CPA Financial Accounting and Reporting (FAR) : CPA Financial Accounting and Reporting (FAR)
Study concepts, example questions & explanations for CPA Financial Accounting and Reporting (FAR)
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Example Questions
Example Question #1 : Special Purpose Frameworks
A city government is currently preparing fund-based financial statements. What guides the timing of recognition for the transactions to be reported?
Modified accrual accounting
Accrual accounting
Accrual accounting for the governmental funds and modified accrual accounting for the proprietary funds
Modified accrual accounting for the governmental funds and accrual accounting for the proprietary funds
Modified accrual accounting for the governmental funds and accrual accounting for the proprietary funds
Governmental funds are prepared using the modified accrual basis of accounting, while proprietary funds use regular accrual accounting.
Example Question #2 : Special Purpose Frameworks
Which of the following is true regarding cash basis and accrual basis revenue in regards to accounts receivable?
Both of these
A decrease in accounts receivable from the beginning of the year to the end of the year generally represents cash collections.
None of these
Under the cash basis, revenue is recognized when the receivable is initially recorded.
A decrease in accounts receivable from the beginning of the year to the end of the year generally represents cash collections.
Under both the cash and accrual basis of accounting, reductions in accounts receivable is generally due to cash collections.
Example Question #3 : Special Purpose Frameworks
When adjusting service revenue from cash basis to accrual basis, which of the following adjustments must be made?
The beginning balance of accounts receivable must be added to cash fees collected
The ending balance of accounts receivable must be added to cash fees collected
Beginning unearned service revenue must be subtracted from cash fees collected
Customer deposits received during the year must be added to cash fees collected
The ending balance of accounts receivable must be added to cash fees collected
To adjust cash received to accrual basis income, ending AR is added back to cash received and beginning AR is subtracted.
Example Question #4 : Special Purpose Frameworks
Under modified accrual basis accounting, revenue is recognized when:
Neither
Measurable and available
Earned
Both
Measurable and available
Modified accrual is used by governmental funds and income is recognized when it can be reasonably measured and when it is available for usage during the year or 60 days after.
Example Question #1 : Ifrs Vs. Gaap
IFRS requires which revenue recognition method when the outcome of rendering services cannot be estimated reliably?
Completed contract method
Cost recovery method
Percentage of completion method
Installment sales method
Cost recovery method
IFRS requires that the cost recovery method be used with an outcome of rendering services is uncertain.
Example Question #2 : Ifrs Vs. Gaap
Which of the following statements regarding research and development under IFRS is correct?
Under IFRS, research and development related expenses are both expensed
Under IFRS, research and development related expenses are both capitalized
Under IFRS, research related costs are capitalized and development costs are expensed
Under IFRS, research related costs are expensed and development costs are capitalized
Under IFRS, research related costs are expensed and development costs are capitalized
Under IFRS, research related costs are expensed and development costs are capitalized
Example Question #3 : Ifrs Vs. Gaap
Which of the following statements regarding the accounting for investment property under IFRS is correct?
Both of the above
Gains and losses from fair value adjustments on investment property are reported on the income statement.
If the entity elects the fair value method, no depreciation expense will be taken.
None of the above
Both of the above
Under IFRS, no depreciation expense is recorded under the fair value method. Also under IFRS, gains and losses from fair value adjustments on investment property are recorded on the income statement.
Example Question #4 : Ifrs Vs. Gaap
Which of the following statements regarding the accounting for investment property under IFRS is correct?
None of these
Both of these
Gains and losses from fair value adjustments on investment property are reported on the income statement.
If the entity elects the fair value method, no depreciation expense will be taken.
Both of these
Under IFRS, no depreciation expense is recorded under the fair value method. Also under IFRS, gains and losses from fair value adjustments on investment property are recorded on the income statement.
Example Question #5 : Ifrs Vs. Gaap
Under US GAAP, which of the following should be disclosed for for each reportable operating segment of an enterprise? A) Profit or loss B) Total Assets
Both
A
Neither
B
Both
Both of these items should be disclosed under US GAAP. Generally, more pieces of information should be disclosed than less.
Example Question #1 : Conceptual Framework
The objectives of financial reporting, as set forth by the FASB conceptual framework, are based on which of the following?
Generally accepted accounting principles
The needs of financial statement users
SEC reporting requirements
Materiality
The needs of financial statement users
FASB basis its objectives for financial reporting on the needs of the ultimate financial statement user.
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