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FAR Mock Exam 1 & AICPA Practice Questions & Answers (With Most Tested Topic On FAR 2020)
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FAR Mock Exam 1 & AICPA Practice Questions & Answers (With Most Tested Topic On FAR 2020)
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FAR Mock Exam 1 & AICPA Practice Questions &Answers (With Most Tested Topic On FAR 2020)
*Research and development (R&D) GAAP vs IFRS* Correct Ans -
GAAP R&D
-All R&D cost are expensed except:
1) Software after feasibility
2) alternative use after future projects
IFRS R&D
-All R&D costs are expensed except for development costs.
Software cost GAAP vs IFRS Correct Ans - GAAP
1) Expense as R&D all costs up to and including point of technological
feasibility (TF). TF is when detail program is completed or working model.
2) Cost after TF - Capitalize as software until production
3) Production = inventory
IFRS
-All R&D costs are expensed except for development costs.
Goodwill Impairment (GAAP) vs Goodwill Impairment (IFRS) Correct
Ans - US GAAP Impairment
Step 1
Is, CV > FV
If yes, Step 2
CV - FV = goodwill impairment
IFRS Impairment
Step 1:
Determine recoverable amount
Use the higher of, FV less cost to sell or PV of future CF
Step 2:
Take the higher amount and plug it for RA
CV - Recoverable amount
,Recognition and measurement of gain contingencies Correct Ans -
Gain contingency:
-Only record /accrue gain contingency when realized.
-If gain contingencies are probable or reasonably possible *state the range
in the footnotes.*
-Ignore gain contingencies that are remote.
Recognition and measurement of loss contingencies Correct Ans -
Probable:
-Likely to occur = Record JE /Accrue and disclose in footnotes. (Dr Expense
Cr Liability)
-Under GAAP if no amount of probable loss is better estimate disclose the
*minimum range.*
-Under IFRS If no amount of probable loss is better estimate disclose the
*midpoint range.*
-Also treated as loss contingencies that are accrued as long as amounts are
probable and reasonably estimated:
1. Unasserted claims as probable,
2. Premiums and warranties
Reasonable possible:
-More than remote but less than likely = Disclose only and No JE
Remote:
-Slight chance of occurring = Ignore
Exception to remote loss contingencies is for "guarantee-type" remote loss
contingencies such as (DOG):
1. Debts of others guaranteed (officers/related parties)
2. Obligations of commercial banks under standby letters of credit
3. Guarantees to repurchase receivables (or related property) that have
been sold or assigned.
Treatment of Stock Dividends Correct Ans - The stock dividend is a
*"small" stock dividend* because it is less than 20% - 25%. Small stock
dividends are capitalized at market value, which exceeds par in this case.
Retained earnings is reduced by the market value of the shares issued,
common stock is increased by the par value of stock issued, and additional
,paid-in capital is increased by the difference between market value and par
value times the number of shares issued.
Dr RE (FV)
Cr CS (Par)
Cr APIC
When more than 20 to 25 percent of the previously issued shares are
distributed, the dividend is treated as a *large stock dividend*, as it may be
expected to reduce the market price of the stock (similar to a stock split).
The par (or stated) value of the stock is normally transferred from retained
earnings to capital stock to meet the legal requirements.
Dr RE (Par)
Cr CS
*The debit to RE decreases SE and the Cr to CS increases SE. This gives you
a net change of 0 to SE.*
Major fund classification Correct Ans - 10% test: fund amount has
to be 10 percent higher than combined total governmental fund assets.
5% test: fund amount has to be 5 percent higher than combined total
governmental and enterprise fund assets.
-The general fund is ALWAYS a major fund
-Internal service fund is not a major fund
MCQ-10624
Nu Corp. agreed to give Rand Co. a machine in full settlement of a note
payable to Rand. The machine's original cost was $140,000. The note's face
amount was $110,000. On the date of the agreement:
-The note's carrying amount was $105,000, and its present value was
$96,000.
-The machine's carrying amount was $109,000, and its fair value was
$96,000.
, What amount of net gain (or losses) should Nu recognize?
A. $0
B. $(13,000)
C. $(9,000)
D. $(4,000) Correct Ans - D. $(4,000)
The net loss listed is the difference between the carrying amount of the
liability and the carrying amount of the machine. Nu has a gain of $9,000
on the note settlement, which is the difference between the liability
carrying value ($105,000) and the fair value of the consideration given to
extinguish the debt ($96,000). Nu also has a disposal loss on the machine.
An ordinary loss of $13,000 is recognized and equals the difference
between the machine's carrying value ($109,000) and its fair value
($96,000).
MCQ-10325
TGR Enterprises provided the following information from its statement of
financial position for the year ended December 31, year 1:
January 1 -- December 31
Cash$ 10,000 $50,000
Accountsreceivable120,000 100,000
Inventories200,000 160,000
Prepaid expenses20,000 10,000
Accounts payable175,000 120,000
Accrued liabilities25,000 30,000
TGR's sales and cost of sales for year 1 were $1,400,000 and $840,000,
respectively. What is the accounts receivable turnover in days?
A. 31.3
B. 28.7
C. 26.1
D. 41.7 Correct Ans - C. 26.1
The requirement is to calculate receivable turnover in days. Accounts
receivable turnover in days is calculated as 365 divided by the accounts
receivable turnover ratio. The accounts receivable turnover ratio is
calculated as credit sales/average accounts receivable. In this case,
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