AICPA CPA-Financial Exam Dumps

Choice 'a' is correct. Market price declines should be recognized in the interim period in which decline is judged permanent and later, if they 'turn around,' are recognized as gains in subsequent periods only to the extent of previously reported losses.

Choice 'b' is incorrect. Recovery should not cause an increase in inventory value above original cost.

Choice 'c' is incorrect. The recovery should be recognized to the extent of the first quarter write down.

Choice 'd' is incorrect.

Choice 'd' is correct. The rule of conservatism states that revenues and gains should be recognized when the earnings process is complete, but that expenses and losses should be expensed immediately.

Reporting inventory at the lower of cost or market requires the recording of a loss on inventory when market is lower than cost in the period the loss is sustained, rather than when the inventory is sold, consistent with the rule of conservatism.

Choice 'a' is incorrect. Because the future benefits of R&D costs are questionable, these cost should be expensed immediately, consistent with the rule of conservatism and the matching principle.

Choice 'b' is incorrect. The rule of conservatism only requires the accrual of 'probable' losses. The accrual of a reasonably possible loss is not required and the accrual of any contingent gain, whether probable, reasonably possible, or remote, is prohibited.

Choice 'c' is incorrect. The reporting of marketable securities with appreciated values at market value requires the recording of a gain on the asset before the gain is realized. This contradicts the rule of conservatism, but is allowed because fair value is a more relevant measure of the value of marketable securities.

Choice 'd' is correct. The criteria for determining which investments are treated as cash equivalents would be part of the summary of significant accounting policies.

Choice 'a' is incorrect. The maturity dates of noncurrent debts are required disclosures, but are not a part of the summary of significant accounting policies.

Choice 'b' is incorrect. The terms for convertible debt to be exchanged for common stock are not accounting policies; they would be disclosed separately.

Choice 'c' is incorrect. The concentration of credit risk of all financial instruments by geographic region may be a required segment disclosure, especially for financial institutions. However, it would not be a part of the summary of significant accounting policies.

Choice 'a' is correct. General and administrative expenses include:

Freight-in is part of cost of sales; freight-out is a selling expense; and sales salaries are selling expenses.

Choice 'b' is incorrect. Freight-in is part of cost of inventory; freight-out is a selling expense; and sales salaries are selling expenses.

Choice 'c' is incorrect. Freight-in is part of cost of inventory; freight-out is a selling expense; and sales salaries are selling expenses.

Choice 'd' is incorrect. Freight-in is part of cost of inventory; freight-out is a selling expense; and sales salaries are selling expenses.

Note: 1/2 of the office space of $240,000 was used by the sales department, which should be allocated to 'selling expenses' (not general and administrative).

Choice 'a' is correct. $290,000.