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Admission Test Certified Public Accountant (Financial Accounting & Reporting) Sample Questions:

1. Which of the following describes how comprehensive income should be reported?

A) May be reported in a combined statement of income and comprehensive income or disclosed within a statement of stockholders' equity; separate statements of comprehensive income are not permitted.
B) Should not be reported in the financial statements but should only be disclosed in the footnotes.
C) Must be reported in a separate statement, as part of a complete set of financial statements.
D) May be reported in a separate statement, in a combined statement of income and comprehensive income, or within a statement of stockholders' equity.

2. In financial reporting of segment data, which of the following must be considered in determining if an industry segment is a reportable segment?

A) Option D
B) Option A
C) Option B
D) Option C

3. An extraordinary item should be reported separately on the income statement as a component of income:

A) Option D
B) Option A
C) Option B
D) Option C

4. On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with Quo's president and outside accountants, made changes in accounting policies, corrected several errors dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List B represents the general accounting treatment required for these transactions. These treatments are:
* Cumulative effect approach - Include the cumulative effect of the adjustment resulting from the accounting change or error correction in the 1993 financial statements, and do not restate the 1992 financial statements.
* Retroactive or retrospective restatement approach - Restate the 1992 financial statements and adjust 1992 beginning retained earnings if the error or change affects a period prior to 1992.
* Prospective approach - Report 1993 and future financial statements on the new basis but do not restate 1992 financial statements.
Item to Be Answered
During 1993, Quo determined that an insurance premium paid and entirely expensed in 1992 was for the period January 1, 1992, through January 1, 1994.
List B (Select one)

A) Prospective approach.
B) Cumulative effect approach.
C) Retroactive or retrospective restatement approach.

5. During 20X5, Dale Corp. made the following accounting changes:

What amount should be shown in the 20X5 retained earnings statement as an adjustment to the beginning balance?

A) $30,000
B) $0
C) $98,000
D) $128,000

Solutions: