GLEIM PART 1 QUESTIONS PDF

FINANCIAL PLANING , PARFORMANCE ,AND ANALYTICS QUESTIONS Study Unit 1: External Financial Statements and Revenue Recognition 1: (195) External Financial Statements and Revenue Recognition 1: (13) Concepts of Financial Accounting 2: (27) Statement of Fina...

FINANCIAL PLANING , PARFORMANCE ,AND ANALYTICS QUESTIONS Study Unit 1: External Financial Statements and Revenue Recognition 1: (195) External Financial Statements and Revenue Recognition 1: (13) Concepts of Financial Accounting 2: (27) Statement of Financial Position (Balance Sheet) 3: (24) Income Statement and Statement of Comprehensive Income 4: (25) Statement of Changes in Equity and Equity Transactions 5: (53) Statement of Cash Flows 6: (26) Revenue from Contracts with Customers 7: (27) Recognition of Revenue over Time Subunit 1: Concepts of Financial Accounting Question: 1A primary objective of external financial reporting is A. Direct measurement of the value of a business enterprise. B. Provision of information that is useful to present and potential investors, creditors, and others in making rational financial decisions regarding the enterprise. C. Establishment of rules for accruing liabilities. D. Direct measurement of the enterprise’s stock price. Question: 2Which of the following is true regarding the comparison of managerial and financial accounting? A. Managerial accounting is generally more precise. B. Managerial accounting has a past focus, and financial accounting has a future focus. C. The emphasis on managerial accounting is relevance, and the emphasis on financial accounting is timeliness. D. Managerial accounting need not follow generally accepted accounting principles (GAAP), while financial accounting must follow them. Question: 3An objective of financial reporting is A. Providing information useful to investors, creditors, donors, and other users for decision making. B. Assessing the adequacy of internal control. C. Evaluating management results compared with standards. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  D. Providing information on compliance with established procedures. Question: 4An entity that sprays chemicals in residences to eliminate or prevent infestation of insects requires that customers prepay for 3 months’ service at the beginning of each new quarter. Select the term that appropriately describes this situation from the viewpoint of the entity. A. Deferred income. B. Earned income. C. Accrued income. D. Prepaid expense. Question: 5The financial statements included in the annual report to the shareholders are least useful to which one of the following? A. Stockbrokers. B. Bankers preparing to lend money. C. Competing businesses. D. Managers in charge of operating activities. Question: 6The accounting measurement that is not consistent with the going concern concept is A. Historical cost. B. Realization. C. The transaction approach. D. Liquidation value. Question: 7Which of the following is a true statement about the objective of general-purpose financial reporting? A. Financial reporting is ordinarily focused on industries rather than individual entities. B. The objective applies only to information that is useful for investment professionals. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  C. Financial reporting directly measures management performance. D. The information provided relates to the entity’s economic resources and claims. Question: 8Which basis of accounting is most likely to provide the best assessment of an entity’s past and future ability to generate net cash inflows? A. Cash basis of accounting. B. Modified cash basis of accounting. C. Accrual basis of accounting. D. Tax basis of accounting. Question: 9Which of the following is least likely to be accomplished by providing general-purpose financial information useful for making decisions about providing resources to an entity? A. To provide information about changes in an entity’s economic resources and claims to them. B. To provide information to help investors and creditors assess the amount, timing, and uncertainty of prospective net cash inflows to the entity. C. To provide sufficient information to determine the value of the entity. D. To provide information about management’s performance. Question: 10All of the following support the objective of financial reporting except providing information that A. Is useful for making investment and credit decisions. B. Helps management evaluate alternative projects. C. Concerns enterprise resources and claims to those resources. D. Helps investors and creditors predict future cash flows. Question: 11General purpose external financial reporting of a corporation focuses primarily on the needs of which of the following users? A. Regulatory and taxing authorities. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. Investors and creditors and their advisors. C. The board of directors of the corporation. D. The management of the corporation. Question: 12For financial reporting to be useful, it must A. Be in accordance with generally accepted accounting principles. B. Provide information useful for making business and investment decisions. C. Be understandable to those who have a limited knowledge of business activities. D. Directly measure the value of the entity being reported on. Question: 13What is the primary objective of financial reporting? A. To provide economic information that is comprehensible to all users. B. To provide management with an accurate evaluation of their financial performance. C. To provide forecasts for future cash flows and financial performance. D. To provide information that is useful for economic decision making. Subunit 2: Statement of Financial Position (Balance Sheet) Question: 1The primary purpose of the statement of financial position is to reflect A. The fair value of the firm’s assets at some moment in time. B. The status of the firm’s assets in case of forced liquidation of the firm. C. The success of a company’s operations for a given amount of time. D. Items of value, debt, and net worth. Question: 2Prepaid expenses are valued on the statement of financial position at the A. Cost to acquire the asset. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. Face amount collectible at maturity. C. Cost to acquire minus accumulated amortization. D. Cost less expired or used portion. Question: 3A statement of financial position allows investors to assess all of the following except the A. Efficiency with which enterprise assets are used. B. Liquidity and financial flexibility of the enterprise. C. Capital structure of the enterprise. D. Net realizable value of enterprise assets. Question: 4The accounting equation (assets – liabilities = equity) reflects the A. Entity point of view. B. Fund theory. C. Proprietary point of view. D. Enterprise theory. Question: 5Long-term obligations that are or will become callable by the creditor because of the debtor’s violation of a provision of the debt agreement at the balance sheet date should be classified as A. Long-term liabilities. B. Current liabilities unless the debtor goes bankrupt. C. Current liabilities unless the creditor has waived the right to demand repayment for more than 1 year from the balance sheet date. D. Contingent liabilities until the violation is corrected. Question: 6A statement of financial position is intended to help investors and creditors A. Assess the amount, timing, and uncertainty of prospective net cash inflows of a firm. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. Evaluate economic resources and obligations of a firm. C. Evaluate economic performance of a firm. D. Evaluate changes in the ownership equity of a firm. Question: 7The purchase of treasury stock is recorded on the statement of financial position as a(n) A. Increase in assets. B. Decrease in liabilities. C. Increase in shareholders’ equity. D. Decrease in shareholders’ equity. Question: 8When classifying assets as current and noncurrent for reporting purposes, A. The amounts at which current assets are carried and reported must reflect realizable cash values. B. Prepayments for items such as insurance or rent are included in an “other assets” group rather than as current assets as they will ultimately be expensed. C. The time period by which current assets are distinguished from noncurrent assets is determined by the seasonal nature of the business. D. Assets are classified as current if they are reasonably expected to be realized in cash or consumed during the normal operating cycle. Question: 9A corporation uses a calendar year for financial and tax reporting purposes and has $100 million of mortgage bonds due on January 15, Year 2. By January 10, Year 2, the corporation intends to refinance this debt with new long-term mortgage bonds and has entered into a financing agreement that clearly demonstrates its ability to consummate the refinancing. This debt is to be A. Classified as a current liability on the statement of financial position at December 31, Year 1. B. Classified as a long-term liability on the statement of financial position at December 31, Year 1. C. Retired as of December 31, Year 1. D. Considered off-balance-sheet debt. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 10A statement of financial position provides a basis for all of the following except A. Computing rates of return. B. Evaluating capital structure. C. Assessing liquidity and financial flexibility. D. Determining profitability and assessing past performance. Question: 11A company intends to refinance a portion of its short-term debt in Year 2 and is negotiating a long- term financing agreement with a local bank. This agreement would be noncancelable and would extend for a period of 2 years. The amount of short-term debt that the company can exclude from its statement of financial position at December 31, Year 1, A. May exceed the amount available for refinancing under the agreement. B. Depends on the demonstrated ability to consummate the refinancing. C. Is reduced by the proportionate change in the working capital ratio. D. Is zero unless the refinancing has occurred by year end. Question: 12A manufacturer receives an advance payment for special-order goods that are to be manufactured and delivered within the next year. The advance payment should be reported in the manufacturer’s current-year statement of financial position as a(n) A. Current liability. B. Noncurrent liability. C. Contra asset amount. D. Accrued revenue. Question: 13A company has outstanding accounts payable of $30,000 and a short-term construction loan in the amount of $100,000 at year end. The loan was refinanced through issuance of long-term bonds after year end but before issuance of financial statements. How should these liabilities be recorded in the balance sheet? A. Noncurrent liabilities of $130,000. B. Current liabilities of $130,000. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  C. Current liabilities of $30,000, noncurrent liabilities of $100,000. D. Current liabilities of $130,000, with required footnote disclosure of the refinancing of the loan. Question: 14Noncurrent debt should be included in the current section of the statement of financial position if A. It is to be converted into common stock before maturity. B. It matures within the year and will be retired through the use of current assets. C. Management plans to refinance it within the year. D. A bond retirement fund has been set up for use in its scheduled retirement during the next year. Question: 15A company has the following items recorded on its financial records: Available-for-sale debt securities $200,000 Prepaid expenses 400,000 Treasury stock 100,000 The total amount of the above items to be shown as assets on the statement of financial position is A. $400,000 B. $500,000 C. $600,000 D. $700,000 Question: 16A receivable classified as current on the statement of financial position is expected to be collected within A. The current operating cycle. B. 1 year. C. The current operating cycle or 1 year, whichever is longer. D. The current operating cycle or 1 year, whichever is shorter. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 17Current assets are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business. Current assets most likely include A. Intangible assets. B. Purchased goodwill. C. Organizational costs. D. Trading securities. Question: 18A corporation was incorporated on January 1, Year 6, with $500,000 from the issuance of stock and borrowed funds of $75,000. During the first year of operations, net income was $25,000. On December 15, the corporation paid a $2,000 cash dividend. No additional activities affected equity in Year 6. At December 31, Year 6, the corporation’s liabilities had increased to $94,000. In the corporation’s December 31, Year 6 balance sheet, total assets should be reported at A. $598,000 B. $600,000 C. $617,000 D. $692,000 Question: 19An entity had the following account balances at year end. Sales $452,000 Cash 23,400 Accounts payable 14,300 Rent expense 3,700 Accounts receivable 9,400 Cost of goods sold 214,000 Land 104,000 Unearned revenue 6,800 Gain on sale 17,500 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 Equipment 28,800 Inventories 2,200 Notes payable 67,000 What is the amount of total current assets reported on the balance sheet? A. $35,000 B. $39,900 C. $59,300 D. $63,800 Question: 20All of the following are limitations of the balance sheet except that A. The balance sheet is prepared using management judgments and estimates. B. Assets and liabilities are usually recorded at historical cost, which might differ significantly from current market value. C. The balance sheet provides information on the liquidity and solvency of the company. D. The balance sheet omits many items that cannot be recorded objectively but which have financial value to the company. Question: 21Which of the following is not an example of off-balance-sheet financing? A. Use of debt covenants. B. Factoring receivables. C. Using special purpose entities. D. Joint ventures. Question: 22Heavy use of off-balance-sheet lease financing will tend to A. Make a company appear riskier than it actually is because its stated debt ratio will appear higher. B. Make a company appear less risky than it actually is because its stated debt ratio will appear lower. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  C. Affect a company’s cash flows but not its degree of risk. D. Have no effect on either cash flows or risk because the cash flows are already reflected in the income statement. Question: 23Which one of the following would not be classified as a current liability? A. Security deposits received from renters for a one-year lease. B. Rent for the current year received on January 2 of the current year. C. Undistributed stock dividends. D. Ten-year bonds sold 110 months ago. Question: 24A company received an invoice in January for the electricity used by its warehouse in December, and it recorded the expense in January. The company uses the accrual basis of accounting. What is the impact to the company’s December financial statements? A. Current liabilities were understated, and retained earnings were overstated. B. Operating expenses were overstated, and retained earnings were overstated. C. Cash and cash equivalents were overstated, and retained earnings were understated. D. Accrued expenses were overstated, and retained earnings were understated. Question: 25When treasury stock is accounted for at cost, the cost is reported on the balance sheet as a(n) A. Asset. B. Reduction of retained earnings. C. Reduction of additional paid-in-capital. D. Unallocated reduction of equity. Question: 26Which one of the following statements regarding treasury stock is correct? A. It is unretired but no longer outstanding, yet it has all the rights of outstanding shares. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. It is an asset representing shares that can be sold in the future or otherwise issued in stock option plans or in effectuating business combinations. C. It is unable to participate in the liquidation proceeds of the firm but able to participate in regular cash dividend distributions as well as stock dividends and stock splits. D. It is reflected in shareholders’ equity as a contra account. Question: 27A corporation purchased 10,000 shares of its own $5 par-value common stock for $25 per share. This stock originally sold for $28 per share. The corporation used the cost method to record this transaction. If the par-value method had been used rather than the cost method, which of the following accounts would show a different dollar amount? A. Treasury stock and total shareholders’ equity. B. Additional paid-in capital and retained earnings. C. Paid-in capital from treasury stock and retained earnings. D. Additional paid-in capital and treasury stock. Subunit 3: Income Statement and Statement of Comprehensive Income Question: 1The profit and loss statement of an entity includes the following information for the current fiscal year: Sales $160,000 Gross profit 48,000 Year-end finished goods inventory 58,300 Opening finished goods inventory 60,190 The cost of goods manufactured by the entity for the current fiscal year is A. $46,110 B. $49,890 C. $110,110 D. $113,890 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 2In a multiple-step income statement for a retail company, all of the following are included in the operating section except A. Sales. B. Cost of goods sold. C. Dividend revenue. D. Administrative and selling expenses. Question: 3Which one of the following would be shown on a multiple-step income statement but not on a single-step income statement? A. Loss from discontinued operations. B. Gross profit. C. Cost of goods sold. D. Net income from continuing operations. Question: 4A retail entity maintains a markup of 25% based on cost. The entity has the following information for the current year: Purchases of merchandise $690,000 Freight-in on purchases 25,000 Sales 900,000 Ending inventory 80,000 Beginning inventory was A. $40,000 B. $85,000 C. $110,000 D. $265,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 5The financial statement that provides a summary of the firm’s operations for a period of time is the A. Income statement. B. Statement of financial position. C. Statement of shareholders’ equity. D. Statement of retained earnings. Question: 6Comprehensive income is best defined as A. Net income excluding extraordinary gains and losses. B. The change in net assets for the period including contributions by owners and distributions to owners. C. Total revenues minus total expenses. D. The change in net assets for the period excluding owner transactions. Question: 7Which one of the following items is included in the determination of income from continuing operations? A. Discontinued operations. B. Extraordinary loss. C. Cumulative effect of a change in an accounting principle. D. Unusual loss from a write-down of inventory. Question: 8Because of inexact estimates of the service life and the residual value of a plant asset, a fully depreciated asset was sold in the current year at a material gain. This gain most likely should be reported A. In the other revenues and gains section of the current income statement. B. As part of sales revenue on the current income statement. C. In the extraordinary item section of the current income statement. D. As an adjustment to prior periods’ depreciation on the statement of changes in equity. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 9In recording transactions, which of the following best describes the relation between expenses and losses? A. Losses are extraordinary charges to income, whereas expenses are ordinary charges to income. B. Losses are material items, whereas expenses are immaterial items. C. Losses are expenses that may or may not arise in the course of ordinary activities. D. Expenses can always be prevented, whereas losses can never be prevented. Question: 10An entity has a 50% gross margin, general and administrative expenses of $50, interest expense of $20, and net income of $10 for the year just ended. If the corporate tax rate is 50%, the level of sales revenue for the year just ended was A. $90 B. $135 C. $150 D. $180 Question: 11Assume that employees confessed to a $500,000 inventory theft but are not able to make restitution. How should this material fraud be shown in the company’s financial statements? A. Classified as a loss and shown as a separate line item in the income statement. B. Initially classified as an accounts receivable because the employees are responsible for the goods. Because they cannot pay, the loss would be recognized as a write-off of accounts receivable. C. Included in cost of goods sold because the goods are not on hand, losses on inventory shrinkage are ordinary, and it would cause the least amount of attention. D. Recorded directly to retained earnings because it is not an income-producing item. Question: 12An entity had the following opening and closing inventory balances during the current year: 1/1 12/31 Finished goods $ 90,000 $260,000 Raw materials 105,000 130,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Work-in-progress 220,000 175,000 The following transactions and events occurred during the current year:  $300,000 of raw materials were purchased, of which $20,000 were returned because of defects.  $600,000 of direct labor costs were incurred.  $750,000 of production overhead costs were incurred. The cost of goods sold for the current year ended December 31 would be A. $1,480,000 B. $1,500,000 C. $1,610,000 D. $1,650,000 Question: 13If the beginning balance for May of the materials inventory account was $27,500, the ending balance for May is $28,750, and $128,900 of materials were used during the month, the materials purchased during the month cost A. $101,400 B. $127,650 C. $130,150 D. $157,650 Question: 14Given the following data for a company, what is the cost of goods sold? Beginning inventory of finished goods $100,000 Cost of goods manufactured 700,000 Ending inventory of finished goods 200,000 Beginning work-in-process inventory 300,000 Ending work-in-process inventory 50,000 A. $500,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. $600,000 C. $800,000 D. $950,000 Question: 15The following information was taken from last year’s accounting records of a manufacturing company. Inventory January 1 December 31 Raw materials $38,000 $ 45,000 Work-in-process 21,000 10,000 Finished goods 78,000 107,000 Other information Direct labor $236,000 Shipping costs on outgoing orders 6,500 Factory rent 59,000 Factory depreciation 18,700 Advertising expense 24,900 Net purchases of raw materials 115,000 Corporate administrative salaries 178,000 Material handling costs 35,800 On the basis of this information, the company’s cost of goods manufactured and cost of goods sold are A. $460,500 and $489,500, respectively. B. $468,500 and $439,500, respectively. C. $468,500 and $470,900, respectively. D. $646,500 and $617,500, respectively. Question: 16The following information pertains to a corporation’s income statement for the 12 months just ended. The company has an effective income tax rate of 40%. Discontinued operations $(70,000) ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 Income from continuing operations (net of tax) 72,000 Cumulative effect of change in accounting principle 60,000 Net income for the year is A. $36,000 B. $12,000 C. $8,000 D. $30,000 Question: 17Which of the following items is not classified as other comprehensive income (OCI)? A. Extraordinary gains from extinguishment of debt. B. Foreign currency translation adjustments. C. Prior service cost adjustment resulting from amendment of a defined benefit pension plan. D. Unrealized gains for the year on available-for-sale debt securities. Question: 18Which of the following are acceptable formats for reporting comprehensive income? I. In one continuous financial statement II. In a statement of changes in equity III. In a separate statement of net income IV. In two separate but consecutive financial statements A. I and II only. B. I, II, and III only. C. III and IV only. D. I and IV only. Question: 19A company reports the following information as of December 31: ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 Sales revenue $800,000 Cost of goods sold 600,000 Operating expenses 90,000 Unrealized holding gain on available-for-sale debt securities, net of tax 30,000 What amount should the company report as comprehensive income as of December 31? A. $30,000 B. $110,000 C. $140,000 D. $200,000 Question: 20All of the following are defined as elements of an income statement except A. Expenses. B. Shareholders’ equity. C. Gains and losses. D. Revenues. Question: 21According to U.S. GAAP, where on the income statement should a multinational company report the loss from the disposal sale of a major operating unit? A. Report the loss, pretax, in a separate section between income from continuing operations and net income. B. Report the loss, net of tax, in a separate section between income from continuing operations and net income. C. Report the loss, pretax, in a separate section between income from operations and income before income tax. D. Report the loss, net of tax, in a separate section between income before tax and net income. Question: 22A company reported first quarter revenues of $10,000,000, gross profit margin of 25%, and operating income of 15%. To reduce overhead expenses, a consultant recommends that the company outsource some of its operating activities beginning with the second quarter. This recommendation is anticipated to reduce operating ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 expenses by 20% without affecting sales volume. The company has an income tax rate of 35%. Assuming cost of sales remains at 75%, what is the impact on the income statement if the company implements the recommendation? A. Gross profit will increase by 8.0%. B. Operating income will increase by 8.7%. C. Operating income will increase by $200,000. D. Operating expenses will be reduced by $300,000. Question: 23A company incurred $200,000 of manufacturing cost during the month, with a beginning finished goods inventory of $20,000 and an ending finished goods inventory of $15,000. Assuming no work-in-process inventories, the company’s cost of goods sold was A. $220,000 B. $205,000 C. $200,000 D. $105,000 Question: 24To comply with the matching principle, the cost of labor services of an employee who participates in the manufacturing of a product normally should be charged to the income statement in the period in which the A. Work is performed. B. Employee is paid. C. Product is completed. D. Product is sold. Subunit 4: Statement of Changes in Equity and Equity Transactions Question: 1Items reported as prior-period adjustments A. Do not include the effect of a mistake in the application of accounting principles, as this is accounted for as a change in accounting principle rather than as a prior-period adjustment. B. Do not affect the presentation of prior-period comparative financial statements. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  C. Do not require further disclosure in the body of the financial statements. D. Are reflected as adjustments of the opening balance of the retained earnings of the earliest period presented. Question: 2Unless the shares are specifically restricted, a holder of common stock with a preemptive right may share proportionately in all of the following except A. The vote for directors. B. Corporate assets upon liquidation. C. Cumulative dividends. D. New issues of stock of the same class. Question: 3On December 1, a corporation’s board of directors declared a property dividend, payable in stock held in a company. The dividend was payable on January 5. The investment in the company had an original cost of $100,000 when acquired 2 years ago. The market value of this investment was $150,000 on December 1, $175,000 on December 31, and $160,000 on January 5. The amount to be shown on the corporation’s statement of financial position at December 31 as property dividends payable would be A. $100,000 B. $150,000 C. $160,000 D. $175,000 Question: 4The statement of shareholders’ equity shows a A. Reconciliation of the beginning and ending balances in shareholders’ equity accounts. B. Listing of all shareholders’ equity accounts and their corresponding dollar amounts. C. Computation of the number of shares outstanding used for earnings per share calculations. D. Reconciliation of net income to net operating cash flow. Question: 5Which one of the following statements regarding dividends is correct? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  A. A stock dividend of 15% of the outstanding common shares results in a debit to retained earnings at the par value of the stock distributed. B. At the declaration date of a 30% stock dividend, the carrying value of retained earnings will be reduced by the fair market value of the stock distributed. C. The declaration of a cash dividend will have no effect on book value per share. D. The declaration and payment of a 10% stock dividend will result in a reduction of retained earnings at the fair market value of the stock. Question: 6Which one of the following statements is correct regarding the effect preferred stock has on a company? A. The firm’s after-tax profits are shared equally by common and preferred shareholders. B. Control of the firm is now shared by the common and preferred shareholders, with preferred shareholders having greater control. C. Preferred shareholders’ claims take precedence over the claims of common shareholders in the event of liquidation. D. Nonpayment of preferred dividends places the firm in default, as does nonpayment of interest on debt. Question: 7An adjusted trial balance at December 31, Year 6, includes the following account balances: Common stock, $3 par $600,000 Additional paid-in capital 800,000 Treasury stock, at cost 50,000 Net unrealized holding loss on available-for-sale securities 20,000 Retained earnings: appropriated for uninsured earthquake losses 150,000 Retained earnings: unappropriated 200,000 What amount should be reported as total equity in the December 31, Year 6, balance sheet? A. $1,680,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. $1,720,000 C. $1,780,000 D. $1,820,000 Question: 8A public company has declared a property dividend of one share of its investment in M corporation for every 10 shares of its common stock outstanding. The M shares were originally purchased by the company for $50 per share; on the date the dividend was declared, the market value was $75 per share. As a result of this declaration, the company should recognize A. A loss of $25 per share to be distributed. B. A gain of $25 per share to be distributed. C. No gain or loss. D. An appropriate gain or loss based on the market value on the date of distribution. Question: 9A corporation has 10,000,000 shares of $10 par-value stock authorized, of which 2,000,000 shares are issued and outstanding. The Board of Directors declared a 2-for-1 stock split on November 30 to be issued on December 30. The stock was selling for $30 per share on the date of declaration. In addition, the Board has amended the articles of incorporation to allow for a proportional increase in the number of authorized shares. The par-value information appearing in the shareholder’s equity section of the statement of financial position at December 31 will be A. $5 B. $10 C. $15 D. $30 Question: 10A company has 1,000,000 shares of common stock authorized, of which 100,000 shares are held as treasury shares; the remainder are held by the company shareholders. On November 1, the Board of Directors declared a cash dividend of $.10 per share to be paid on January 2. At the same time, the Board declared a 5% stock dividend to be issued on December 31. On the date of the declaration, the stock was selling for $10 a share, and no fractional shares were to be issued. The total amount of these declarations to be shown as current liabilities on the statement of financial position as of December 31 is A. $90,000 B. $100,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  C. $540,000 D. $600,000 Question: 11How would a stock split affect the par value of the stock and the company’s shareholders’ equity? Par Value Shareholders’ Equity A. Decrease Increase B. Decrease No change C. Increase Decrease D. Increase No change Question: 12An undistributed stock dividend declared by the Board of Directors should be reported as a(n) A. Current liability. B. Long-term liability. C. Footnote to the financial statements. D. Item in the shareholders’ equity section. Question: 13Which one of the following transactions does not affect the balance of retained earnings? A. Declaration of a stock dividend. B. A quasi-reorganization. C. Declaration of a stock split. D. Declaration of a property dividend. Question: 14A corporation’s common stock is currently selling for $108 per share. The corporation is planning a new stock issue in the near future and would like to stimulate interest in the company. The Board, however, does not want to distribute capital at this time. Therefore, the corporation is considering whether to offer a 2-for-1 common stock split or a 100% stock dividend on its common stock. The best reason for opting for the stock split is that A. It will not decrease shareholders’ equity. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. It will not impair the company’s ability to pay dividends in the future. C. The impact on earnings per share will not be as great. D. The par value per share will remain unchanged. Question: 15A change in the estimate for bad debts should be A. Treated as an error. B. Handled retroactively. C. Considered as an extraordinary item. D. Treated as affecting only the period of the change. Question: 16A chain of supermarkets specializing in gourmet food, has been using the average cost method to value its inventory. During the current year, the company changed to the first-in, first-out method of inventory valuation. The president of the company reasoned that this change was appropriate since it would more closely match the flow of physical goods. This change should be reported on the financial statements as A. Cumulative-effect type accounting change. B. Affecting only future periods. C. Change in accounting estimate. D. Correction of an error. Question: 17A publicly-traded company has 100,000 outstanding shares of common stock with a par value of $5. The company uses U.S. GAAP to prepare its financial statements. The company recently declared a 5% stock dividend. On the date the stock dividend was declared, the company’s stock was trading at $25 per share. On the date of declaration, the company’s A. Additional paid-in capital will increase. B. Retained earnings will increase. C. Total shareholders’ equity will decrease. D. Outstanding shares will decrease. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 18The major segments of the statement of retained earnings for a period are A. Dividends declared, prior period adjustments, and changes due to treasury stock transactions. B. Before-tax income or loss and dividends paid or declared. C. Prior-period adjustments, before-tax income or loss, income tax, and dividends paid. D. Net income or loss, prior-period adjustments, and dividends paid or declared. Question: 19On December 15, a company distributed a cash dividend of $120,000 and declared a 5% stock dividend with a market value of $100,000. If the company uses U.S. GAAP, these two transactions would decrease the company’s total shareholders’ equity by A. $0 B. $100,000 C. $120,000 D. $220,000 Question: 20Preferred stock and common stock differ in that A. Preferred stock has a higher priority than common stock with regard to earnings and assets in the event of bankruptcy. B. Failure to pay dividends on common stock will not force the company into bankruptcy while failure to pay dividends on preferred stock will force the company into bankruptcy. C. Preferred shareholders generally control the management of the company while common shareholders have limited voting rights. D. Preferred stock earnings are deductible for tax purposes while common stock earnings are not. Fact Pattern: The trial balance of Mint Corp. at December 31, Year 6, is presented below and has been adjusted except for income tax expense. Other financial data for the year ended December 31, Year 6, are as follows:  During Year 6, estimated tax payments of $450,000 were charged to prepaid taxes. Mint has not recorded income tax expense. There were no temporary or permanent differences, and Mint’s tax rate is 30%.  Dr. Cr. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 Cash $ 600,000 Accounts receivable, net 3,500,000 Contract asset 1,600,000 Contract liability $ 700,000 Prepaid taxes 450,000 Fixed assets, net 1,480,000 Note payable -- noncurrent 1,620,000 Common stock 750,000 Additional paid-in capital 2,000,000 Retained earnings -- unappropriated 900,000 Retained earnings -- restricted for note payable 160,000 Earnings from long-term contracts 6,680,000 Costs and expenses 5,180,000 $12,810,000 $12,810,000 Question: 21In Mint’s December 31, Year 6, balance sheet, what amount should be reported as total retained earnings? A. $1,950,000 B. $2,110,000 C. $2,400,000 D. $2,560,000 Question: 22A company pays more than the fair value to acquire treasury stock. The difference between the price paid to acquire the treasury stock and the fair value should be recorded as A. An asset. B. A liability. C. Shareholders’ equity. