Wiley CPAexcel Exam Review 2014 Study Guide, Financial Accounting and Reporting

Appendix C: 2013 Released AICPA Questions for Financial Accounting and Reporting

1. Which of the following is the paramount objective of financial reporting by state and local governments?

a. Reliability.

b. Consistency.

c. Comparability.

d. Accountability.

1. (d) The requirement is to identify the paramount objective of financial reporting by state and local governments. Answer (d) is correct because in governmental financial reporting there is an emphasis on accountability or stewardship of resources entrusted to public officials. Answers (a), (b), and (c) are incorrect because none of them are the paramount objective of financial reporting by state and local governments.

2. A company is preparing its year-end cash flow statement using the indirect method. During the year, the following transactions occurred:

Dividends paid	$300
Proceeds from the issuance of common stock	250
Borrowings under a line of credit	200
Proceeds from the issuance of convertible bonds	100
Proceeds from the sale of a building	150

What is the company’s increase in cash flows provided by financing activities for the year?

a. $50

b. $150

c. $250

d. $550

2. (c) The requirement is to calculate the cash flows from financing activities. Financing activities tend to relate to noncurrent liabilities and equity transactions. Proceeds from the sale of a building would be considered an investing activity. Answer (c) is the correct answer because cash flow from financing activities would include: