Continue to Read CPA-Financial Free Dumps (Part 2, Q41-Q60) of V8.02 – Check CPA-Financial Exam Questions Before Downloading

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Below are the CPA-Financial free dumps (Part 2, Q41-Q60) of V8.02:

1. According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on:

Generally accepted accounting principles.

Reporting on management's stewardship.

The need for conservatism.

The needs of the users of the information.

2. According to the FASB conceptual framework, which of the following situations violates the concept of reliability?

Data on segments having the same expected risks and growth rates are reported to analysts estimating future profits.

Financial statements are issued nine months late.

Management reports to stockholders regularly refer to new projects undertaken, but the financial statements never report project results.

Financial statements include property with a carrying amount increased to management's estimate of market value.

3. How should the effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate be reported?

As a component of income from continuing operations.

By restating the financial statements of all prior periods presented.

As a correction of an error.

By footnote disclosure only.

4. During 1994, Orca Corp. decided to change from the FIFO method of inventory valuation to the weighted average method. Inventory balances under each method were as follows:





Orca's income tax rate is 30%.

Orca should report the cumulative effect of this accounting change as a(n):

Adjustment to beginning retained earnings.

Component of income from continuing operations.

Extraordinary item.

Component of income after extraordinary items.

5. On January 2, 20X5, to better reflect the variable use of its only machine, Holly, Inc. elected to change its method of depreciation from the straight-line method to the units of production method. The original cost of the machine on January 2, 20X3, was $50,000, and its estimated life was 10 years. Holly estimates that the machine's total life is 50,000 machine hours. Machine hours usage was 8,500 during 20X4 and 3,500 during 20X3.

Holly's income tax rate is 30%. Holly should report the accounting change in its 20X5 financial statements as a(n):

Cumulative effect of a change in accounting principle of $2,000 in its income statement.

Adjustment to beginning retained earnings of $2,000.

Cumulative effect of a change in accounting principle of $1,400 in its income statement.

None of the above.

6. What are the Statements of Financial Accounting Concepts intended to establish?

Generally accepted accounting principles in financial reporting by business enterprises.

The meaning of "Present fairly in accordance with generally accepted accounting principles."

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

The hierarchy of sources of generally accepted accounting principles.

7. On December 2, 20X1, Flint Corp.'s board of directors voted to discontinue operations of its frozen food division and to sell the division's assets on the open market as soon as possible. The division reported net operating losses of $20,000 in December and $30,000 in January. On February 26, 20X2, sale of the division's assets resulted in a gain of $90,000.

Assuming that the frozen foods division qualifies as a component of the business and ignoring income taxes, what amount of gain/loss from discontinued operations should Flint recognize in its income statement for 20X2?

$0

$40,000

$60,000

$90,000

8. At December 31, 1998, Off-Line Co. changed its method of accounting for demo costs from writing off the costs over two years to expensing the costs immediately. Off-Line made the change in recognition of an increasing number of demos placed with customers that did not result in sales. Off-Line had deferred demo costs of $500,000 at December 31, 1997, $300,000 of which were to be written off in 1998 and the remainder in 1999. Off-Line's income tax rate is 30%.

In its 1998 financial statements, what amount should Off-Line report as cumulative effect of change in accounting principle?

$0

$200,000

$350,000

$500,000

9. On December 31, 20X2, the Board of Directors of Maxy Manufacturing, Inc. committed to a plan to discontinue the operations of its Alpha division. Maxy estimated that Alpha's 20X3 operating loss would be $500,000 and that the fair value of Alpha's facilities was $300,000 less than their carrying amounts.

Alpha's 20X2 operating loss was $1,400,000, and the division was actually sold for $400,000 less than its carrying amount in 20X3. Maxy's effective tax rate is 30%.

In its 20X2 income statement, what amount should Maxy report as loss from discontinued operations?

$980,000

$1,190,000

$1,400,000

$1,700,000

10. APB Opinion No. 28, Interim Financial Reporting, concluded that interim financial reporting should be viewed primarily in which of the following ways?

As useful only if activity is spread evenly throughout the year.

As if the interim period were an annual accounting period.

As reporting for an integral part of an annual period.

As reporting under a comprehensive basis of accounting other than GAA

11. In open market transactions, Gold Corp. simultaneously sold its long-term investment in Iron Corp. bonds and purchased its own outstanding bonds. The broker remitted the net cash from the two transactions.

Gold's gain on the purchase of its own bonds exceeded its loss on the sale of the Iron bonds. Assume the transaction to purchase its own outstanding bonds is unusual in nature and has occurred infrequently.

Gold should report the:

Net effect of the two transactions as an extraordinary gain.

Net effect of the two transactions in income before extraordinary items.

Effect of its own bond transaction gain in income before extraordinary items, and report the Iron bond transaction as an extraordinary loss.

Effect of its own bond transaction as an extraordinary gain, and report the Iron bond transaction loss in income before extraordinary items.

12. Foy Corp. failed to accrue warranty costs of $50,000 in its December 31, 1992, financial statements. In addition, a $30,000 change from straight-line to accelerated depreciation was made at the beginning of 1993. Both the $50,000 and the $30,000 are net of related income taxes.

What amount should Foy report as prior period adjustments in 1993?

$0

$30,000

$50,000

$80,000

13. According to the FASB conceptual framework, comprehensive income includes which of the following?

Option A

Option B

Option C

Option D

14. Mellow Co. depreciated a $12,000 asset over five years, using the straight-line method with no salvage value. At the beginning of the fifth year, it was determined that the asset will last another four years.

What amount should Mellow report as depreciation expense for year 5?

$600

$900

$1,500

$2,400

15. In April 30, 20X4, Deer Corp. approved a plan to dispose of a component of its business. For the period January 1 through April 30, 20X4, the component had revenues of $500,000 and expenses of $800,000.

The assets of the component were sold on October 15, 20X4 at a loss.

In its income statement for the year ended December 31, 20X4, how should Deer report the component's operations from January 1 to April 30, 20X4?

$500,000 and $800,000 should be included with revenues and expenses, respectively, as part of continuing operations.

$300,000 should be reported as part of the loss on disposal of a component and included as part of continuing operations.

$300,000 should be reported as an extraordinary loss.

$300,000 should be reported as a loss from operations of a component and included in loss from discontinued operations.

16. The cumulative effect of a change in accounting estimate should be shown separately:

On the income statement above income from continuing operations.

On the income statement after income from continuing operations and before extraordinary items.

On the retained earnings statement as an adjustment to the beginning balance.

It should not be recorded separately on any financial statement.

17. Lore Co. changed from the cash basis of accounting to the accrual basis of accounting during 1994.

The cumulative effect of this change should be reported in Lore's 1994 financial statements as a:

Prior period adjustment resulting from the correction of an error.

Prior period adjustment resulting from the change in accounting principle.

Component of income before extraordinary item.

Component of income after extraordinary item.

18. What is the purpose of information presented in notes to the financial statements?

To provide disclosures required by generally accepted accounting principles.

To correct improper presentation in the financial statements.

To provide recognition of amounts not included in the totals of the financial statements.

To present management's responses to auditor comments.

19. An extraordinary gain should be reported as a direct increase to which of the following?

Net income.

Comprehensive income.

Income from continuing operations, net of tax.

Income from discontinued operations, net of tax.

20. On January 2, 1989, Union Co. purchased a machine for $264,000 and depreciated it by the straight-line method using an estimated useful life of eight years with no salvage value. On January 2, 1992, Union determined that the machine had a useful life of six years from the date of acquisition and will have a salvage value of $24,000. An accounting change was made in 1992 to reflect the additional data.

The accumulated depreciation for this machine should have a balance at December 31, 1992, of:

$176,000

$160,000

$154,000

$146,000

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