CPA Financial Accounting and Reporting (FAR) : CPA Financial Accounting and Reporting (FAR)
Study concepts, example questions & explanations for CPA Financial Accounting and Reporting (FAR)
All CPA Financial Accounting and Reporting (FAR) Resources
Example Questions
Example Question #1 : Government Wide Financial Statements
Taxes levied on citizens for infrastructure improvements should be reported in:
Program revenues
Functional revenues
None of the above
General revenues
General revenues
Program revenues would include charges for services and grants. Nonexchange revenues for governmental activities are general revenues.
Example Question #1 : Cafr (Fund) Accounting
The city of Hammond opened a landfill at the beginning of Year 1, which is expected to take 10 years to fill. At the end of Year 1, the land full is 8% full and the estimated current closures costs are $150,000. At the end of Year 2, the landfill is currently 20% full and the estimated closure costs are $200,000. The city does not charge a fee to use the landfill and thus reports it in the general fund. What amount of expenditures should be reported in Year 2 in the fund-based financial statements in connection with the closure of the landfill?
$0
$38,000
$40,000
$12,000
$0
Nothing is recorded for closure costs in the fund financial statements because no current economic resources were used for closing the landfill. A liability would be recorded in the government-wide statements because the focus in those statements is on both current and non-current resources.
Example Question #2 : Cafr (Fund) Accounting
The fire department of Forbes Township purchased a new fire truck on January 1, Year 1. Fund-based financial statements are being produced for Year 1 that include the fire department in the general fund. Which of the following statements is true?
Recognition of depreciation expense is optional
Depreciation expense should be calculated and reported for the fire truck only if the modified approach is used
Depreciation expense should be calculated and reported for the fire truck
Recognition of depreciation expense is not appropriate
Recognition of depreciation expense is not appropriate
The focus of the fund financial statements is current financial resources, and recording depreciation will not impact current financial resources. Thus, the purchase of the car will be reflected in the fund statements, but the depreciation will only be recorded in the government-wide statements, which includes non-current resources as well as current resources.
Example Question #3 : Cafr (Fund) Accounting
Golden City levies a real estate tax. In Year 1, the city expects to collect $400,000 between January 1, Year 2, and March 15, Year 2. It expects to collect $160,000 per month in January and February, and an additional $80,000 in March. The city's policy is that money collectible within 60 days is considered available. How much of the revenue should be recognized in Year 1 in the fund financial statements?
$160,000
$400,000
$0
$320,000
$320,000
At the end of Year 1, the city will only recognize the revenue it expects to collect within the next 60 days. This includes January and February, so Year 1 revenue will include $160K for January + $160K for February.
Example Question #4 : Cafr (Fund) Accounting
If a primary government's general fund has an equity interest in a joint venture, all or a portion of this equity interest should be reported in the:
Custodial fund
Internal service fund
Trust fund
Government wide statement of net position
Government wide statement of net position
The portion of the equity interest in the joint venture that represents the government's investment in the net position of the venture is recorded in the government wide statement of net position.
Example Question #5 : Cafr (Fund) Accounting
Which of the following would be reported as program revenues on a local government's government wide statement of activities?
Charges for services
Taxes levied for a specific function
Interest revenues
Proceeds from the sale of a capital asset used for a specific function
Charges for services
For a local government's government wide statement of activities, charges for services are reported as program revenue.
Example Question #6 : Cafr (Fund) Accounting
Internal service funds, while being proprietary funds, are reported under which at the government wide level?
Proprietary
Fiduciary
Disclosure
Governmental activities
Governmental activities
When the consolidation of governmental financial statements are complete, the internal service funds are displayed under governmental activities rather than proprietary.
Example Question #1 : Modified Accrual Basis Of Accounting
The city of Frankford assesses a sales tax on all purchases over $40,000. On December 28, Year 1, a sale of $65,000 occurs that will result in a payment of a tax to the city of $2,400. The payment is expected to be received during March of Year 2. Assets such as investments and receivables are viewed as current if they are collectible within 60 days. How should this tax revenue be reported in the Year 1 fund financial statements?
It should not be recorded until Year 2
It should be divided proportionately between Year 1 and Year 2
As a revenue
As an encumbrance
It should not be recorded until Year 2
This sales tax assessment will not be recorded in Year 1 because it is not expected to be collected within 60 days of year-end.
Example Question #2 : Modified Accrual Basis Of Accounting
Pattinson County is currently preparing general purpose financial statements for Year 1. Currently, they are working on fund-based financial statements for the general fund and special revenue fund. Which of the following will not be reported as assets on the balance sheet for these funds at December 31, Year 1?
An outstanding receivable for property taxes with collection expected to happen in early Year 2
A piece of machinery that was purchased on December 28 and will not be paid for until January of Year 2
Supplies that were received on December 24 and reported using the purchases method
An investment made in a publicly-held company that will be liquidated in the future as needed
A piece of machinery that was purchased on December 28 and will not be paid for until January of Year 2
An encumbrance will be recorded for the machine at the time of purchase but an asset will not be recorded until the machine is received.
Example Question #3 : Modified Accrual Basis Of Accounting
The city of Carlton produces a comprehensive annual financial report which includes general purpose financial statements. Which of the following statements is true?
Both fund-based financial statements or government-wide financial statements must be included
Either fund-based financial statements or government-wide financial statements must be included
Fund-based financial statements must be included but government-wide financial statements are optional
Government-wide financial statements must be included but fund-based financial statements are optional
Both fund-based financial statements or government-wide financial statements must be included
The CAFR includes fund-base statements and government-wide statements.
All CPA Financial Accounting and Reporting (FAR) Resources
