful representation? A) Free from error. B) Completeness. C) Neutrality. D) Comparability.

D) Comparability.

IFRS requires a classified Statement of Financial Position. What are the required classifications? A) Cash; trade receivables and payables; property, plant and equipment; long-term assets and liabilities; and other assets and liabilities. B) Cash; trade receivables and payables; property, plant and equipment; and other assets and liabilities. C) Current, long-term, and other assets and liabilities. D) Current and non-current assets and liabilities.

D) Current and non-current assets and liabilities.

When a parent-subsidiary relationship exists, consolidated financial statements are prepared in recognition of the accounting concept of: A) Reliability. B) Materiality. C) Legal entity. D) Economic entity.

D) Economic entity.

In determining the fair value of an asset or liability, would the fair value of the asset or the fair value of the liability be determined using an entry price or an exit price? Asset Fair Value Liability Fair Value A) Entry price Entry price B) Entry price Exit price C) Exit price Entry price D) Exit price Exit price

D) Exit price Exit price

What group currently writes the Generally Accepted Accounting Principles? A) Internal Revenue Service. B) Securities and Exchange Commission. C) Financial Accounting Foundation. D) Financial Accounting Standards Board.

D) Financial Accounting Standards Board.

Reporting accounts receivable at net realizable value is a departure from the accounting principle of: A) Conservatism. B) Fair value. C) Market value. D) Historical cost.

D) Historical cost.

Which one of the following is not an other comprehensive basis of accounting (OCBOA)? A) Cash basis. B) Modified cash basis. C) Income tax basis. D) IFRS for SMEs.

D) IFRS for SMEs.

According to the conceptual framework, the usefulness of providing information in financial statements is subject to the constraint of: A) Consistency. B) Cost-benefit. C) Relevance. D) Representational faithfulness.

. B) Cost-benefit.

According to the FASB conceptual framework, certain assets are reported in financial statements at the amount of cash or its equivalent that would have to be paid if the same or equivalent assets were acquired currently. What is the name of the reporting concept? A) Replacement cost. B) Current market value. C) Historical cost. D) Net realizable value.

A) Replacement cost.

When should an item that meets the definition of an element be recognized? A) The item has a cost or value that can be measured reliably. B) It is highly unlikely that any future economic benefit associated with the item will flow to the entity. C) Both A and B. D) Neither A nor B.

A) The item has a cost or value that can be measured reliably.

Conceptually, interim financial statements can be described as emphasizing: A) Timeliness over faithful representation. B) Faithful representation over relevance. C) Relevance over comparability. D) Comparability over neutrality.

A) Timeliness over faithful representation

What is the purpose of reporting comprehensive income? A) To summarize all changes in equity from nonowner sources B) To reconcile the difference between net income and cash flows provided from operating activities C) To provide a consolidation of the income of the firm's segments D) To provide information for each segment of the business

A) To summarize all changes in equity from nonowner sources

Under FASB U.S. GAAP, which of the following items would cause net earnings to differ from comprehensive income for an enterprise in an industry not having specialized accounting principles? A) Unrealized loss on debt investments classified as available-for-sale B) Unrealized loss on equity investments classified as current C) Loss on exchange of similar assets. D) Loss on exchange of dissimilar assets.

A) Unrealized loss on debt investments classified as available-for-sale

For a firm that elects to use fair value to measure eligible financial assets and financial liabilities, specific disclosures are required for which of the following financial statements? Statement of Financial Position (Balance Sheet) / Income Statement A) Yes Yes B) Yes No C) No Yes D) No No

A) Yes Yes

The determination of fair value may be for: A Stand-alone Asset or Liability A Group of Assets or Liabilities A) Yes Yes B) Yes No C) No Yes D) No No

A) Yes Yes

Under IFRS for SMEs, which of the following methods, if any, can be used by an investor to account for an investment in another entity (an associate) over which the investor has significant influence? Cost Method Equity Method A) Yes Yes B) Yes No C) No Yes D) No No

A) Yes Yes

Which of the following is a benefit of the fair value framework with respect to fair value measurement and fair value reporting? Increased Consistency Increased Comparability A) Yes Yes B) Yes No C) No Yes D) No No

A) Yes Yes

Which one of the following can be measured at fair value at the option of the reporting entity? A) A liability under a lease contract B) A debt investment classified as held-for-trading with readily determinable fair value C) A debt investment classified as held-to-maturity D) A liability under a pension plan

C) A debt investment classified as held-to-maturity

In which one of the following circumstances is the entry price to acquire an asset least likely to represent fair value of the asset? A) An investment security is acquired for cash through a public market. B) A machine is acquired from a wholesaler by giving an interest-bearing note. C) A significant amount of raw material inventory is acquired for cash from a bankrupt supplier. D) Land and a building are acquired in the open market by giving a mortgage to a lender.

