A lessee that enters into a finance lease will report the:

A. lease payable on its balance sheet.

B. full lease payment on its income statement.

C. full lease payment as an operating cash flow.

Under US GAAP, internally created identifiable intangible assets most likely:

A. are expensed and not reported on the balance sheet.

B. have their amortization method and useful life reviewed at least annually.

C. can be revalued only when there is an active market for the specific intangible asset.

Which of the following amortization methods is most likely to evenly distribute the cost of an intangible asset over its useful life?

C. Double-declining balance method.

For a company reporting under IFRS, which of the following events most likely represents low financial reporting quality? The company:

A. included gains from foreign exchange rate changes in its cost of goods sold.

B. entered a long-term lease for a customized piece of equipment and classified it as a finance lease.

C. reported an increase in EPS as a result of the sale of a subsidiary.

Which of the following is most likely not an objective of financial statements?

C. To provide information about the users of an entity’s financial statements.

A. To provide information about the performance of an entity.

B. To provide information about the financial position of an entity.

Which of the following events is most likely to lead management to make biased accounting choices?

C. Changing the company’s CEO

A. Changing the company’s fiscal year

B. Changing the company’s audit firm

Regarding a company’s debt obligations, which of the following is most likely presented on the balance sheet?

C. The portion of long-term debt due in the next 12 months

B. Maturity dates for debt obligations

Which of the following statements is most accurate regarding cash flow statements?

C. Under US GAAP, bank overdrafts should be classified as a financing cash flow.

A. Under IFRS, the indirect method of preparation is encouraged.

B. Under IFRS, interest paid can be reported either as an operating or as an investing cash flow.

When preparing an income statement, which of the following items would most likely be classified as other comprehensive income?

A. A foreign currency translation adjustment

B. An unrealized gain on a security held for trading purposes

C. A realized gain on a derivative contract not accounted for as a hedge

To compute tangible book value, an analyst would:

C. subtract all intangible assets from stockholders’ equity.

A. add goodwill to stockholders’ equity.

B. add all intangible assets to stockholders’ equity.

Assuming no changes in other variables, which of the following would decrease ROA?

C. An increase in average assets.

A. A decrease in the effective tax rate.

B. A decrease in interest expense.

Which of the following statements about the cash flow statement prepared under the direct method is most accurate?

A. For users, it is easier to interpret information necessary to assess a company’s financial needs and ability to repay obligations.

B. For preparers, it is the easier and less costly format to prepare.

C. It mirrors the forecasting approach for future income that adjusts for the timing differences between accrual and cash accounting.

Providing information about the performance of a company, its financial position, and changes in financial position that is useful to a wide range of users is most accurately described as the role of:

C. financial statement analysis.

Carrying inventory at a value above its historical cost would most likely be permitted if:

A. the inventory was held by a producer of agricultural products.

B. financial statements were prepared using US GAAP.

C. the change resulted from a reversal of a previous write-down.

For which of the examples given would common-size income statements generally provide the greatest insight?

B. A time-series analysis of a rapidly expanding single company

A. A liquidity analysis of two companies within the same industry

C. A comparison of similarly sized companies from different industries

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MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Assume the companies use a periodic inventory system.<br /><br />Zimt AG wrote down the value of its inventory in 2017 and reversed the write-down in 2018. Compared to the results the company would have reported if the write-down had never occurred, Zimt’s reported 2018:

A. profit was overstated.

B. cash flow from operations was overstated.

C. year-end inventory balance was overstated.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

For its fiscal year-end, Sublyme Corporation reported net income of $200 million and a weighted average of 50,000,000 common shares outstanding. There are 2,000,000 convertible preferred shares outstanding that paid an annual dividend of $5. Each preferred share is convertible into two shares of the common stock. The diluted EPS is closest to:

A. $3.52.

B. $3.65.

C. $3.70.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

A. net profit margin and financial leverage have decreased.

B. net profit margin and financial leverage have increased.

C. net profit margin has decreased but its financial leverage has increased.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

A. essentially unchanged.

B. higher by 2.5%.

C. lower by 2.3%.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Which of the following best describes a reason a company would acquire the use of equipment through an operating lease rather than by purchase?

A. To take advantage of less costly financing

B. To obtain preferential tax treatment for the lease payments compared with ownership

C. To increase cash from operations

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Using the straight-line method of depreciation for reporting purposes and accelerated depreciation for tax purposes would most likely result in a:

A. valuation allowance.

B. deferred tax asset.

C. temporary difference.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Which of the following is most likely a lessee’s disclosure about operating leases?

A. Lease liabilities.

B. Future obligations by maturity.

C. Net carrying amounts of leased assets.

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FRA Review

Assume the companies use a periodic inventory system.<br /><br />Zimt AG wrote down the value of its inventory in 2017 and reversed the write-down in 2018. Compared to the results the company would have reported if the write-down had never occurred, Zimt’s reported 2018:

Which of the following best describes a reason a company would acquire the use of equipment through an operating lease rather than by purchase?

Using the straight-line method of depreciation for reporting purposes and accelerated depreciation for tax purposes would most likely result in a:

Which of the following is most likely a lessee’s disclosure about operating leases?

Valuing assets at the amount of cash or equivalents paid or the fair value of the consideration given to acquire them at the time of acquisition most closely describes which measurement of financial statement elements?

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