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  D. An expense. Question: 23Data regarding Ball Corp.’s investment in available-for-sale debt securities follow: Cost Fair Value December 31, Year 3 $150,000 $130,000 December 31, Year 4 150,000 160,000 Differences between cost and fair values are considered temporary. The decline in fair value was considered temporary and was properly accounted for at December 31, Year 3. Ball’s Year 4 statement of changes in equity should report an increase of A. $30,000 B. $20,000 C. $10,000 D. $0 Question: 24United, Inc.’s unadjusted current assets section and equity section of its December 31, Year 1, balance sheet are as follows: Current Assets Cash $ 60,000 Investments in equity securities (including $300,000 of United common stock) 400,000 Trade accounts receivable 340,000 Inventories 148,000 Total $948,000 Equity Common stock $2,224,000 Retained earnings (deficit) (224,000) Total $2,000,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 The investments and inventories are reported at their costs, which approximate fair values. In its Year 1 statement of equity, United’s total amount of equity at December 31, Year 1, is A. $2,224,000 B. $2,000,000 C. $1,924,000 D. $1,700,000 Question: 25In Year 1, Company A recorded the following transactions related to the equity section of its balance sheet: 1/4/Year 1 Issued 100,000 shares of $3 par value common stock for $500,000 3/1/Year 1 Repurchased 50,000 shares of common stock for $4 per share 8/8/Year 1 Reissued 50,000 shares of common stock at $6 per share 12/1/Year 1 Declared, but did not pay, dividends of $1 per common share 12/31/Year 1 Recorded net income of $75,000 for Year 1 Assume that at the beginning of Year 1, A’s equity consisted only of $100,000 of retained earnings. Additionally, assume that A uses the cost method of accounting for treasury stock. What is A’s Year 1 ending equity balance? A. $675,000 B. $775,000 C. $575,000 D. $600,000 Subunit 5: Statement of Cash Flows Question: 1When preparing the statement of cash flows, companies are required to report separately as operating cash flows all of the following except ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  A. Interest received on investments in bonds. B. Interest paid on the company’s bonds. C. Cash collected from customers. D. Cash dividends paid on the company’s stock. Question: 2A statement of cash flows is intended to help users of financial statements A. Evaluate a firm’s liquidity, solvency, and financial flexibility. B. Evaluate a firm’s economic resources and obligations. C. Determine a firm’s components of income from operations. D. Determine whether insiders have sold or purchased the firm’s stock. Question: 3Which of the following items is specifically included in the body of a statement of cash flows? A. Operating and nonoperating cash flow information. B. Conversion of debt to equity. C. Acquiring an asset through a capital lease. D. Purchasing a building by giving a mortgage to the seller. Question: 4With respect to the content and form of the statement of cash flows, the A. Pronouncements covering the cash flow statement encourage the use of the indirect method. B. Indirect method adjusts ending retained earnings to reconcile it to net cash flows from operations. C. Direct method of reporting cash flows from operating activities includes disclosing the major classes of gross cash receipts and gross cash payments. D. Reconciliation of the net income to net operating cash flow need not be presented when using the direct method. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 5Depreciation expense is added to net income under the indirect method of preparing a statement of cash flows in order to A. Report all assets at gross carrying amount. B. Ensure depreciation has been properly reported. C. Reverse noncash charges deducted from net income. D. Calculate net carrying amount. Question: 6All of the following should be classified under the operating section in a statement of cash flows except a A. Decrease in inventory. B. Depreciation expense. C. Decrease in prepaid insurance. D. Purchase of land and building in exchange for a long-term note. Question: 7Which one of the following transactions should be classified as a financing activity in a statement of cash flows? A. Purchase of equipment. B. Purchase of treasury stock. C. Sale of trademarks. D. Payment of interest on a mortgage note. Question: 8A company entered into the following transactions during the year:  Purchased stock for $200,000  Purchased electronic equipment for use on the manufacturing floor for $300,000  Paid dividends to shareholders of the company in the amount of $800,000 The amount to be reported in the investing activities section of the company’s statement of cash flows would be A. $200,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. $500,000 C. $800,000 D. $1,300,000 Question: 9Which one of the following transactions should not be classified as a financing activity in the statement of cash flows? A. Issuance of common stock. B. Purchase of treasury stock. C. Payment of dividends. D. Income tax refund. Question: 10All of the following should be classified as investing activities in the statement of cash flows except A. Cash outflows to purchase manufacturing equipment. B. Cash inflows from the sale of bonds of other entities. C. Cash outflows to lenders for interest. D. Cash inflows from the sale of a manufacturing plant. Question: 11All of the following should be included in the reconciliation of net income to net operating cash flow in the statement of cash flows except a(n) A. Decrease in inventory. B. Decrease in prepaid insurance. C. Purchase of land and building in exchange for a long-term note. D. Increase in income tax payable. Question: 12In preparing a statement of cash flows, an item included in determining net cash flow from operating activities is the ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  A. Amortization of a bond premium. B. Proceeds from the sale of equipment for cash. C. Cash dividends paid. D. Purchase of treasury stock. Question: 13The information reported in the statement of cash flows should help investors, creditors, and others to assess all of the following except the A. Amount, timing, and uncertainty of prospective net cash inflows of a firm. B. Company’s ability to pay dividends and meet obligations. C. Company’s ability to generate future cash flows. D. Management of the firm with respect to the efficient and profitable use of its resources. Question: 14To calculate cash flows using the indirect method, which one of the following items must be added back to net income? A. Revenue. B. Marketing expense. C. Depreciation expense. D. Interest income. Question: 15A company acquired land by assuming a mortgage for the full acquisition cost. This transaction should be disclosed on its statement of cash flows as a(n) A. Financing activity. B. Investing activity. C. Operating activity. D. Noncash financing and investing activity. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 16Net income was $3,000,000 for the year ended December 31. Additional information is as follows: Depreciation on fixed assets $1,500,000 Gain from cash sale of land 200,000 Increase in accounts payable 300,000 Dividends paid on preferred stock 400,000 The net cash provided by operating activities in the statement of cash flows for the year ended December 31 should be A. $4,200,000 B. $4,500,000 C. $4,600,000 D. $4,800,000 Fact Pattern: Royce Company had the following transactions during the fiscal year ended December 31, Year 2:  Accounts receivable decreased from $115,000 on December 31,  Sold a truck with a net carrying Year 1, to $100,000 on December 31, Year 2. amount of $7,000 for $5,000  Royce’s board of directors declared dividends on December 31, cash, reporting a loss of $2,000. Year 2, of $.05 per share on the 2.8 million shares outstanding,  Paid interest to bondholders of payable to shareholders of record on January 31, Year 3. The $780,000. company did not declare or pay dividends for fiscal Year 1.  The cash balance was $106,000 on December 31, Year 1, and $284,000 on December 31, Year 2. Question: 17Royce Company uses the direct method to prepare its statement of cash flows at December 31, Year 2. The interest paid to bondholders is reported in the A. Financing section, as a use or outflow of cash. B. Operating section, as a use or outflow of cash. C. Investing section, as a use or outflow of cash. D. Debt section, as a use or outflow of cash. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 Fact Pattern: Royce Company had the following transactions during the fiscal year ended December 31, Year 2:  Accounts receivable decreased from $115,000 on December 31,  Sold a truck with a net carrying Year 1, to $100,000 on December 31, Year 2. amount of $7,000 for $5,000  Royce’s board of directors declared dividends on December 31, cash, reporting a loss of $2,000. Year 2, of $.05 per share on the 2.8 million shares outstanding,  Paid interest to bondholders of payable to shareholders of record on January 31, Year 3. The $780,000. company did not declare or pay dividends for fiscal Year 1.  The cash balance was $106,000 on December 31, Year 1, and $284,000 on December 31, Year 2. Question: 18Royce Company uses the indirect method to prepare its Year 2 statement of cash flows. It reports a(n) A. Source or inflow of funds of $5,000 from the sale of the truck in the financing section. B. Use or outflow of funds of $140,000 in the financing section, representing dividends. C. Deduction of $15,000 in the operating section, representing the decrease in year-end accounts receivable. D. Addition of $2,000 in the operating section for the $2,000 loss on the sale of the truck. Fact Pattern: Royce Company had the following transactions during the fiscal year ended December 31, Year 2:  Accounts receivable decreased from $115,000 on December 31,  Sold a truck with a net carrying Year 1, to $100,000 on December 31, Year 2. amount of $7,000 for $5,000  Royce’s board of directors declared dividends on December 31, cash, reporting a loss of $2,000. Year 2, of $.05 per share on the 2.8 million shares outstanding,  Paid interest to bondholders of payable to shareholders of record on January 31, Year 3. The $780,000. company did not declare or pay dividends for fiscal Year 1.  The cash balance was $106,000 on December 31, Year 1, and $284,000 on December 31, Year 2. Question: 19The total of cash provided (used) by operating activities plus cash provided (used) by investing activities plus cash provided (used) by financing activities is A. Cash provided of $284,000. B. Cash provided of $178,000. C. Cash used of $582,000. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  D. Equal to net income reported for fiscal year ended December 31, Year 2. Question: 20The following information was taken from accounting records for the year ended December 31: Proceeds from issuance of preferred stock F $4,000,000 Dividends paid on preferred stock F 400,000 Bonds payable converted to common stock 2,000,000 Payment for purchase of machinery 500,000 Proceeds from sale of plant building 1,200,000 2% stock dividend on common stock 300,000 Gain on sale of plant building 200,000 The net cash flows from investing and financing activities that should be presented on the statement of cash flows for the year ended December 31 are, respectively, A. $700,000 and $3,600,000. B. $700,000 and $3,900,000. C. $900,000 and $3,900,000. D. $900,000 and $3,600,000. Question: 21When using the statement of cash flows to evaluate a company’s continuing solvency, the most important factor to consider is the cash A. Balance at the end of the period. B. Flows from (used for) operating activities. C. Flows from (used for) investing activities. D. Flows from (used for) financing activities. Question: 22Dividends paid to shareholders are shown on the statement of cash flows as A. Operating cash inflows. B. Operating cash outflows. C. Cash flows from investing activities. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  D. Cash flows from financing activities. Question: 23All of the following are classifications on the statement of cash flows except A. Operating activities. B. Equity activities. C. Investing activities. D. Financing activities. Question: 24The sale of available-for-sale securities should be accounted for on the statement of cash flows as a(n) A. Operating activity. B. Investing activity. C. Financing activity. D. Noncash investing and financing activity. Question: 25An entity reported net income of $150,000 for the current year. Changes occurred in several balance sheet accounts during the current year as follows: Investment in stock, all of which was acquired in the previous year, carried on the equity basis $5,500 increase Premium on bonds payable 1,400 decrease Deferred income tax liability (long-term) 1,800 increase In the current year cash flow statement, the reported net cash provided by operating activities should be A. $150,400 B. $146,800 C. $144,900 D. $141,300 Question: 26A company reported net income for the year of $1,050,000. During the year, accounts receivable decreased $300,000, prepaid expenses increased $150,000, accounts payable for merchandise decreased $150,000, and liabilities for other expenses increased $100,000. Administrative expenses include depreciation expense of ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 $50,000, and the company reported a loss on the sale of obsolete equipment of $10,000. Calculate net cash flows from operating activities during the year. A. $1,790,000 B. $1,690,000 C. $1,210,000 D. $1,110,000 Question: 27A company’s year-end income statement shows the following: Revenues $5,000,000 Selling and general expenses (including depreciation expense of $200,000) 3,800,000 Interest expense 50,000 Gain on sale of equipment 40,000 Income tax expense (including deferred tax expense of $30,000) 320,000 Net income $ 870,000 During the year, noncash current assets rose by $100,000, and current liabilities increased by $150,000. On its statement of cash flows, the company would report cash provided by operating activities of A. $1,080,000 B. $1,110,000 C. $1,160,000 D. $1,190,000 Question: 28An accountant has gathered the following information to prepare the statement of cash flows for the current year. Net income of $456,900 includes a deduction of $45,600 for depreciation expense. The company issued $300,000 of dividends this year and purchased one new building for $275,000. The balance sheets from the current period and prior period included the following balances: Prior Year Current Year Accounts receivable, net $ 56,860 $ 45,300 Accounts payable 12,900 10,745 Inventory 186,700 194,320 Using the indirect method, what is the amount of cash provided by operating activities? ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  A. $202,500 B. $405,205 C. $504,285 D. $521,405 Question: 29Which one of the following would result in a decrease in cash flow measured under the indirect method of preparing a statement of cash flows? A. Amortization expense. B. Decrease in income taxes payable. C. Proceeds from the issuance of common stock. D. Decrease in inventories. Question: 30A statement of cash flows prepared using the indirect method would have cash activities listed in which one of the following orders? A. Financing, investing, operating. B. Investing, financing, operating. C. Operating, financing, investing. D. Operating, investing, financing. Question: 30A statement of cash flows prepared using the indirect method would have cash activities listed in which one of the following orders? A. Financing, investing, operating. B. Investing, financing, operating. C. Operating, financing, investing. D. Operating, investing, financing. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 31Which one of the following should be classified as a cash flow from an operating activity on the statement of cash flows? A. A decrease in accounts payable during the year. B. An increase in cash resulting from the issuance of previously authorized common stock. C. The payment of cash for the purchase of additional equipment needed for current production. D. The payment of a cash dividend from money arising from current operations. Question: 32The most commonly used method for calculating and reporting a company’s net cash flow from operating activities on its statement of cash flows is the A. Direct method. B. Indirect method. C. Single-step method. D. Multiple-step method. Question: 33The presentation of the major classes of operating cash receipts (such as receipts from customers) minus the major classes of operating cash disbursements (such as cash paid for merchandise) is best described as the A. Direct method of calculating net cash provided or used by operating activities. B. Cash method of determining income in conformity with generally accepted accounting principles. C. Format of the statement of cash flows. D. Indirect method of calculating net cash provided or used by operating activities. Question: 34A controller is gathering data for the statement of cash flows for the most recent year end. The controller is planning to use the direct method to prepare this statement and has made the following list of cash inflows for the period:  Collections of $100,000 for goods sold to customers  Securities purchased for investment purposes with an original cost of $100,000 sold for $125,000  Proceeds from the issuance of additional company stock totaling $10,000 The correct amount to be shown as cash inflows from operating activities is ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  A. $100,000 B. $135,000 C. $225,000 D. $235,000 Question: 35During the year, a firm acquired a long-term productive asset for $5,000 and also borrowed $10,000 from a local bank. These transactions should be reported on the statement of cash flows as A. Outflows for investing activities, $5,000; inflows from financing activities, $10,000. B. Inflows from investing activities, $10,000; outflows for financing activities, $5,000. C. Outflows for operating activities, $5,000; inflows from financing activities, $10,000. D. Outflows for financing activities, $5,000; inflows from investing activities, $10,000. Question: 36A company has recorded the following payments for the current period: Purchase of investment stock $300,000 Dividends paid to shareholders 200,000 Repurchase of company stock 400,000 The amount to be shown in the investing activities section of the statement of cash flows should be A. $300,000 B. $500,000 C. $700,000 D. $900,000 Question: 37A company has the following payments recorded for the current period: Dividends paid to