CPA Exam: Financial Accounting & Reporting

What is the first step in the ASC 606 five-step model for revenue recognition?

Identify the contract with a customer.

Under the indirect method of the Statement of Cash Flows, what is the starting point for calculating operating cash flows?

Net Income.

Which inventory valuation method results in the highest ending inventory during periods of rising prices?

FIFO (First-In, First-Out).

What are the two categories of net assets reported by a Not-for-Profit (NFP) organization?

Net assets with donor restrictions and net assets without donor restrictions.

How often must goodwill be tested for impairment under US GAAP?

At least annually.

In Fair Value measurement (ASC 820), what level uses quoted prices in active markets for identical assets?

Level 1.

What is the standard measurement basis for inventory under the FIFO or weighted average cost methods?

Lower of Cost or Net Realizable Value (NRV).

How should a company account for a contract modification that adds distinct goods at a price that reflects their standalone selling price?

As a separate contract.

What is the criteria for a lessee to classify a lease as a finance lease regarding the lease term?

The lease term is for the major part of the remaining economic life of the underlying asset.

How is a gain on the sale of equipment treated in the operating section of the Statement of Cash Flows using the indirect method?

It is subtracted from net income.