CFI FMVA 6 questions with correct answers
Accounting Principles and Standards Correct Answer-
Which of the following best describes accounting principles in general?
Correct Answer-They outline the fundamental rules and concepts and
establish the framework on which detailed accounting standards are
based.
A sound accounting framework allows for all of the following benefits
except: Correct Answer-Identical items being reported on the financial
statements of different companies
3. Correct Answer-Conservatism principle:: It provides guidance on how
to record transactions when there is uncertainty.
Historical Cost:It states that assets and liabilities are recorded on the
financial statements at the cost at which they were acquired or assumed.
Objectivity; It states that financial statements must be free from bias and
based on verifiable evidence.
Economic Entity: It states that transactions carried out by a business are
separated from those conducted by its owner.
Matching:It states that the expenses of a business should be recorded in
the periods in which the corresponding revenues are earned.
On March 1st, Mr. Smithe signed up for a fitness program at Fit Co. and
paid $960 for the entire program upfront. The program includes a total
of 12 sessions and two sessions are delivered each month. How much
,revenue from Mr. Smithe should Fit Co. recognize at the end of March?
Correct Answer-160
Which of the following characteristics does not enhance the usefulness
of financial information? Correct Answer-Relevance
Identify the statement that is most accurate. Correct Answer-Financial
information that has confirmatory value provides feedback that either
confirms or changes previous evaluations.
Which of the following is not a correct description of how an operating
lease is recognized on the financial statements? Correct Answer-The
amortization expense of the right-of-use asset is calculated using the
straight-line depreciation method over the lease term.
Company Inc. enters into a 10-year finance lease at the beginning of
2021 for a total of $250,000. The annual lease payment is $25,000
(payable at the end of each year) and the rate implicit in the lease is 5%.
No initial direct costs are incurred. How much interest expense should
be recognized in 2021? Correct Answer-9,652
Which of the following statements about income taxes is not correct?
Correct Answer-Deductible temporary differences give rise to deferred
tax liabilities, meaning that more tax is payable in the future.
10. Correct Answer-Deductible Temporary differences
,Generally arise when the tax base of the assets is greater than the
carrying amount
Generally arise when there are differences that result in current
accounting income being greater than taxable income
Give rise to deferred tax assets
Taxable Temporary Diffferences
Arise when the tax base of the liabilities is greater than the carrying
amount
Arise when the carrying amount of the liabilities is greater than the tax
base
Taxable Temporary Differences
Calculate the deferred tax liability given the following items incurred in
2020 by Company B. Bonuses are tax deductible only in the year in
which they are paid. Correct Answer-372
Company Co. has 1,000 employees and it decides to grant each of the
employees 200 share options as part of its new rewards plan. The
options are exercisable over 5 years and subject only to the condition
that the company's stock price must be at least 30% higher than its
original issue price. Company Co.'s share-based payments are subject to:
Correct Answer-Non-vesting condition
Company A has 800 employees, and it decides to grant each of the
employees 50 share options as part of its new rewards plan. The options
are exercisable over 5 years and subject to a 3-year service condition.
, The fair value of each option at the grant date is $16. The company
estimates that 80% of its employees will meet the service condition
required for receiving the options. Calculate the total share-based
payment expense for Company A assuming that 80% of the employees
actually meet the service condition. Correct Answer-512,000
Which of the following is not a required criterion for a transaction to be
considered a business combination? Correct Answer-Presence of outputs
Which of the following statements regarding the accounting for business
combinations is false? Correct Answer-Goodwill is the difference
between the consideration transferred by the acquirer to the acquiree and
the fair value of identifiable assets acquired.
Debt issuance costs are: Correct Answer-Amortized over the term of the
related debt liability
Scenario and Sensitivity Analysis Correct Answer-
If you want to test how an increase in percentage of cost of good sold
affects the contribution margin, you would use ________. Correct
Answer-Sensitivity Analysis
When performing a scenario analysis, which of the following
tools/functions in Excel is used to create a dropdown list where we can
select the live case? Correct Answer-Data Validation
Accounting Principles and Standards Correct Answer-
Which of the following best describes accounting principles in general?
Correct Answer-They outline the fundamental rules and concepts and
establish the framework on which detailed accounting standards are
based.
A sound accounting framework allows for all of the following benefits
except: Correct Answer-Identical items being reported on the financial
statements of different companies
3. Correct Answer-Conservatism principle:: It provides guidance on how
to record transactions when there is uncertainty.
Historical Cost:It states that assets and liabilities are recorded on the
financial statements at the cost at which they were acquired or assumed.
Objectivity; It states that financial statements must be free from bias and
based on verifiable evidence.
Economic Entity: It states that transactions carried out by a business are
separated from those conducted by its owner.
Matching:It states that the expenses of a business should be recorded in
the periods in which the corresponding revenues are earned.
On March 1st, Mr. Smithe signed up for a fitness program at Fit Co. and
paid $960 for the entire program upfront. The program includes a total
of 12 sessions and two sessions are delivered each month. How much
,revenue from Mr. Smithe should Fit Co. recognize at the end of March?
Correct Answer-160
Which of the following characteristics does not enhance the usefulness
of financial information? Correct Answer-Relevance
Identify the statement that is most accurate. Correct Answer-Financial
information that has confirmatory value provides feedback that either
confirms or changes previous evaluations.
Which of the following is not a correct description of how an operating
lease is recognized on the financial statements? Correct Answer-The
amortization expense of the right-of-use asset is calculated using the
straight-line depreciation method over the lease term.
Company Inc. enters into a 10-year finance lease at the beginning of
2021 for a total of $250,000. The annual lease payment is $25,000
(payable at the end of each year) and the rate implicit in the lease is 5%.
No initial direct costs are incurred. How much interest expense should
be recognized in 2021? Correct Answer-9,652
Which of the following statements about income taxes is not correct?
Correct Answer-Deductible temporary differences give rise to deferred
tax liabilities, meaning that more tax is payable in the future.
10. Correct Answer-Deductible Temporary differences
,Generally arise when the tax base of the assets is greater than the
carrying amount
Generally arise when there are differences that result in current
accounting income being greater than taxable income
Give rise to deferred tax assets
Taxable Temporary Diffferences
Arise when the tax base of the liabilities is greater than the carrying
amount
Arise when the carrying amount of the liabilities is greater than the tax
base
Taxable Temporary Differences
Calculate the deferred tax liability given the following items incurred in
2020 by Company B. Bonuses are tax deductible only in the year in
which they are paid. Correct Answer-372
Company Co. has 1,000 employees and it decides to grant each of the
employees 200 share options as part of its new rewards plan. The
options are exercisable over 5 years and subject only to the condition
that the company's stock price must be at least 30% higher than its
original issue price. Company Co.'s share-based payments are subject to:
Correct Answer-Non-vesting condition
Company A has 800 employees, and it decides to grant each of the
employees 50 share options as part of its new rewards plan. The options
are exercisable over 5 years and subject to a 3-year service condition.
, The fair value of each option at the grant date is $16. The company
estimates that 80% of its employees will meet the service condition
required for receiving the options. Calculate the total share-based
payment expense for Company A assuming that 80% of the employees
actually meet the service condition. Correct Answer-512,000
Which of the following is not a required criterion for a transaction to be
considered a business combination? Correct Answer-Presence of outputs
Which of the following statements regarding the accounting for business
combinations is false? Correct Answer-Goodwill is the difference
between the consideration transferred by the acquirer to the acquiree and
the fair value of identifiable assets acquired.
Debt issuance costs are: Correct Answer-Amortized over the term of the
related debt liability
Scenario and Sensitivity Analysis Correct Answer-
If you want to test how an increase in percentage of cost of good sold
affects the contribution margin, you would use ________. Correct
Answer-Sensitivity Analysis
When performing a scenario analysis, which of the following
tools/functions in Excel is used to create a dropdown list where we can
select the live case? Correct Answer-Data Validation
