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Home / CPAUS-FAR · FAR: Financial Accounting and Reporting / Unit 2: Select Balance Sheet Accounts

CPAUS-FAR · FAR: Financial Accounting and Reporting·UnitCPAUS-FAR · Unit 02Access: Free tier

Unit 2: Select Balance Sheet Accounts

Prepare for Unit 2: Select Balance Sheet Accounts with practice questions covering 10 topics. Part of FAR: Financial Accounting and Reporting — build your knowledge and track your progress with GoCPAus.

Questions
157
Topics
10
Access
Free

What’s in it.

10 topics
  • Topic 01

    Cash and Cash Equivalents

    16 questions
  • Topic 02

    Accounts Receivable

    27 questions
  • Topic 03

    Inventory

    14 questions
  • Topic 04

    Investments

    15 questions
  • Topic 05

    Property, Plant and Equipment

    14 questions
  • Topic 06

    Intangible Assets

    14 questions
  • Topic 07

    Leases

    14 questions
  • Topic 08

    Current and Non-Current Liabilities

    15 questions
  • Topic 09

    Long-Term Debt

    14 questions
  • Topic 10

    Equity

    14 questions

Sample questions

3 of many

A few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.

  1. A company has 3 inventory items. Item A: Cost $100, NRV $90. Item B: Cost $200, NRV $220. Item C: Cost $150, NRV $130. The company applies the lower-of-cost-or-NRV rule on an item-by-item basis (IFRS) and also using the total approach. What are the inventory values under each method?

    • Item-by-item: $450; Total approach: $450
    • Item-by-item: $420; Total approach: $450
    • Item-by-item: $100 + $200 + $130 = $430; Total approach: $450 cost vs $440 NRV → $440
      Correct answer
    • Item-by-item: $420; Total approach: $440
    Explanation

    Item-by-item (IFRS required): take the lower of cost or NRV for each item: A: min($100, $90) = $90; B: min($200, $220) = $200; C: min($150, $130) = $130. Total = $90 + $200 + $130 = $420. Hmm — the correct answer above states $430, but recalculating gives $420. This appears to be a known inconsistency in the question. Under the total approach (sometimes used under US GAAP): Total cost = $450; Total NRV = $440. Apply LCM: $440.

  2. What is the effect of a 2-for-1 forward stock split on stockholders' equity?

    • Total stockholders' equity is unchanged; shares outstanding double and par value per share halves
      Correct answer
    • A journal entry is required to transfer par value amounts between accounts
    • Total stockholders' equity decreases because par value per share is reduced
    • Retained earnings decrease because the split requires a debit to retained earnings
    Explanation

    A forward stock split increases shares outstanding and proportionally decreases par value per share, leaving total par value and total stockholders' equity unchanged. A 2-for-1 split doubles shares and halves par value. No journal entry is required — only a memo entry documenting the new share count and new par value. This contrasts with a stock dividend, which does require a journal entry. EPS is retroactively restated for the split.

  3. A company issues a $500,000, 8%, 5-year bond when the market rate is 10%. Assuming annual interest payments, what is the carrying value of the bond at the end of year 1 after recording interest expense and the coupon payment?

    • $460,000
    • $462,093 (approximately)
      Correct answer
    • $500,000
    • $468,000
    Explanation

    Step 1: Determine issue price. PV of principal = $500,000 / (1.10)^5 ≈ $310,460. PV of annuity = $40,000 × [(1 − (1.10)^-5) / 0.10] = $40,000 × 3.7908 ≈ $151,632. Issue price ≈ $462,092. Step 2: End of year 1. Interest expense = $462,092 × 10% = $46,209. Coupon payment = $500,000 × 8% = $40,000. Discount amortisation = $46,209 − $40,000 = $6,209. New carrying value = $462,092 + $6,209 ≈ $468,301. Note: The answer $462,093 refers to the issue price (rounded), not the end-of-year-1 value. This is a known inconsistency in this question.