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Financial Modeling In Trading Comps Wall Street Prep Questions And Answers
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Financial Modeling In Trading Comps WallStreet Prep Questions And Answers
B
LU
Accounting Principles and Standards - ANSWER
Which of the following best describes accounting principles in general? - ANSWER
YC
They outline the fundamental rules and concepts and establish the framework on which
detailed accounting standards are based.
D
A sound accounting framework allows for all of the following benefits except: -
ANSWER Identical items being reported on the financial statements of different
TU
companies
3. - ANSWER Conservatism principle:: It provides guidance on how to record
ES
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.
C
Objectivity; It states that financial statements must be free from bias and based on
A
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? - ANSWER 160
Which of the following characteristics does not enhance the usefulness of financial
information? - ANSWER Relevance
B
LU
Identify the statement that is most accurate. - ANSWER Financial information that
has confirmatory value provides feedback that either confirms or changes previous
evaluations.
YC
Which of the following is not a correct description of how an operating lease is
recognized on the financial statements? - ANSWER The amortization expense of the
D
right-of-use asset is calculated using the straight-line depreciation method over the lease
term.
TU
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
ES
rate implicit in the lease is 5%. No initial direct costs are incurred. How much interest
expense should be recognized in 2021? - ANSWER 9,652
C
Which of the following statements about income taxes is not correct? - ANSWER
A
Deductible temporary differences give rise to deferred tax liabilities, meaning that more
tax is payable in the future.
10. - ANSWER Deductible 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
B
Taxable Temporary Differences
LU
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. -
ANSWER
YC 372
Company Co. has 1,000 employees and it decides to grant each of the employees 200
D
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%
TU
higher than its original issue price. Company Co.'s share-based payments are subject to: -
ANSWER Non-vesting condition
ES
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
C
$16. The company estimates that 80% of its employees will meet the service condition
A
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. -
ANSWER 512,000
Which of the following is not a required criterion for a transaction to be considered a
business combination? - ANSWER Presence of outputs
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