shareholders $150,000 Interest paid on bank loan 250,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 Purchase of equipment 350,000 The total amount of the above items to be shown in the operating activities section of the statement of cash flows should be A. $150,000 B. $250,000 C. $350,000 D. $750,000 Question: 38A company has recorded the following payments for the current period: Interest paid on bank loan $300,000 Dividends paid to shareholders 200,000 Repurchase of company stock 400,000 The amount to be shown in the financing activities section of the statement of cash flows should be A. $300,000 B. $500,000 C. $600,000 D. $900,000 Fact Pattern: Selected financial information for Kristina Company for the year just ended is shown below. Net income $2,000,000 Increase in net accounts receivable 300,000 Decrease in inventory 100,000 Increase in accounts payable 200,000 Depreciation expense 400,000 Gain on the sale of available-for-sale securities 700,000 Cash receivable from the issue of common stock 800,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2 Cash paid for dividends 80,000 Cash paid for the acquisition of land 1,500,000 Cash received from the sale of available-for-sale securities 2,800,000 Question: 39Kristina’s cash flow from financing activities for the year is A. $(80,000) B. $720,000 C. $800,000 D. $3,520,000 Fact Pattern: Selected financial information for Kristina Company for the year just ended is shown below. Net income $2,000,000 Increase in net accounts receivable 300,000 Decrease in inventory 100,000 Increase in accounts payable 200,000 Depreciation expense 400,000 Gain on the sale of available-for-sale securities 700,000 Cash receivable from the issue of common stock 800,000 Cash paid for dividends 80,000 Cash paid for the acquisition of land 1,500,000 Cash received from the sale of available-for-sale securities 2,800,000 Question: 40Kristina’s cash flow from investing activities for the year is A. $(1,500,000) B. $1,220,000 C. $1,300,000 D. $2,800,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Fact Pattern: Selected financial information for Kristina Company for the year just ended is shown below. Net income $2,000,000 Increase in net accounts receivable 300,000 Decrease in inventory 100,000 Increase in accounts payable 200,000 Depreciation expense 400,000 Gain on the sale of available-for-sale securities 700,000 Cash receivable from the issue of common stock 800,000 Cash paid for dividends 80,000 Cash paid for the acquisition of land 1,500,000 Cash received from the sale of available-for-sale securities 2,800,000 Question: 41Assuming the indirect method is used, Kristina’s cash flow from operating activities for the year is A. $1,700,000 B. $2,000,000 C. $2,400,000 D. $3,100,000 Question: 42For the fiscal year just ended, an entity had the following results: Net income $920,000 Depreciation expense 110,000 Increase in accounts payable 45,000 Increase in net accounts receivable 73,000 Increase in deferred income tax liability 16,000 Net cash flow from operating activities is A. $928,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. $986,000 C. $1,018,000 D. $1,074,000 Question: 43Three years ago, a company purchased stock at a cost of $100,000. This stock was sold for $150,000 during the current fiscal year. The result of this transaction should be shown in the investing activities section of the statement of cash flows as A. Zero. B. $50,000 C. $100,000 D. $150,000 Question: 44A controller has gathered the following information as a basis for preparing the statement of cash flows. Net income for the current year was $82,000. During the year, old equipment with a cost of $60,000 and a net carrying amount of $53,000 was sold for cash at a gain of $10,000. New equipment was purchased for $100,000. Shown below are selected closing balances for last year and the current year. Last Year Current Year Cash $ 39,000 $ 85,000 Accounts receivable net 43,000 37,000 Inventories 93,000 105,000 Equipment 360,000 400,000 Accumulated depreciation -- equipment 70,000 83,000 Accounts payable 22,000 19,000 Notes payable 100,000 100,000 Common stock 250,000 250,000 Retained earnings 93,000 175,000 Net cash flow from operating activities for the current year is A. $63,000 B. $73,000 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  C. $83,000 D. $93,000 Question: 45A mail order supplier of camping gear is putting together its current-year statement of cash flow. A comparison of the firm’s year-end balance sheet with the prior year’s balance sheet shows the following changes from a year ago. Assets Cash & marketable securities $ (600) Accounts receivable 200 Inventories (100) Gross fixed assets 4,600 Accumulated depreciation (500) Total $3,600 Liabilities & Net Worth Accounts payable $ 250 Accruals 50 Long-term note (300) Long-term debt 1,400 Common stock 0 Retained earnings 2,200 Total $3,600 The firm’s payout ratio is 20%. During the current year, net cash provided by operations amounted to A. $2,900 B. $3,050 C. $3,450 D. $4,050 Question: 46For a manufacturing firm, which of the following would be included in cash outflows from financing activities on the Statement of Cash Flows? A. Payments of salaries and wages. B. Repayment of the principal portion of firm debt. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  C. Issuance of new stock. D. Interest payments on firm debt. Question: 47Below are the balances for the following accounts on the balance sheet of a company as of the end of Year 20X2 and Year 20X1. Year 20X2 Year 20X1 Cash $1,000 $ 800 Marketable securities ? 7,200 Inventory 500 500 Wages and salaries payable 2,000 2,500 Accounts payable 1,300 1,000 Accounts receivable 5,000 6,000 Prepayments 1,200 500 The company has net income for Year 20X2 of $1,900, has no fixed assets, and has no investing or financing activities. Using the indirect method for preparing the cash flow statement, what is the balance in the marketable securities account as of the end of Year 20X2? A. $7,000 B. $8,800 C. $9,000 D. $9,900 Question: 48An accountant is preparing the statement of cash flows using the indirect method. She found on the balance sheet that the prior year’s net balance of equipment (equipment less accumulated depreciation) was $295,700, and the current year’s balance of equipment is $304,000. Depreciation expense during the current year was $22,400. During the year, the company sold equipment for $40,000, resulting in a gain of $21,600. On the statement of cash flows, what is the cash outflow for the purchase of equipment this year? A. $4,300 B. $49,100 ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  C. $52,300 D. $70,700 Question: 49A company had a balance of $100,000 in retained earnings at the beginning of the year and of $125,000 at the end of the year. Net income for this time period was $40,000. The statement of financial position indicated that the dividends payable account had decreased by $5,000 throughout the year, despite the fact that both cash dividends and a stock dividend were declared. The amount of the stock dividend was $8,000. When preparing its statement of cash flows for the year, the company should show cash paid for dividends as A. $20,000 B. $15,000 C. $12,000 D. $5,000 Question: 50The management of an entity is analyzing the financial statements of a corporation because the entity is strongly considering purchasing a block of the corporation’s ordinary shares that would give the entity significant influence over the corporation. Which financial statement should the entity primarily use to assess the amounts, timing, and certainty of future cash flows of the corporation? A. Income statement. B. Statement of changes in equity. C. Statement of cash flows. D. Statement of financial position. Question: 51Cash flows from transactions in which of the following securities are most likely to be considered cash flows from operating activities? A. Held-to-maturity securities. B. Trading debt securities. C. Available-for-sale debt securities. D. Noncurrent debt securities. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 52In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for A. Operating activities. B. Borrowing activities. C. Lending activities. D. Financing activities. Question: 53Consider the following financial data for a company that is preparing its cash flow statement: Amortization expense $ 150,000 Cash dividends paid to common shareholders 75,000 Net income 1,500,000 Work-in-process inventory increase over the prior year 300,000 Gain on sale of equipment 50,000 Using the indirect method, cash flow from operating activities would be A. $1,225,000 B. $1,300,000 C. $1,350,000 D. $1,375,000 Subunit 6: Revenue from Contracts with Customers Question: 1ABC operates a catering service that specializes in business luncheons for large corporations. ABC requires customers to place their orders 2 weeks in advance of the scheduled events. ABC bills its customers on the 10th day of the month following the date of service and requires that payment be made within 30 days of the billing date. Conceptually, ABC should recognize revenue from its catering services at the date when a A. Customer places an order. B. Luncheon is served. C. Billing is mailed. