Research Exercise 9

Throughout the semester you have completed a number of research exercises and cases to develop your research skills. The ability to search and find the correct accounting treatment for new and existing financial transactions is a critical skill in a number of accounting jobs - companies must ensure that their accounting is compliant with GAAP. Research is also an important component of the CPA Exam. As such, for this last assignment I have included a number of research exercises taken from CPA Exam Review books and from the AICPA's CPA Exam Sample Test. I wanted to include these questions so that you can get a feel for the structure and wording of the CPA Exam questions. These questions are very similar to the ones that you will receive on the CPA Exam.

As I mentioned above, these questions are taken from Review books and the CPA Exam Sample Test. As such, the answers are available from sources other than the FASB Codification website for those who search hard enough. Let me remind you, once again, that your answers are to be obtained ONLY from the FASB Codification website. Obtaining the answers from any other source is cheating, and is in direct violation of Oakton's Code of Academic Conduct. Accounting is a profession where the application of the highest ethical standards is critical, and I expect that all of you will apply those same standards to this assignment.

My intent in preparing this exercise is for you to be able to "test" yourself, so that you can assess how strong your research skills have become against a benchmark that simulates the CPA Exam. However, I know that the wording of CPA Exam questions can sometimes be difficult to understand, and I don't want anyone to lose points because of the way the questions are worded. As such, please feel free to email me your completed exercise for review before you submit it for grading. I'm more than happy to review your answers and let you know if any of them are incorrect.

1. Lanny Financial offers credit cards to college students at a variable rate on outstanding balances. The company also charges an annual fee for using the line of credit. Which section of the authoritative literature best defines how and when Lanny should recognize the annual fee revenue?

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2. Assume that you are assigned to the audit of Jane Corporation. Jane has committed itself to a formal plan for sale of a business component that meets the requirements for presentation as discontinued operations. Which section of the Professional Standards addresses the issue of how to account for the costs that will be incurred to relocate employees of the discontinued component?

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3. Assume that you are assigned to the audit of Health Corporation. The Controller of Health has asked you in which section of the statement of cash flows should the proceeds from the sale of available-for-sale securities be presented. Which section of the Professional Standards addresses this issue?

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4. Assume that you are assigned to the audit of Cole Construction Company. Cole constructs buildings under long-term contracts using the completed contract basis of accounting. Cole has determined that a loss is anticipated on its contract with Hale Corporation. Which section of the Professional Standards provides guidance on how this situation should affect Cole's financial statements?

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5. Assume that you are assigned to the audit of Dumas Corporation. Dumas has decided to self construct a productive asset. Which section of the Professional Standards provides guidance on whether the asset qualifies for capitalization of interest?

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