Section A Quiz

1)Which one of the following transactions should not be classified as a
financing activity according to GAAP?

A.Issuance of common stock.

B.Income tax refund.

C.Purchase of treasury stock.

D.Payment of dividends.

2)All of the following should be classified as investing activities except

A.cash inflows from the sale of bonds of other entities.

B.cash outflows to purchase manufacturing equipment.

C.cash outflows to lenders for interest.

D.cash inflows from the sale of a manufacturing plant

3) In preparing a statement of cash flows, an item included in determining net cash flow from operating activities is the

A.amortization of a bond premium.

B.proceeds from the sale of equipment for cash.

C.cash dividends paid.

D.purchase of treasury stock.

4) sale of available-for-sale debt securities should be accounted for on
the statement of cash flows as

A.investing activity.

B.financing activity.

C.operating activity.

D.noncash investing and financing activity.

5) integrated report should include….

A.Risks and opportunities.

B.Customer demographics.

C.Internal usage of data and information technology.

D.Competitive intelligence.

6) …………is not an element of the value creation process

A. external environment.

B. business model.

C. outlook of the firm.

D. history of the firm.

7)
…….is correct about the pledging as collateral of accounts receivable
& factoring of accounts receivable for a manufacturing firm.

A.The factoring of accounts receivable involves the invoice from the manufacturing firm to its customer being stamped with a notification that payment is to be made directly to the other party, whereas the assignment of accounts receivable does not.

B.The factoring of accounts receivable provides collateral for the manufacturing firm, whereas the assignment of receivables provides direct financing.

C.The assignment of accounts receivable involves the invoice from the manufacturing firm to its customer being stamped with a notification that payment is to be made directly to the other party, whereas the factoring of accounts receivable does not.

D.The lender has recourse to the manufacturing firm under factoring but not under the assignment of accounts receivable.

8)During inflationary periods, LIFO inventory accounting will have a

A.lower cost of goods sold and lower inventory value.

B.higher cost of goods sold and higher inventory value.

C.lower cost of goods sold and higher inventory value.

D.higher cost of goods sold and lower inventory value.

9)………… provides the best matching of expenses against revenues

A. Specific identification

B. Weighted average

C. Last-in, first-out

D. First-in, first-out

10)….….is an error that will result in the overstatement of net income.

A.Overstatement of ending inventory

B.Overstatement of beginning inventory

C.Overstatement of credit loss expense

D.Overstatement of amortization of leasehold improvements

11)A decline in the fair value below amortized cost of an available-forsale investment in a bond will………

A.be treated as an unrealized loss and included in the equity section of the balance sheet as a separate item.

B.be evaluated for impairment and for determination of whether the unrealized loss is a credit loss, which is recognized in net income, or whether it is caused by other factors, which is recognized in equity.

C.not be realized until the security is sold.

D.be accumulated in a valuation allowance resulting from the passage of time.

12) In case of using fair value accounting, the firm will be in a favorable
frame if it chooses to report the liability at fair value when it has

A.$70 million in outstanding bonds trading at $95.

B.$25 million in putable bonds trading at $108.

C.$56 million in variable rate preferred shares outstanding.

D.$44 million in outstanding bonds trading at $105.

13)unrealized gains and losses on equity securities with readily
determinable fair values should be…..

A. deferred until the securities are sold.

B. reported directly in retained earnings.

C. reported as other comprehensive income.

D. recognized in the income statement.

14) Financial statements of the majority-owned subsidiaries must be……

A.consolidated, if the investor company has significant influence over the operating and financial policies of an investee company, usually indicated by ownership of 20% to 50% of the outstanding voting stock.

B.consolidated, if the investor company has a controlling financial interest in a subsidiary or subsidiaries.

C.consolidated, unless the noncontrolling interest in the subsidiary is very large.

D.consolidated, unless the subsidiary engages in "non-homogeneous" operations.

15)……is correct about noncontrolling interest is correct.

A.Noncontrolling interest does not impact the consolidated income statement since it only affects the balance sheet.

B.Noncontrolling interest is recorded as a liability on the consolidated balance sheet.

C.Noncontrolling interest is presented in the equity section of the consolidated balance sheet, representing the portion of a subsidiary not owned by the parent.

D.Noncontrolling interest represents the total value of all subsidiary companies owned by the parent company

16)Depreciation is……..

A.Accumulating a fund for the replacement of the asset.

B.Allocating the cost of the asset to the periods of use.

C.Accounting for costs to reflect the change in general price levels.

D.Asset valuation for statement of financial position purposes.

17)………. requires the recognition of a deferred tax liability.

A.Interest received on state and municipal bonds.

B.The first and last months' rental revenue on a lease received in advance when the lessee signs the lease.

C.During the early years of an asset's life, use of an accelerated depreciation method for tax purposes while using straight-line depreciation for financial income purposes.

D.An accrual for product warranty expenses that will be incurred and paid in the future.

18)Temporary and permanent differences between taxable income and
pre-tax financial income differ in that:

A.Temporary differences include items that enter into pre-tax financial income but never into taxable income.

B.Temporary differences do not give rise to future taxable or deductible amounts.

C.Only permanent differences have deferred tax consequences.

D.Only temporary differences have deferred tax consequences.

19)……….will result in a deferred tax asset

A.Use of the straight-line depreciation method in financial income and the Modified Accelerated Cost Recovery System (MACRS) on the income tax return.

B.Advance rental receipts reported on the tax return as revenue when received but recognized as revenue in financial income over the term of the rental agreement.

C.Investment gains on an equity investment accounted for under the equity method in financial income and under the cost less impairment method for income tax purposes.

D.Unrealized (holding) gains on equity securities recognized in financial income but not taxable until the securities are sold.

20)Qatar airways should recognize revenue from an airline ticket in the
period in which

A.The related flight takes place.

B.Passenger reservations are confirmed.

C.The ticket is issued.

D.Passenger reservations are booked.

Section A Quiz

awais March 14, 2025

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