CPA Financial Accounting and Reporting (CPA-Financial) - AICPA Exam Questions

On December 2, 20X1, Flint Corp.'s board of directors voted to discontinue operations of its frozen food division and to sell the division's assets on the open market as soon as possible. The division
reported net operating losses of $20,000 in December and $30,000 in January. On February 26, 20X2,
sale of the division's assets resulted in a gain of $90,000. Assuming that the frozen foods division
qualifies as a component of the business and ignoring income taxes, what amount of gain/loss from discontinued operations should Flint recognize in its income statement for 20X2?

On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with Quo's president and outside accountants, made changes in accounting policies, corrected several errors dating from 1992 and before, and instituted new accounting policies. Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements. This question represents one of Quo's transactions. List A represents possible clarifications of these transactions as: a change in accounting principle, a change in accounting estimate, a correction of an error in previously presented financial statements, or neither an accounting change nor an accounting error. Item to Be Answered The equipment that Quo manufactures is sold with a five-year warranty. Because of a production
breakthrough, Quo reduced its computation of warranty costs from 3% of sales to 1% of sales.
List A (Select one)

Which of the following information should be included in Melay, Inc.'s 1992 summary of significant accounting policies?

During a period when an enterprise is under the direction of a particular management, its financial statements will directly provide information about:

Conn Co. reported a retained earnings balance of $400,000 at December 31, 1991. In August 1992,
Conn determined that insurance premiums of $60,000 for the three-year period beginning January 1,
1991, had been paid and fully expensed in 1991. Conn has a 30% income tax rate. What amount
should Conn report as adjusted beginning retained earnings in its 1992 statement of retained earnings?