CPA Practice Exam - Financial Accounting and Reporting
Part 4
1. Long-term debt is classified as a noncurrent liability when:
It's due over one year
it's secured by collateral: It's due over one year
2. The effective interest rate method of amortizing a bond discount is: The same as the straight-
line method
Based on the bond's yield at issuance: Based on the bond's yield at issuance
3. A change in
accounting principle is accounted for as a .
Retrospective adjustment
Prospective adjustment: Retrospective adjustment
4. If an error is discovered in a prior period's financial statements, it should be corrected by:
Adjusting the current period's income statement
Retrospective adjustment to prior periods: Retrospective adjustment to prior periods
5. Investments in can be classified as trading, available-for-sale or held-
to-maturity:
Debt securities
Both common and preferred stock: Debt securities
6. The unrealized gains and losses on available-for-sale securities are reported in:
Other Comprehensive Income Retained Earnings: Other
Comprehensive Income
1/
12
, CPA Practice Exam - Financial Accounting and Reporting
Part 4
7. Comprehensive Income Includes .
Net income Only
Other comprehensive income Only
Both net income and other comprehensive income: Both net income and other comprehen- sive income
8. may include the following: 1) Foreign currency translation ad- justments 2) Gains/Losses
from cash flow hedges and 3) Changes in the value of available-for-sale securities
Net Income
Other Comprehensive Income: Other Comprehensive Income
9. Under the acquisition method, goodwill is calculated as the
excess of the purchase price over the of net identifiable assets acquired.
Fair Value
Market Value: Fair Value
10. Which of the following is NOT a reason for Goodwill to arise in a business combination?
The reputation of the acquired company
The fair value of identifiable net assets is less than book value: The fair value of identifiable net assets is less than book value
11. Under the revenue recognition principle, revenue is recognized when the performance obligation is
satisfied, true or false?: True
12. Which of the following is a characteristic of a performance obligation?
At a point in time only
2/
12
Part 4
1. Long-term debt is classified as a noncurrent liability when:
It's due over one year
it's secured by collateral: It's due over one year
2. The effective interest rate method of amortizing a bond discount is: The same as the straight-
line method
Based on the bond's yield at issuance: Based on the bond's yield at issuance
3. A change in
accounting principle is accounted for as a .
Retrospective adjustment
Prospective adjustment: Retrospective adjustment
4. If an error is discovered in a prior period's financial statements, it should be corrected by:
Adjusting the current period's income statement
Retrospective adjustment to prior periods: Retrospective adjustment to prior periods
5. Investments in can be classified as trading, available-for-sale or held-
to-maturity:
Debt securities
Both common and preferred stock: Debt securities
6. The unrealized gains and losses on available-for-sale securities are reported in:
Other Comprehensive Income Retained Earnings: Other
Comprehensive Income
1/
12
, CPA Practice Exam - Financial Accounting and Reporting
Part 4
7. Comprehensive Income Includes .
Net income Only
Other comprehensive income Only
Both net income and other comprehensive income: Both net income and other comprehen- sive income
8. may include the following: 1) Foreign currency translation ad- justments 2) Gains/Losses
from cash flow hedges and 3) Changes in the value of available-for-sale securities
Net Income
Other Comprehensive Income: Other Comprehensive Income
9. Under the acquisition method, goodwill is calculated as the
excess of the purchase price over the of net identifiable assets acquired.
Fair Value
Market Value: Fair Value
10. Which of the following is NOT a reason for Goodwill to arise in a business combination?
The reputation of the acquired company
The fair value of identifiable net assets is less than book value: The fair value of identifiable net assets is less than book value
11. Under the revenue recognition principle, revenue is recognized when the performance obligation is
satisfied, true or false?: True
12. Which of the following is a characteristic of a performance obligation?
At a point in time only
2/
12
