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FAR CPA Exam Questions and answers. Latest updates, VERIFIED.
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FAR CPA Exam Questions and answers. Latest updates, VERIFIED. Revenue T-Account - -Dr. Beg Balance Dr. Revenue Dr. End Balance Cr. Cash Unearned Revenue T-Account - -Dr. Revenue Cr. Beg Balance Cr. Cash Cr. End Balance Prepaid Expense T-Account - -Dr. Beg Balance Dr. Cash Dr. End...

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  • August 10, 2023
  • 55
  • 2023/2024
  • Exam (elaborations)
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FAR CPA Exam Questions and answers.
Latest updates, VERIFIED.

Revenue T-Account - ✔✔-Dr. Beg Balance

Dr. Revenue

Dr. End Balance

Cr. Cash



Unearned Revenue T-Account - ✔✔-Dr. Revenue

Cr. Beg Balance

Cr. Cash

Cr. End Balance



Prepaid Expense T-Account - ✔✔-Dr. Beg Balance

Dr. Cash

Dr. End Balance

Cr. Expense



Accounts Payable T-Account - ✔✔-Dr. Cash

Cr. Beg

Cr. Expense

Cr. End



What is fair value? - ✔✔-amount a business receives when it sells an asset or pays when transferring a
liability



Fair value is adjusted for ________________ costs. - ✔✔-Transportation

,What is the difference between a principal and most advantageous market? - ✔✔-principal = greatest
volume and level of activity

most advantageous = maximizes price received (e.g. selling price - transactions cost, most advantageous
is higher of the two)



What are the three approaches in determening fair value? - ✔✔-income = using present value
techniques to discount future cash flows

market = using information from recent transactions

cost = using current replacement cost



What characteristics does 'relevance' consist of? - ✔✔-predictive, confirmatory and materiality



What characteristics does 'faithful representation' consist of? - ✔✔-completeness, neutral and free from
error



What is the acronym for the 4 accounting assumptions? - ✔✔-Entirely from you GUT

entity = separate/distinct from owners

going-concern = indefinite life

unit of measurement = monetary unit of measure

time period = indefinite life broken into time frames



What is the acronym for the 4 accounting principles? - ✔✔-MERD

measurement = historical (land), NBV (PPE), NRV (A/R), replacement cost (Inventory), NPV (bonds) and
fair value (Investment)

revenue-recognition = revenue recognized when performance obligation is satisfied

expense recognition = expense matches revenue earned

disclosure principle = all information is not recognized in financial statements

,What instruments can the fair value option be applied to? - ✔✔-recognized asset/liabilities, firm
commitments, written loan commitments, rights/obligations, insurance contracts



What instruments can't the fair value option be applied to? - ✔✔-investment in a consolidated entity,
obligations to employee plans (e.g. pensions), leases, demand deposits, investment in equity



What is the difference between a discounted cash flow and an expected cash flow? - ✔✔-discounted
uses a single cash flow value and discounts it using the risk-adjusted rate while the expected cash flow
has different cash flow periods and they are discounted using a risk-free rate/interest rate



What are the disclosing requirements for fair value? - ✔✔-reporting date, valuation techniques, and
inputs used in those techniques



What is the main difference between level 1, 2 and 3 of the fair value hierarchy? - ✔✔-- level 1 includes
quoted prices in active market for identical assets/liabilities

- level 2 includes similar assets/liabilities or other inputs that are observable in an active market or
identical in a nonactive market

- level 3 includes unobservable inputs and assumptions (discounted cash flows)



What are the disclosure requirements when fair value is on a recurring basis? - ✔✔-a table showing
items in each level



The process of converting noncash resources and rights into cash or claims to cash - ✔✔-realization



Breakdown of multi-step income statement - ✔✔-Revenues - COGS

= Gross Profits - Operation exp

= income from operations +/- other income/exps

= income from continuing operations before tax - income tax

= income from continuing operations +/- discontinued operations (net of tax)

= net income

, What are the items in OCI? - ✔✔-unrealized G/L on A4S securities, G/L from pension costs, foreign
currency translation adjustments, unrealized G/L from derivative transactions from cash flow hedge



What are items in owner's equity? - ✔✔-common/preferred stock, APIC, retained earnings, treasury
stock , AOCI



Where are changes in equity disclosed in the financial statements? - ✔✔-in the footnotes, supplemental
schedules or as a separate statement



Which statements do companies in the SEC have to report showing the breakdown of the past 3 years? -
✔✔-owner's equity statement, income statement and statement of cash flows



Current ratio - ✔✔-CA / CL



Quick-acid test ratio - ✔✔-(cash + short term invesments + receivables) / current liabilities



Cash inflows/outfows from operating activities - ✔✔-+ from customers

+ dividends/interest

- to suppliers and employees

- interest and tax exp



Cash inflows/outflows from investing activities - ✔✔-+ sales of PPE

+ collection of loan principal

+ disposal of A4S, H2M or equity securities

- purchase of PPE

- purchase of stocks and CD's

- lending

- investment in securities



Cash inflows/outflows from financing activities - ✔✔-+ sale of stock

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