Exam (elaborations)
CPA Exam FAR 1 Questions and Answers 2024
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Exam of 6 pages for the course CPA at CPA (CPA Exam FAR 1)
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CPA Exam FAR 1M1 - answer
Two fundamental qualitative characteristics of useful information - answer1. Relevant
2. Reliable aka faithful
Relevance - answer- Capable of making a difference in the decisions made by users
- Must include predictive value, confirmatory value, and materiality
Faithful Representation - answer- Faithfully represents the reported economic
phenomena
- Must be complete and neutral
What are the four Enhancing Qualitative Characteristics of financial information? -
answer1. Comparability
2. Verifiability
3. Timeliness
4. Understandability
In order to recognize an item through a journal entry, what three characteristics must it
have? - answer1. Measurability
2. Relevance
3. Reliability
What is the difference between Current Market Value and Replacement cost? - answer-
Replacement cost is the amount of cash that would be paid to acquire or replace an
asset currently. It is an acquisition cost
- Current market value is the price to sell, not acquire, an asset
How should interim financial reporting be primarily viewed? - answerAs reporting for an
integral part of an annual period
What are revenues according to FASB? - answer- Inflows or other enhancements of
assets
- Settlements (decreases) in liabilities resulting from the entity's ongoing major
operations, not from "incidental" operations
M2 - answer
What are three things the income statement is useful for? - answer1. Determining
profitability
2. Determining value for investment purposes
, 3. Determining creditworthiness
What is a balance sheet useful for? - answerAssessing financial risk
What is a Classified Balance Sheet? - answerA balance sheet that distinguishes current
and non-current assets and liabilities
How should a material transaction that is infrequent and/or unusual in nature be
presented in the financial statements? - answerSeparately as a component of income
from continuing operations regardless of whether the transaction is a gain or loss
In a single-step income statement, where does amounts from discontinued operations
appear? - answerIn discontinued operations, separate from the normal "revenues" and
"expenses" sections
For a prepaid expense to be considered a current asset, how far out may the expense
be paid for? - answer12 months. Prepaid expenses that exceed 12 months are no
longer current
M5 - answer1. Impairment loss of the component
Five components of an Entity for which operations and cash flows can be clearly
distinguished, both operationally and for financial reporting purposes - answer1. An
operating segment
2. A reportable segment
3. A reporting unit
4. A subsidiary
5. An asset group
In order for a business component to be classified as "held for sale", what criteria must
be met? - answer1. Management commits to a plan to sell the component
2. The component is available for immediate sale
3. An active program to locate a buyer has been initiated
4. *The sale of the component is probable and the sale is expected to be completed
within one year*
5. Sale is actively marketed
6. Actions required to complete the sale make it unlikely that significant changes to the
plan will be made or that the plan will be withdrawn
What three calculations must be done for a Discontinued Operation? - answer1.
Impairment loss of the component
2. Results of operations of the component
3. Gain or loss on disposal of the component
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