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  D. Customer’s payment is received. Question: 2A company provides fertilization, insect control, and disease control services for a variety of trees, plants, and shrubs on a contract basis. For $50 per month, the company will visit the subscriber’s premises and apply appropriate mixtures. If the subscriber has any problems between the regularly scheduled application dates, the company’s personnel will promptly make additional service calls to correct the situation. Some subscribers elect to pay for an entire year because the company offers an annual price of $540 if paid in advance. For a subscriber who pays the annual fee in advance, the company should recognize the related revenue A. When the cash is collected. B. Evenly over the year as the services are performed. C. At the end of the contract year after all of the services have been performed. D. At the end of the fiscal year. Question: 3On February 1, Year 1, a computer software firm agrees to program a software package. Twelve payments of $10,000 on the first of each month are to be made, with the first payment March 1, Year 1. The software is accepted by the client June 1, Year 2. How much Year 1 revenue should be recognized? A. $0 B. $100,000 C. $110,000 D. $120,000 Question: 4An airline should recognize revenue from airline tickets in the period when A. Passenger reservations are booked. B. Passenger reservations are confirmed. C. Tickets are issued. D. Related flights occur. Question: 5A department store sells gift certificates that may be redeemed for merchandise. Each certificate expires 3 years after issuance. The revenue from the gift certificates should be recognized ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  A. Evenly over 3 years from the date of issuance. B. In the period the certificates are sold. C. In the period the certificates expire. D. In the period the certificates are redeemed or in the period they expire if they are allowed to lapse. Question: 6An individual who recently founded a company that produces baseball bats and balls wants to determine their policy for revenue recognition. According to the revenue recognition principle, the most appropriate time to recognize revenue would be when A. The sale occurs. B. Cash is received. C. Production is completed. D. Quarterly financial statements are prepared. Question: 7A software developer enters into a contract with a new customer to sell a software license and perform installation services. The entity sometimes sells the license and installation services separately. The installation service is routinely performed by other entities and does not significantly modify the software. The entity historically provided to new customers technical support for a 5-year period for no additional consideration. The contract does not specify the terms or conditions for the technical support services. According to the revenue recognition principle governing contracts with customers, which of the following represents the performance obligations identified by the entity in this contract? A. One performance obligation: (1) Software license plus installation services. B. Two performance obligations: (1) Software license and (2) installation services. C. Three performance obligations: (1) Software license, (2) installation services, and (3) technical support services. D. Two performance obligations: (1) Software license plus installation services and (2) technical support services. Question: 8According to the revenue recognition principle governing contracts with customers, which of the following, if any, determines the transaction price of a contract with a significant financing component? Undiscounted Cash Flows Variable Consideration A. Yes Yes ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  B. Yes No C. No Yes D. No No Question: 9Under the revenue recognition principle governing contracts with customers, adjustment of the transaction price to reflect the time value of money results in A. Revenue from contracts with customers in the income statement. B. An item of other comprehensive income. C. Interest income or expense that is presented in the income statement separately from revenue. D. An unusual item in the income statement. Question: 10The transaction price from contracts with customers generally should not be adjusted for the effect of the time value of money when A. The transfer of goods is at the discretion of the seller. B. A substantial amount of the consideration is contingent on a future event that is not within the control of the seller. C. The time between the payment and the delivery of the promised goods in the contract to the customer is 18 months. D. The selling price of the product and the consideration promised in the contract differ significantly. Question: 11The best evidence of a standalone selling price of a promised good or service to a customer is A. Expected cost. B. Expected cost plus an appropriate margin. C. An observable price. D. Competitor’s selling price. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Question: 12The standalone selling price of a performance obligation in a contract with customers may not be directly observable. Alternatives for estimating the standalone selling price include Estimation of the Price in the Seller’s Market Residual Approach A. No Yes B. No No C. Yes No D. Yes Yes Question: 13A promised asset is transferred in full satisfaction of a performance obligation in a contract when the customer A. Obtains control of the asset. B. Can direct use of the product. C. Has physical possession of the asset. D. Pays for the asset in full. Question: 14A hotel enters into a contract with a customer to provide 10 rooms for 10 nights for $200 per room per night. In addition to the room price per night, the hotel collects a city occupancy tax of $7 per room per night. According to the hotel’s promotion, each customer that purchases in total more than 50 room nights is entitled to a credit of $3,000 on the entire purchase. What is the total transaction price of the contract? A. $20,000 B. $17,700 C. $17,000 D. $20,700 Question: 15On January 1, Year 1, an entity sold a product to a customer for $64,751 payable 36 months after delivery. The customer obtains control of the product at contract inception. The cash selling price of the product is $50,000. This price is the amount that the customer would pay upon delivery at contract inception assuming the same product is sold under otherwise identical terms and conditions. The contract includes an implicit interest rate of 9%. What amounts of revenue and interest income from this contract, if any, were recognized by the entity in Year 1? Revenue from ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  Customers Interest Income A. $64,751 $0 B. $50,000 $4,500 C. $50,000 $14,751 D. $54,500 $0 Question: 16On January 1, Year 1, Sam Co. entered into a contract with a customer to sell a machine for two annual payments of $144,049 starting at the end of Year 1. The customer obtains control of the machine at contract inception. The cash selling price of the machine is $250,000. Sam determined that (1) the contract includes a significant financing component and (2) the contract includes an implicit interest rate of 10%. What amounts of revenue and interest income from this contract, if any, were recognized by Sam in Year 2? Revenue from Customers Interest Income A. $0 $13,095 B. $144,049 $0 C. $125,000 $19,049 D. $250,000 $25,000 Question: 17An entity enters into a contract with a customer to sell products X, Y, and Z in exchange for $250,000. Control over the products will be transferred to the customer at different points in time. The entity determines that the delivery of each product is a distinct performance obligation. Products X and Y are regularly sold separately and their standalone selling prices of $40,000 and $120,000, respectively, are directly observable. The standalone selling price of product Z of $160,000 was estimated using the adjusted market assessment approach. The entity determined that the discount provided to the customer does not relate to one or more specific products in the contract. What revenue will be recognized by the entity on the sale of product X? A. $40,000 B. $22,500 C. $31,250 D. $62,500 Question: 18For contracts with customers, a contract modification is accounted for as a separate contract if the additional promised goods are and the price for these additional goods is. ‫ﻛﻝ ﺍﻟﻛﺗﺏ ﻭﺍﻻﺳﺋﻠﻪ ﺍﻟﻠﻲ ﺗﺣﺗﺎﺟﻭﻫﺎ ﺣﺗﻼﻗﻭﻫﺎ ﻋﻠﻰ ﺍﻟﻘﻧﺎﺗﻳﻥ ﺩﻭﻝ‬ https://t.me/CMA_part1 https://t.me/CMA_part2  List A List B A. Distinct Based on the price of the original contract B. Not distinct Their incremental selling price C. Distinct Their standalone selling price D. Not distinct Cumulative catch-up adjustment to revenue Question: 19Which of the following is not a criterion that must be met for a contract with a customer to be accounted for under the revenue recognition standard? A. The contract must have commercial substance. B. The payment terms can be identified. C. The costs to fulfill the contract are expected to be recovered. D. Each party’s rights regarding goods or services to be transferred can be identified. Question: 20On October 1, Year 1, Company A sold 100,000 gallons of Product X to Company B at $3 per gallon. Fifty thousand gallons were delivered to Company B on December 21, Year 1, and the remaining quantity was delivered to Company B on January 8, Year 2. Payment terms are 50% due on October 1, Year 1, 25% due on first delivery, and 25% on second deliver