The following information pertains to Seda Co.’s pension plan:

Actuarial estimate of projected benefit obligation at January 1, 2017 $72,000
Assumed discount rate 10%
Service costs for 2017 $18,000
Pension benefits paid during 2017 $15,000

If no change in actuarial estimates occurred during 2017, Seda’s projected benefit obligation at December 31, 2017 was


CPA Question 02

Cott, Inc. prepared an interest amortization table for a 5-year lease payable with a bargain purchase option of $2,000, exercisable at the end of the lease. At the end of the 5 years, the balance in the leases payable column of the spreadsheet was zero. Cott has asked Grant, CPA, to review the spreadsheet to determine the error. Only one error was made on the spreadsheet. Which of the following statements represents the best explanation for this error?

Cott subtracted the annual interest amount from the lease payable balance instead of adding it.
The beginning present value of the lease did not include the present value of the bargain purchase option.
The present value of the bargain purchase option was subtracted from the present value of the annual payments.
Cott discounted the annual payments as an ordinary annuity, when the payments actually occurred at the beginning of each period.

CPA Question 02

Which of the following information should be disclosed as supplemental information in the Statement of Cash Flows?

  Cash flow per share   Conversion of debt to equity

Yes   No
No   Yes
Yes   Yes
No   No

CPA Question 03

The following trial balance of JB Company at December 31, Year five, has been adjusted except for income taxes. The income tax rate is 30%.

Dr. Cr.
Accounts receivable, net $725,000
Accounts payable 250,000
Accumulated depreciation 125,000
Cash 185,000
Contributed capital 650,000
Expenses 3,750,000
Goodwill 140,000
Prepaid taxes 225,000
Property, plant, and equipment 850,000
Retained earnings, 1/1/year five 350,000
Revenues 4,500,000
5,875,000 5,875,000

During year five, estimated tax payments of $225,000 were paid and debited to prepaid taxes. There were no differences between financial statement and taxable income for year five. Included in accounts receivable is $400,000 due from a loyal customer. Special terms were granted to this customer to make payments of $100,000 semi-annually every March 1 and September 1. In JB Company’s December 31, Year five Balance Sheet, what amount should be reported as total assets?


CPA Question 03

Lem Co., which accounts for treasury stock under the par value method, acquired 100 shares of its $6 par value common stock for $10 per share. The shares had originally been issued by Lem for $7 per share. By what amount would Lem’s additional paid-in capital from common stock decrease as a result of the acquisition?


CPA Question 03

Improper revenue recognition is the most common form of fraudulent financial reporting and is the most prevalent reason for accounting restatements for all of the following reasons except:

Revenue recognition is a complex process.
Identification of performance obligations may require judgment.
Revenue recognition is not prone to error because of management’s focus on proper revenue recognition.
Management faces pressure to meet revenue expectations.

CPA Question 03

Data for a defined benefit pension plan for the current year are as follows:

PBO, January 1,   $200mn
Assets, January 1, $160mn
Pension expense, $60mn
Funding contribution, $50mn
PBO gain (year-end), $14mn
Amortization of PSC for year, $4mn

The ending pension liability balance is

CPA Question 03

Robbins, Inc. leased a machine from Ready Leasing Co. The lease qualifies as a capital lease and requires 10 annual payments of $10,000 beginning immediately. The lease specifies an interest rate of 12% and a purchase option of $10,000 at the end of the tenth year, even though the machine’s estimated value on that date is $20,000. Robbins’ incremental borrowing rate is 14%. The present value of an annuity due of $1 at: 12% for 10 years is 6.328 14% for 10 years is 5.946 The present value of $1 at: 12% for 10 years is .322 14% for 10 years is .270 What amount should Robbins record as lease liability at the beginning of the lease term?


CPA Question 03

The primary purpose of a Statement of Cash Flows is to provide relevant information about:

Differences between net income and associated cash receipts and disbursements.
The cash receipts and cash disbursements of an enterprise during a period.
An enterprise’s ability to generate future positive net cash flows.
An enterprise’s ability to meet cash operating needs.
CPA Question 04

The following is Gold Corp.’s June 30, 2017, trial balance:

Cash overdraft $10,000
Accounts receivable, net $35,000
Inventory 58,000
Prepaid expenses 12,000
Land held for resale 100,000
Property, plant, and equipment, net. 95,000
Accounts payable and accrued expenses 32,000
Common stock 25,000
Additional paid-in capital 150,000
Retained earnings 83,000
$300,000 $300,000

Additional information: •Checks amounting to $30,000 were written to vendors and recorded on June 29, 2017, resulting in a cash overdraft of $10,000. The checks were mailed on July 9, 2017. •Land held for resale was sold for cash on July 15, 2017. •Gold issued its financial statements on July 31, 2017. In its June 30, 2017, balance sheet, what amount should Gold report as current assets?


CPA Question 04

A property dividend should be recorded in retained earnings at the property’s

Book value at date of declaration.
Book value at date of issuance (payment).
Market value at date of declaration.
Market value at date of issuance (payment).

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