CPA FAR Practice Test 2

ABC Corp purchased 75% of the outstanding common stock of XYZ Corp for $360,000. XYZ Corp had the following condensed balance sheet

The fair value of plant and equipment was 70,000 more than it’s recorded carrying amount. The fair value and carrying amounts were equal for all other assets and liabilities.

What amount of goodwill related to XYZ’s acquisition should ABC report on its consolidated balance sheet under US GAAP?

True or False: GAAP requires the accrual of sick pay benefits as services are rendered by employees?

GoTrain has a sales promotion on June 31st, Year 1. The sales promotion provided a coupon on each widget sold. Six coupons must be presented to receive a premium that costs GoTrain $2.00. GoTrain estimates that 60% of the coupons will be redeemed. Use the information below to calculate the premium liability the should be recorded:

XYZ Corp leased a truck from EFG Corp for 10 years. The net present value of the lease is $200,000. The fair value of the truck is $195,000. The truck’s useful life is 12 years. The truck is not used for any specialized purposes. What type of lease would this be classified as?

A derivative must contain ALL of the following characteristics:

1. One or more underlyings and one or mote notional amounts or payment provisions
2. Requires no initial net investment or one that is smaller than would be required for other types of similar contracts
3. Its terms require or permit a net settlement
4. Requires a large initial investment or one that is larger than would be required for other types of similar contracts.

True or False: Debentures are unsecured bonds?

To amortize a discount, premium, or bond issuance cost using the straight line method for each period, use the following calculation:

Bell Corp. has the following operating income (loss) for its first 3 years of operations

Year 1: $200,000

Year 2: ($500,000)

Year 3: 1,500,000

In all years, there was no deferred income taxes (prior to Year 1), and Bell’s effective tax income tax rate was 21%. On the year 3 income statement, what amount should Bell report as total income tax expense.

Use the below facts to calculate basic EPS for ABC Corp:

Net Income $300,000

Stockholders Equity $500,000

Preferred Dividends $30,000

Weighted average common shares outstanding 200,000

Court Corp., a not-for-profit organization, received $300 from a donor. In return, the donor received three tickets to a how along with an acknowledgement in the show program. Each ticket had a fair value of $50 dollars. What amount is recorded as contribution revenue?