WorldatWork Certified Compensation Professional (CCP) T7 Questions & Answers

• Question 31:

  What is the purpose of a balance sheet?

  A. To show sources of funds and the manner in which those funds are employed

  B. To account for changes in cash during the accounting period

  C. To show details of the nature of a company's operating activities

  D. To reconcile the beginning and ending balances of stockholders' equity

  Correct Answer: A

• Question 32:

  Which of the following plans obliges an employer to pay a specified amount of benefits to the employee?

  A. Post-employment plan

  B. Defined contribution plan

  C. Defined benefit plan

  D. Bonus plan

  Correct Answer: C

• Question 33:

  The concept that numbers and descriptions must match what really existed or happened is represented by which fundamental qualitative characteristic?

  A. Predictive value

  B. Complete

  C. Faithful representation

  D. Relevance

  Correct Answer: C

• Question 34:

  How do noncurrent assets (long-term assets) differ from current assets?

  A. Noncurrent assets cannot be easily converted to cash within a year

  B. Noncurrent assets are not affected by the fiscal year

  C. Noncurrent assets cannot be easily converted to cash within two years

  D. Noncurrent assets can only be converted to cash until the subsequent fiscal year

  Correct Answer: A

• Question 35:

  The profit-sharing plan of Company ABC requires the company pay a specified proportion of its profit for the year to employees who serve throughout the year. If no employees leave during the year, the total profit-sharing payments for the year will be 3% of profit. The company estimates that staff turnover will reduce the payments to 2.5% of profit. What does Company ABC recognize as a liability and an expense?

  A. 0.5% of profit

  B. 2.5% of profit

  C. 3% of profit

  D. 5.5% of profit

  Correct Answer: B

• Question 36:

  What is one of the purposes of International Accounting Standards Board (IASB)'s conceptual framework, which establishes the concepts that underlie financial reporting?

  A. Provides information about economic entities that is useful in making economic decisions

  B. Provides guidance where conflicting interpretations have developed

  C. Provides benchmark for judgments

  D. Informs International Accounting Standards Board (IASB) of implications of proposed standards

  Correct Answer: C

• Question 37:

  What are the main equity categories in a statement of stockholders' equity?

  A. Retained earnings and treasury stock

  B. Investing activities and financing activities

  C. Operating revenues and noncurrent assets

  D. Revenue items and owners' equity

  Correct Answer: A

• Question 38:

  When does a present obligation exist?

  A. When the employee renders service

  B. When the company has no realistic alternative but to make the payments

  C. When a change in the company's informal practices would cause unacceptable damage to its relationship with employees

  D. When the company recognizes the expected cost of profit-sharing and bonus payments

  Correct Answer: B

• Question 39:

  Recognition of revenue when earned and the matching of expenses when incurred describes which of the following practices?

  A. Business accounting

  B. Cash basis accounting

  C. IASB accounting

  D. Accrual accounting

  Correct Answer: D

• Question 40:

  Which of the following best defines the term "equity"?

  A. The residual interest in the assets of the entity after deducting all its liabilities

  B. A present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits

  C. Decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants

  D. Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants

  Correct Answer: A