What is the purpose
of a derivative instrument?
a. Additional investment
activity for companies to use their cash
b. Allowing the firm to
offer its staff a way to participate in the growth of the company
c. Creating a guarantee of
profit
d.
Mitigating  risk on the changing value of the asset on which it is
based
What is a
"temporary difference"?
a. A difference due to an
error in accounting
b. A difference in tax law
and GAAP which creates a temporary difference in financial reporting
c. A difference in the
management's perspective on the current period's earnings
d. A difference between the
tax department's and accounting department's accounting systems
Which FASB deals
with the impairment of long lived assets?
a. FASB 201
b. FASB 144
c. FASB 101
d. FASB 99
Which of the
following would be a derivative instrument?
a. Common stock
b. Preferred stock
c. Options contracts
d. Debt instrument
Why is the value of
a derivative continually adjusted for accounting purposes?
a. To reflect the current
market value, since values fluctuate frequently
b. To make accounting
financial reports more attractive
c. To increase earnings
d. To lower liability until
the derivative is written off
How are income
taxes calculated in general for the current period?
a. Using the highest tax
bracket in the name of conservatism
b. Using the taxable net
income multiplied by the estimated tax rate for the company
c. As an average for the
year
d. Based on previous year's
tax amount for the same period
Which FASB
Statement addresses the accounting for derivatives?
a. FASB 12
b. FASB 144
c. FASB 133
d. FASB 201
What other
characteristic does a component of a company have to have in order to be a true
discontinued operation?
a. It is a product line
which didn't work out.
b. It is a distinct,
separate line of business for the company.
c. The manager in charge of
the operation was fired.
d. The operation is located
in another country.
Which of the FASB
statements discusses the accounting standard for reporting comprehensive
income?
a. FASB 201
b. FASB 133
c. FASB 144
d. FASB 130
What is the
requirement regarding the format of financial reports and comprehensive income?
a. There is no requirement
on the format of financial reports.
b. They must be font size 14
and not exceed 5 pages.
c. They should detail out
every expense.
d. That expense categories
be limited to no more than 10.
Under which of the
following situations would prior financial reports not have to be restated?
a. The change is due to a
policy change and in writing.
b. The change materially
affects what EPS would have been last year.
c. The change has no impact
on previous accounting or financial reports.
d. The change is due to an
error in the interpretation of accounting GAAP law.
What is
comprehensive income?
a. Income less any taxes
b. Income from the main
product line, without clubbing the income from other product lines
c. Income including all
extraordinary items
d. Normal income including
revenues, cogs, expenses, gains and losses
When should a
contingent liability be reported financially?
a. After legal documents
obligating the firm are signed
b. When the contingent
liability becomes probable
c. In the period that
follows the documenting of the liability
d. Retroactively
Which FASB
Statement addresses accounting for earnings per share?
a. FASB 128
b. FASB 55
c. FASB 144
d. FASB 12
How is the interest
cost to be capitalized calculated?
a. By taking into account
the interest cost on the borrowings made to complete the asset
b. By using the average
market rate
c. By following the Federal
reserve rate
d. By following the interest
rate on the company's savings account
Which of the
following is not a part of inventory?
a. Finished Goods
b. Work in Progress
c. Raw Materials
d. Cost of Goods Sold
What is meant by
the term "dilution"?
a. It is just another term
for common stock.
b. Common stock plus
preferred stock
c. The number of shares that
would be outstanding if all options and other contracts related to shares were
executed
d. Common Stock and other
equity
Who does an error
correction financial report restatement benefit?
a. The company
b. The investors
c. The employees
d. All of the above
What interest rate
would be used to calculate interest capitalization if there is no specific loan
associated with the asset except just the overall company debt?
a. The lowest rate of
interest the company has on loans
b. The highest rate of
interest the company has on loans
c. The Federal reserve rate
d. A weighted rate based on
the amounts of loans and rates carried by the company
What is a
"mark to market" adjustment?
a. Selling off assets
b. Adjusting the price of a
derivative once it is sold
c. Buying offsetting
derivatives to mitigate risk
d. Adjusting the book value
of a derivative to the current market rate
Which FASB
statement addresses the capitalization of interest?
a. FASB 101
b. FASB 144
c. FASB 201
d. FASB 34
What is the
conversion rate?
a. The interest rate earned
on the bond
b. The number of people who
convert the debt compared to those who don't
c. The number of years the
convertible debt is outstanding
d. The rate at which each
dollar of bond converts into shares
Which of the
following would impairment not apply to?
a. Land
b. Intangible Assets
c. Equipment
d. Office Supplies
What is the general
rule regarding the reporting of comprehensive income?
a. That it should not be
shown as it is misleading
b. That comprehensive income
should be calculated and prominently displayed on financial reports
c. That it should be mailed
in a letter to all shareholders
d. That it should only be
calculated yearly
What is the date of
abandonment?
a. The day the asset is
purchased
b. The day the asset is
fully depreciated
c. The day the asset is sold
d. The day the asset ceases
to be utilized
What are the tax
implications of consolidation?
a. It creates a higher tax
burden.
b. It reduces tax burden.
c. Depends on the state the
company is located in.
d. None, if consolidation is
for financial reporting purposes and not for tax purposes.
Why would a
shareholder want to know what diluted EPS as compared to basic EPS?
a. Because it represents
what a stock can be sold for currently
b. Because it reduces the
stockholder's tax liability
c. Because it will reflect
the potential dilution of the value of the company which can be excessive for
companies with large numbers of options outstanding
d. Because it represents how
well the management is performing in comparison with the past management
Which section of
FASB deals with Accounting for Inventory Costs?
a. FASB 401
b. FASB 151
c. FASB 10
d. It is not covered by FASB
Why are
uncollectible accounts receivable considered a contingency?
a. Because they are an asset
b. Because they are material
c. Because they are not probable
d. Because they can be
estimated and it is probable not all accounts receivable will be collected
What is stock
dividend as compared to cash dividend?
a. The issuance of cash
which can only be used to buy stock
b. The issuance of
additional stock to shareholders in lieu of cash
c. The issuance of stock in
the current period, traded for cash in a later period under contract
d. A promise by the company
that the stock price will increase
Which of the FASB
statements discusses the accounting treatment of discontinued operations?
a. FASB 123
b. FASB 144
c. FASB 12
d. FASB 201
What is
"impairment"?
a. Expensing of the cost of
goods sold
b. A revaluation of the
assets on the books
c. An asset becoming
unusable
d. Natural resources getting
used up
What are the 3
important dates pertaining to the issuance of stock dividend?
a. Date of record, Date of
payment, Date of distribution
b. Date of issuance, Date of
delivery, Date of record
c. Date of payment, Date of
record, Date of company formation
d. Date of declaration, Date
of record, Date of distribution
Which of the
following is a method of testing for impairment?
a. Net Income potential
method
b. Discounted cash flow
value compared to carrying value
c. Asking management what a
fair value is
d. Looking at the historical
cost
What is
"earnings per share"?
a. The total earnings of the
company
b. The ratio of a company's
earnings to the number of shares outstanding
c. Earnings of the company
less any dividends
d. Earnings of the company
divided by the number of preferred shares outstanding
What value should a
contingency be booked at?
a. Not be booked until it
occurs, and then booked using the actual value
b. At the actual amount, and
retroactively
c. Using the best estimate
and then adding 10%
d. Using the most likely
estimated amount, factoring in conservatism
Why would a company
issue stock dividend?
a. Because shareholders
prefer stock to cash
b. Because they can issue
the stock of any corporation to the shareholders
c. Because it involves lower
tax impact to both the shareholders and the corporation
d. Because no cash outlay is
required while the shareholders are still rewarded
What number of
shares is used in calculating basic EPS?
a. Weighted average number
of shares outstanding for the period
b. The closing number of
shares outstanding
c. The opening number of
shares outstanding
d. The total number of
shares authorized
What does the term
derivative mean for accounting purposes?
a. A financial instrument
the value of which is derived from another financial instrument
b. A financial instrument
such as a stock or bond
c. A liability of which the
obligation is derived based on interest rates
d. An asset the value of
which is derived by the current trade in value
Why would a company
want to discontinue the operations of a division?
a. Because it generates too
much income
b. Because it is not
profitable and won't be in the future
c. Because it is located
outside of the company's location
d. Because the tax rate is
too high
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