Get AICPA CPA-Financial Exam Practice Questions - Real and Updated

Answer : C

Choice 'c' is correct.

Comprehensive income must be presented in one of three formats:

1. In a combined statement of income and comprehensive income;

2. In a separate statement of comprehensive income that begins with net income; or

3. In a statement of changes in equity.

Choices 'a', 'b', and 'd' are incorrect, per the above.

Balance Sheet and Disclosures Overview

Answer : C

Choice 'c' is correct. Statements of Financial Accounting Concepts are intended to establish the objectives and concepts that the Financial Accounting Standards Board will use in developing standards of financial accounting and reporting. SFAC 1 para. 3

Choice 'a' is incorrect. The Statements of Financial Accounting Concepts do not specify financial accounting standards prescribing accounting procedures or practices. SFAC 1 para. 3

Choice 'b' is incorrect. Auditing standards develop the meaning of 'Present fairly in accordance with generally accepted accounting principles.'

Choice 'd' is incorrect. The hierarchy of sources of generally accepted accounting principles is determined by GAAP.

Answer : C

Choice 'c' is correct. The 20X3 loss from discontinued operations would include both the 20X3 operating loss of $500,000 (which turned out to be a correct estimate) and the 'additional' loss (on disposal) of $100,000, net of tax, for a total of $600,000 x .70 or $420,000.

Choice 'a' is incorrect. It includes the 20X3 operating loss of $500,000 but not the $300,000 impairment loss but does report the 20X3 operating loss net of tax.

Choice 'b' is incorrect. It includes the 20X3 operating loss of $500,000, but not the $100,000 loss on disposal, and reports the 20X3 operating loss gross of tax and not net of tax.

Choice 'd' is incorrect. It reports the 20X3 loss from discontinued operations gross of tax and not net of tax. The 20X3 loss from discontinued operations should include both the 20X3 operating loss of $500,000 and the loss on disposal of $100,000, net of tax, for a total of $600,000 x .70 or $420,000.

Answer : D

Choice 'd' is correct, a 'change in accounting estimate' affects only the current and subsequent (future) periods, if the change affects both. It does not affect 'prior periods,' nor 'retained earnings.'

Choice 'a' is incorrect. Restating prior years' financial statements is required when comparative financial statements are shown for prior period adjustments of 'corrections of errors,' 'changes in entities,' and changes in accounting principle.

Choices 'b' and 'c' are incorrect. A 'change in accounting estimate' does not affect prior periods.

Answer : D

Choice 'd' is correct. Once the decision has been made to dispose of a component of a business and that component meets the criteria to be classified as held for sale, the operating results of the component for the period reported on, and any gain or loss from the disposal, should be reported separately from continuing operations, net of tax. In this question, the component was classified as held for sale and was sold in the same year.

Thus, in 20X4, the results of operations, the $300,000 ($500,000-$800,000) loss, are reported as a loss from discontinued operations. The loss on disposal would be reported as part of that loss from discontinued operations also.

Choice 'a' is incorrect. The results of operations prior to the decision date, and also after the decision date, are reported separately from the results of continuing operations as a part of discontinued operations.

Choice 'b' is incorrect. The results of operations prior to the decision date, and also after the decision date, are reported separately from the results of continuing operations as a loss from operations of a component and included in loss from discontinued operations.

Choice 'c' is incorrect. The results of discontinued operations are not reported as an extraordinary item.