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CPA Exam Review Questions Financial Accounting with correct answers
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CPA Exam Review Questions Financial Accounting
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CPA Exam Review Questions FinancialAccounting & Reporting
Which of the following is not a comprehensive basis of accounting other than generally
accepted accounting principles?
A. Basis of accounting used by an entity to comply with the financial reporting
requirements of a government regulatory agency
B. Cash receipts and disbursements basis of accounting
C. Basis of accounting used by an entity to file its income tax return
D. Basis of accounting used by an entity to comply with the financial reporting
requirements of a lending institution - answerD.
The following accounting bases may be used to prepare financial statements in
conformity with a comprehensive basis of accounting other that GAAP:
1. income tax basis of accounting
2. cash basis of accounting
3. modified cash basis of accounting
4. basis of accounting used by an entity to comply with the financial reporting
requirements of a government regulatory agency.
5. a definite set of criteria having substantial support that is applied to all material items
in the financial statements.
An other comprehensive basis of accounting (OCBOA) outside of the permitted bases
listed above is prohibited. A basis of accounting used by an entity to comply with the
financial reporting requirements of a lending institution is not a permitted OCBOA.
One criterion for a capital lease is that the term of the lease must equal a minimum
percentage of the leased property's economic life at the inception of the lease. The
minimum percentage is:
A. 75%
B. 41%
C. 50%
, D. 90% - answerA.
A lease is classified as a capital lease if one of the following criteria is met:
1. the title is transferred to the lease at the end of the lease period.
2. a bargain purchase option exists
3. the lease period is a t least 75% of the asset's life.
4. the present value of the minimum lease payments is at least 90% of the fair value of
the asset
On January 15, Year 5 Rice Co. declared its annual cash dividend on common stock for
the year ended January 31, Year 5. The dividend was paid on February 9, Year 5, to
stockholders of record as of January 28, Year 5. On what date should Rice decrease
retained earnings by the amount of the dividend?
A. January 15, year 5
B. January 31, year 5
C. January 28, year 5
D. February 9, year 5 - answerA.
Retained earnings is decreased and a current liability for the cash dividend is recorded
on the declaration date, in this case, January 15, year 5
For interim financial reporting, a company's income tax provision for the second quarter
of a given year should be determined using the:
A. Statutory tax rate for the year
B. effective tax rate expected to be applicable for the second quarter of the year
C. effective tax rate expected to be applicable for the full year, as estimated at the end
of the first quarter of the year
D. effective tax rate expected to be applicable for the full year, as estimated at the end
of the second quarter of the year. - answerD.
The company should use the effective tax rate expected to be applicable for the full year
as estimated at the end of the second quarter of the year because the interim period is
considered an integral part of the accounting year
What type of bond matures at different points in time?
A. Bearer Bonds
B. Term Bonds
C. Serial Bonds
D. Unsecured Bonds - answerC.
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