Skip to main content
Sign in Create a free account
Varsity Tutors
Sign in Sign up

Practice Test 11 - CPA Financial Accounting & Reporting (FAR)

20 questions. Answer them in any order, then submit to see your score and every explanation.

  1. What is the proper accounting for the business combination in the acquirer's December 31, Year 1 financial statements?
  2. What is the designated market value that should be used to apply the lower of cost or market rule?
  3. How should the revenue associated with these uninstalled materials be recognized in the current period under the cost-to-cost input method?
  4. A lessor's sales-type lease produces revenue of $110,000 and cost of sales of $85,000 at commencement. What gross profit does the lessor recognize from the lease at inception?
  5. Per CF, fair value is based on an orderly sale of an asset or transfer of a liability. This price is the:
  6. A private, for-profit biotech company enters into a contract to provide (1) a research report and (2) a license to use certain data for two years. The customer agrees to pay $60,000 in cash and transfer publicly traded shares with a fair value at contract inception of $40,000; the observable standalone selling prices are $70,000 for the research report and $50,000 for the data license, and the entity measures non-cash consideration at fair value under ASC 606. How should non-cash consideration be valued for allocation and how should the entity allocate the transaction price?
  7. A city is preparing year-end financial statements for its Capital Projects Fund related to construction of a new fire station. During the year, the city issued $8,000,000 of tax-supported general obligation bonds and incurred $7,600,000 of construction invoices, of which $7,200,000 was paid by year-end. Under GASB guidance for governmental fund financial statements (including GASB Statement No. 34), how should the Capital Projects Fund report these activities at year-end?
  8. A company provides a product warranty and estimates 3% of all sales will result in warranty claims. Annual sales are $2,000,000. During the year, $45,000 of warranty claims are honored. What is warranty expense for the year?
  9. A company receives $120,000 of rental income in December Year 1, which is taxable in Year 1 but will be recognized as book revenue in Year 2 when earned. The tax rate is 30%. What is the deferred tax asset or liability at December 31, Year 1?
  10. What is the total Cost of Goods Sold that GlobeTech should report on its income statement for the year?
  11. How should the $5 million note be presented on the December 31, Year 1 balance sheet?
  12. A U.S. for-profit company acquires 100% of a German subsidiary that reports in euros (EUR) under IFRS; the subsidiary's functional currency is the EUR. The subsidiary uses the revaluation model for property, plant, and equipment (PPE) and reports land at a revalued amount of €12,000,000 at year-end; historical cost was €9,000,000. For U.S. GAAP consolidation, what adjustments are necessary to translate the foreign financial statements to U.S. GAAP with respect to this PPE balance?
  13. When a company retires a long-lived asset that had an associated asset retirement obligation (ARO), which of the following correctly describes the accounting treatment?
  14. Which of the following best describes the primary objective of reporting diluted earnings per share?
  15. The measurement period under ASC 805 allows the acquirer to retrospectively adjust provisional amounts recognized at the acquisition date. What is the maximum duration of the measurement period?
  16. A state government prepares GAAP financial statements for its General Fund and, consistent with GASB guidance, presents budgetary comparison information for the General Fund. The government's legally adopted budget is prepared on a basis that differs from GAAP (for example, it excludes certain accruals). How should the government present the budgetary comparison information in relation to the GAAP statements?
  17. What is the transaction price of this contract?
  18. Upon inception of the contract, how much revenue should be recognized for the transfer of the smartphone?
  19. A for-profit construction company reports interim financial statements for the quarter ended March 31, 20X5 (Q1). On March 20, 20X5, it received notice of an environmental claim related to a project completed in the prior year; as of March 31, management concludes a loss is probable and can be reasonably estimated at $900,000. The company applies the same accounting policies in interim and annual periods. Which disclosure is required for interim reporting?
  20. A company repurchases 3,000 shares at $25 per share using the cost method. It subsequently retires 1,000 of those treasury shares. The original issuance price was $18 per share ($1 par, $17 APIC). What journal entry records the retirement?

Practice tests