C) A significant amount of raw material inventory is acquired for cash from a bankrupt supplier.

Under U.S. GAAP, the disclosure requirements when fair value measurement is used are differentiated by which of the following classifications? A) Between assets measured at fair value and liabilities measured at fair value B) Between fair value measurements that result in gains and fair value measurements that result in losses C) Between items measured at fair value on a recurring basis and items measured at fair value on a nonrecurring basis D) Between items for which fair value measurement is required and items for which fair value measurement is elected

C) Between items measured at fair value on a recurring basis and items measured at fair value on a nonrecurring basis

Which of the following statements concerning the determination of fair value at the date an asset is acquired or a liability is assumed is/are correct? I. The exit price is conceptually different than the entry price. II. The entry price and the exit price may be different amounts at the date an asset or liability is initially recognized. A) I only. B) II only. C) Both I and II. D) Neither I nor II.

C) Both I and II.

Which of the following statements, if any, concerning IFRS for SMEs is/are correct? I. IFRS for SMEs is based on accrual basis accounting. II. Generally, IFRS for SMEs may be used as an alternative to using OCBOA. A) I only. B) II only. C) Both I and II. D) Neither I nor II.

C) Both I and II.

Which one of the following is not a required disclosure in annual financial reports for an entity that uses fair value measurement? A) The level of the fair value hierarchy within which fair value measurements fall B) The valuation techniques used to measure fair value C) Combined disclosures about fair value measurements required by all pronouncements D) A discussion of any change from the prior period in valuation techniques used to measure fair value

C) Combined disclosures about fair value measurements required by all pronouncements

Within the context of the qualitative characteristics of accounting information, which of the following is a fundamental qualitative characteristic? A) Relevance B) Timeliness C) Comparability D) Confirmatory value

A) Relevance

Which of the following statements, if any, concerning disclosures about fair value measurements in periods subsequent to initial recognition is/are correct? I. The fair value hierarchy level within which fair value measurements fall must be disclosed. II. Quantitative fair value measurement disclosures must be in tabular format. A) Both I and II are correct. B) I only. C) II only. D) Neither I nor II are correct.

A) Both I and II are correct.

What is the underlying concept governing the Generally Accepted Accounting Principles pertaining to recording gain contingencies? A) Conservatism. B) Relevance. C) Consistency. D) Faithful representation.

A) Conservatism

Which of the following statements is correct regarding fair value measurement? A) Fair value is a market-based measurement. B) Fair value is an entity-specific measurement. C) Fair value measurement does not consider risk. D) Fair value measurement does not consider restrictions.

A) Fair value is a market-based measurement.

Bay Manufacturing Co. purchased a three-month U.S. Treasury bill. In preparing Bay's Statement of Cash Flows, this purchase would A) Have no effect. B) Be treated as an outflow from financing activities. C) Be treated as an outflow from investing activities. D) Be treated as an outflow from lending activities.

A) Have no effect.

Reporting inventory at the lower of cost or market is a departure from the accounting principle of: A) Historical cost. B) Consistency. C)Conservatism. D) Full disclosure.

A) Historical cost.

In which of the following circumstances, if any, would an auditor be concerned as to whether or not the price paid to acquire an asset was the fair value of the asset? I. The asset was acquired from the acquiring firm's majority shareholder. II. The asset was acquired in an active exchange market. A) I only. B) II only. C) Both I and II. D) Neither I nor II.

A) I only.

Each of the following statements is correct regarding the Financial Accounting Standards Board except: A) It develops principles and attributes that allow organizations to understand the necessary elements to ensure a robust system of internal control. B) It is recognized as authoritative by the United States Securities and Exchange Commission and the American Institute of Certified Public Accountants. C) It establishes accounting concepts and standards for financial accounting and reporting and provides guidance on implementation of standards. D) It provides a conceptual framework that helps to increase understanding of, and confidence in, financial information on the part of users of financial reports.

A) It develops principles and attributes that allow organizations to understand the necessary elements to ensure a robust system of internal control.

On January 15, 2008, Able Co. made a significant investment in the debt securities of Baker Co., which it intends to hold until the debt matures. Able's fiscal year-end is December 31. If Able Co. intends to measure and report its investment in Baker Co. debt securities at fair value as permitted by ASC 820 on which one of the following dates must Able elect to implement the fair value option? A) January 15, 2008 B) January 31, 2008 C) March 31, 2008 D) December 31, 2008

A) January 15, 2008

If the accountant forgets to record salary expense in the Statement of Income, what is the result? A) Net income is too high. B) Net income is too low. C) Retained earnings is too low. D) Retained earnings is correctly stated, as the omission only affects the Income Statement.

A) Net income is too high.

The FASB is a(n): A) Private sector body. B) Governmental unit. I C) International organization. D) Group of accounting firms.

A) Private sector body.

According to the IASB Framework, the process of reporting an item in the financial statements of an entity is: A) Recognition. B) Statement of Financial Position. C) Disclosure. D) Presentation.

A) Recognition.

According to the conceptual framework, the process of reporting an item in the financial statements of an entity is: A) Recognition. B) Realization. C) Allocation. D) Matching.

A) Recognition.

The premium on a three-year insurance policy expiring on December 31, 20X4 was paid in total on January 2, 20X2. If the company has a six-month operating cycle, then on December 31, 20X2, the prepaid insurance reported as a current asset would be for: A) six months. B) 12 months. C) 18 months. D) 24 months.

B) 12 months.

Which of the following documents is typically issued as part of the due-process activities of the Financial Accounting Standards Board (FASB) for amending the FASB Accounting Standards Codification? A) A proposed statement of position. B) A proposed accounting standards update. C) A proposed accounting research bulletin. D) A proposed staff accounting bulletin.

B) A proposed accounting standards update.

How are amendments incorporated into the FASB Accounting Standards Codification? A) By issuing an exposure draft B) By releasing an accounting standards update C) By producing a discussion paper D) By publishing a statement of financial accounting standards

B) By releasing an accounting standards update

When the fair value of an asset is determined as the amount that currently would be required to replace the service capacity of the asset, which one of the following valuation techniques has been used? A) Income approach B) Cost approach C) Expense approach D) Market approach

B) Cost approach

Which of the following is a component of other comprehensive income? A) Minimum accrual of vacation pay B) Currency-translation adjustments C) Changes in market value of inventory D) Unrealized gain or loss on equity securities carried at fair value

B) Currency-translation adjustments

In a multi-step Income Statement: A) Total expenses are subtracted from total revenues. B) Gross profit (margin) is shown as a separate item. C) Cost of sales and operating expense are subtracted from total revenues. D) Other income is added to revenue from sales.

B) Gross profit (margin) is shown as a separate item.

Which of the following statements concerning inputs used in ascertaining fair value is/are correct? I. Only observable inputs can be used. II. Inputs that incorporate the entity's assumptions may be used. A) I only. B) II only. C) Both I and II. D) Neither I nor II.

B) II only.

Giaconda, Inc. acquires an asset for which it will measure the fair value by discounting future cash flows of the asset. Which of the following terms best describes this fair value measurement approach? A) Market B) Income C) Cost D) Observable inputs

B) Income

A company is working on a direct response advertising campaign that will likely provide the company future benefits in the form of increased sales over the next two years. The company identified the following costs associated with the advertising campaign: Catalogs on hand to be mailed to potential customers: $100,000 Coupons printed to be mailed to existing customers: 50,000 Employee salaries for call center support: 45,000 Postage to be paid to mail the catalogs and coupons: 25,000 What cost, if any, should be capitalized under IFRS? A) $220,000 B) $150,000 C) $100,000 D) $0

D) $0 - Since these costs are associated with an advertising campaign, and advertising occurs on a continual basis, the costs should be expensed as incurred

Which of the following is not disclosed on the Statement of Cash Flows, either on the face of the statement or in a separate schedule, when prepared under the direct method? A) The major classes of gross cash receipts and gross cash payments B) The amount of income taxes paid C) A reconciliation of net income to net cash flow from operations D) A reconciliation of ending retained earnings to net cash flow from operations

D) A reconciliation of ending retained earnings to net cash flow from operations

Which of the following items would not appear on the Income Statement prepared using IFRS? A) Discontinued operations. B) Gross Profit. C) Depreciation and amortization. D) All items would appear on the Income Statement when using IFRS.

D) All items would appear on the Income Statement when using IFRS.

When a full set of general-purpose financial statements are presented, comprehensive income and its components should A) Appear below income from continuing operations in the Income Statement. B) Be reported net of related income tax effect, in total and individually. C) Appear in a supplemental schedule in the notes to the financial statements. D) Be presented as part of the Income Statement or as a separate financial statement following the Income Statement.

D) Be presented as part of the Income Statement or as a separate financial statement following the Income Statement.