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Free CPA-Financial Exam Braindumps (page: 22)

Page 22 of 41
PDF with 163 Questions

Under FASB Statement of Financial Accounting Concepts #5, which of the following items would cause earnings to differ from comprehensive income for an enterprise in an industry not having specialized accounting principles?

  1. Unrealized loss on investments in noncurrent marketable equity securities available for sale.
  2. Unrealized loss on investments in current marketable equity securities held for trading.
  3. Loss on exchange of nonmonetary assets without commercial substance.
  4. Loss on exchange of nonmonetary assets with commercial substance.

Answer(s): A

Explanation:

Choice "a" is correct. Unrealized loss on investments in marketable equity securities available for sale would cause earnings to differ from comprehensive income for an enterprise in an industry not having specialized accounting principles.
Rule: FAC 5 defines "earnings" for a period to exclude certain cumulative accounting adjustments and other non-owner changes in equity (such as changes in market value of marketable securities available for sale) that are included in comprehensive income for a period.



FASB's conceptual framework explains both financial and physical capital maintenance concepts. Which capital maintenance concept is applied to currently reported net income, and which is applied to comprehensive income?

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): C

Explanation:

Choice "c" is correct. Financial capital - Financial capital. Financial capital maintenance is considered to be an element of both "currently reported net income" and "comprehensive income." This was a rare instance in which this type of information was asked on the exam.



According to the FASB conceptual framework, which of the following is an essential characteristic of an asset?

  1. The claims to an asset's benefits are legally enforceable.
  2. An asset is tangible.
  3. An asset is obtained at a cost.
  4. An asset provides future benefits.

Answer(s): D

Explanation:

Choice "d" is correct. An asset provides future benefits. Rule: According to the FASB conceptual framework, assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.



According to the FASB conceptual framework, an entity's revenue may result from:

  1. A decrease in an asset from primary operations.
  2. An increase in an asset from incidental transactions.
  3. An increase in a liability from incidental transactions.
  4. A decrease in a liability from primary operations.

Answer(s): D

Explanation:

Rule: Revenues are inflows or other enhancements of assets and/or settlements (decreases) in liabilities resulting from the entity's ongoing major operations, not from "incidental" operations. Choice "d" is correct. An entity's revenue may result from a decrease in a liability from primary operations.



Page 22 of 41



Post your Comments and Discuss AICPA CPA-Financial exam with other Community members:

Venkatesh Aiyar commented on September 23, 2024
I will be taking this exam in early December. If anyone has taken or passed this exam recently, please let me know what I should focus on other than the usual suspects such as consolidation, cash flow etc.
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