AICPA Exam CPA-Financial Topic 2 Question 38 Discussion

Actual exam question for AICPA's CPA Financial Accounting and Reporting exam

Question #: 38
Topic #: 2

[All CPA Financial Accounting and Reporting Questions]

Which of the following should be disclosed in a summary of significant accounting policies?

i. Management's intention to maintain or vary the dividend payout ratio.

ii. Criteria for determining which investments are treated as cash equivalents.

iii. Composition of the sales order backlog by segment.

AI only.

BI and III.

CII only.

DII and III.

Show Suggested Answer

Suggested Answer: C

Choice 'c' is correct. Il only.

The criteria for determining which investments are treated as 'cash equivalents' is a method of accounting policies that needs to be disclosed in the summary of significant accounting policies.

Choice 'a' is incorrect. Management's intention to maintain or vary the 'dividend payout ratio' is not an 'accounting policy.'

Choices 'b' and 'd' are incorrect. Composition of the sales order backlog by segment is not an 'accounting policy.'

by Layla at May 07, 2022, 08:57 PM

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