Question

1. Which item would be classified as a source of cash on a company's statement of cash flows?

1. Decrease in accounts payable
2. Increase in accounts receivable
3. Depreciation expense
4. Increase in inventory

2. Which of the following Accounting Standards Codification (ASC) Topics covers US accounting for translating a company's foreign financial statements into their home currency?

1. Topic 320
2. Topic 820
3. Topic 830
4. Topic 815

3. Lenders, creditors and investors usually pay additional attention to which of the following financial statements?

1. Statement of cash flows
2. Statement of retained earnings
3. Balance sheet
4. Income statement

4. For which of the following does ASC Topic 815 require that gains and losses of a revaluation be recognized as income or expense together with the offsetting gains and losses of the hedged item?

1. Derivatives that do not qualify as hedge instruments
2. Fair value hedge
3. Interest rate hedge
4. Cash flow hedge

Answer 1

Part 1

None of the given option correct

As deprecation is already deducted from the income and it is not treated as a source of income

Decrease in accounts payable, increase in accounts receivable and increase in inventory are refers to use of cash

Part 2

Option C

C. Topic 830

FASB ASC Topic 830 provides details regarding Foreign Currency Matters and for operations undertaken in a foreign currency environment. It also provides the accounting guidance for transactions denominated in a foreign currency.

Part 3

Option A

a. Statement of cash flows

As cash flows are important for a company’s financial health, the statement of cash flows generates and delivers useful information to Lenders, creditors, and investors.

Part 4

Option B.

b. Fair value hedge

According to Fair Value Measurement, the derivatives are reflected at fair value in financial statements. For fair value hedge, ASC Topic 815 requires that gains and losses of a revaluation be recognized as income or expense together with the offsetting gains and losses of the hedged item