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CFI FMVA 6 Test Questions & Answers 2024/2025
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CFI FMVA 6 Test Questions & Answers 2024/2025 Accounting Principles and Standards - ANSWERS Which of the following best describes accounting principles in general? - ANSWERSThey outline the fundamental rules and concepts and establish the framework on which detailed accounting standards are...

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  • August 28, 2024
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  • 2024/2025
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CFI FMVA 6 Test Questions & Answers
2024/2025

Accounting Principles and Standards - ANSWERS



Which of the following best describes accounting principles in general? - ANSWERSThey outline the
fundamental rules and concepts and establish the framework on which detailed accounting standards
are based.



A sound accounting framework allows for all of the following benefits except: - ANSWERSIdentical items
being reported on the financial statements of different companies



3. - ANSWERSConservatism principle:: It provides guidance on how to record transactions when there is
uncertainty.

Historical Cost:It states that assets and liabilities are recorded on the financial statements at the cost at
which they were acquired or assumed.

Objectivity; It states that financial statements must be free from bias and based on verifiable evidence.

Economic Entity: It states that transactions carried out by a business are separated from those
conducted by its owner.

Matching:It states that the expenses of a business should be recorded in the periods in which the
corresponding revenues are earned.



On March 1st, Mr. Smithe signed up for a fitness program at Fit Co. and paid $960 for the entire program
upfront. The program includes a total of 12 sessions and two sessions are delivered each month. How
much revenue from Mr. Smithe should Fit Co. recognize at the end of March? - ANSWERS160



Which of the following characteristics does not enhance the usefulness of financial information? -
ANSWERSRelevance



Identify the statement that is most accurate. - ANSWERSFinancial information that has confirmatory
value provides feedback that either confirms or changes previous evaluations.

,Which of the following is not a correct description of how an operating lease is recognized on the
financial statements? - ANSWERSThe amortization expense of the right-of-use asset is calculated using
the straight-line depreciation method over the lease term.



Company Inc. enters into a 10-year finance lease at the beginning of 2021 for a total of $250,000. The
annual lease payment is $25,000 (payable at the end of each year) and the rate implicit in the lease is
5%. No initial direct costs are incurred. How much interest expense should be recognized in 2021? -
ANSWERS9,652



Which of the following statements about income taxes is not correct? - ANSWERSDeductible temporary
differences give rise to deferred tax liabilities, meaning that more tax is payable in the future.



10. - ANSWERSDeductible Temporary differences

Generally arise when the tax base of the assets is greater than the carrying amount

Generally arise when there are differences that result in current accounting income being greater than
taxable income

Give rise to deferred tax assets



Taxable Temporary Diffferences

Arise when the tax base of the liabilities is greater than the carrying amount

Arise when the carrying amount of the liabilities is greater than the tax base

Taxable Temporary Differences



Calculate the deferred tax liability given the following items incurred in 2020 by Company B. Bonuses are
tax deductible only in the year in which they are paid. - ANSWERS372



Company Co. has 1,000 employees and it decides to grant each of the employees 200 share options as
part of its new rewards plan. The options are exercisable over 5 years and subject only to the condition
that the company's stock price must be at least 30% higher than its original issue price. Company Co.'s
share-based payments are subject to: - ANSWERSNon-vesting condition

, Company A has 800 employees, and it decides to grant each of the employees 50 share options as part
of its new rewards plan. The options are exercisable over 5 years and subject to a 3-year service
condition. The fair value of each option at the grant date is $16. The company estimates that 80% of its
employees will meet the service condition required for receiving the options. Calculate the total share-
based payment expense for Company A assuming that 80% of the employees actually meet the service
condition. - ANSWERS512,000



Which of the following is not a required criterion for a transaction to be considered a business
combination? - ANSWERSPresence of outputs



Which of the following statements regarding the accounting for business combinations is false? -
ANSWERSGoodwill is the difference between the consideration transferred by the acquirer to the
acquiree and the fair value of identifiable assets acquired.



Debt issuance costs are: - ANSWERSAmortized over the term of the related debt liability



Scenario and Sensitivity Analysis - ANSWERS



If you want to test how an increase in percentage of cost of good sold affects the contribution margin,
you would use ________. - ANSWERSSensitivity Analysis



When performing a scenario analysis, which of the following tools/functions in Excel is used to create a
dropdown list where we can select the live case? - ANSWERSData Validation



You should perform sensitivity analysis when: - ANSWERSYou need to determine which assumptions
matter the most



The formula contained in the yellow highlighted cell (I39) is = ( , I9,I24). This formula can be copied over
to the entire live scenario section without any manual modification. (Hint: do not forget to use absolute
references.) - ANSWERSChoose, $I$4



What is the share price when the discount rate is 13% and revenue growth is 15%? - ANSWERS36.70

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