CPA Examination

CPA Examination Fundamental Characteristics of Accounting Information - Correct Answer-1. Relevance 2. Reliability (faithful representation) Comprehensive Income - Correct Answer-NI + OCI Unrealized G/L AFS Securities - Correct Answer-OCI: Not on income statement Unusual, frequent items - Correct Answer-No separate disclosures Aspects of Relevance - Correct Answer-Predictive Value, Confirmatory Value, Materiality Aspects of Reliability - Correct Answer-Comparability (consistency), verifiability, timeliness, understandability Single source of US GAAP Amended through - Correct Answer-FASB Accounting Standards Codification Accounting Standards Updates All US public companies - Correct Answer-Required to follow US GAAP Accounting standards update issued - Correct Answer-Only after majority vote by members of FASB Replacement Cost - Correct Answer-Amount of cash or cash equivalent Continued vs. discontinued income - Correct Answer-Predictive value Royalties paid - Correct Answer-Reported as expense in the period incurred Disposal on component of a business - Correct Answer-Discontinued Overdraft reported as - Correct Answer-Current liability Cash account for payment into a bond sinking fund - Correct Answer-Noncurrent asset Non current asset - Correct Answer-Cash realized time beyond operating cycle or 1 year Deposits received from customer - Correct Answer-Liabilities Service Contracts sold - Correct Answer-Deferred revenue increases, but service revenue doesn't increase until services are performed JE when contract is performed - Correct Answer-None Journal entries sales of service contract - Correct Answer-Cash received: Dr. Cash 15000 Cr. Unearned Sales revenue 15000 Product transferred: Dr. Unearned Sales Revenue 15000 Cr. Sales Revenue 15000 Dr. COGS 9000 Cr. Inventory 9000 Revenue recognition process - Correct Answer-ISTAR 1. Identify Contract 2. Separate performance obligations 3. Transaction price expected to be entitled to 4. Allocate to separate performance obligations 5. Recognize revenue based on either a point in time or over time Bill and hold - Correct Answer-Recognize all revenue now. 0 unearned Discount - Correct Answer-Allocated Consignment - Correct Answer-No unearned revenue--didn't sell anything Service contracts - Correct Answer-Deferred revenue= Unearned Liability Service revenue= earned income Milestones achieved - Correct Answer-Output method to recognize revenue