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Practice Test 7 - CPA Financial Accounting & Reporting (FAR)

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

  1. Nexus Corporation has 1,000,000 authorized shares of $1 par value common stock. During 2024, the following transactions occurred: January 1 - 400,000 shares outstanding; March 15 - issued 100,000 shares for $12 per share; June 30 - declared and distributed a 2-for-1 stock split; September 10 - repurchased 50,000 shares for $8 per share. What is the weighted-average number of shares outstanding for 2024?
  2. What are the net assets available for benefits for the Sterling Corp. Pension Plan on December 31?
  3. What is the appropriate accounting treatment for the cost of this equipment in the year of purchase?
  4. How should these interfund activities be reported in Central City's fund financial statements for the enterprise and internal service funds?
  5. A state government's general fund shows the following year-end balances: revenues of $45,000,000, expenditures of $42,000,000, and other financing uses of $2,500,000 for transfers to other funds. The state also recorded $1,800,000 in depreciation on governmental capital assets and had a $400,000 increase in the net pension liability during the year. What amount should be reported as the change in net position for governmental activities?
  6. A state government's toll road is reported as an enterprise fund. The enterprise fund issued 10-year revenue bonds and is preparing its statement of net position under GASB standards. Which factor affects the classification of liabilities in the proprietary fund?
  7. How much revenue should the construction company recognize in Year 1?
  8. A for-profit entity sponsors a defined benefit pension plan. During 20X5, the plan experiences an actuarial gain of $900,000 due to changes in actuarial assumptions. Under FASB ASC 715, how should the actuarial gain affect the 20X5 financial statements (ignore amortization and tax effects)?
  9. On November 15, 20X4, a U.S. for-profit entity (U.S. dollar functional currency) purchased equipment from a Mexican vendor for MXN 2,000,000, payable in 90 days. The spot rate was $0.056/MXN on November 15 and $0.060/MXN on December 31, 20X4; the equipment is carried at historical cost. Under U.S. GAAP, what journal entry should be recorded on December 31, 20X4 to remeasure the MXN-denominated accounts payable?
  10. A subsequent event for an entity with a December 31 year-end is an event or transaction that occurs during which of the following periods?
  11. Global Dynamics Inc. has significant operations in multiple countries and regularly enters into transactions denominated in foreign currencies. During 2024, the company had €2.3 million in outstanding accounts receivable from European customers and ¥450 million in accounts payable to Japanese suppliers at year-end. The company also maintains a €800,000 intercompany loan to its German subsidiary. Foreign exchange rates fluctuated significantly during 2024, resulting in translation gains and losses. Additionally, the company entered into forward contracts to hedge certain foreign currency exposures. What disclosures are required regarding the company's foreign currency activities?
  12. A company repurchases treasury stock at $48 per share (cost method) and later reissues the shares at $48 per share exactly. What is the journal entry for the reissuance?
  13. What is the company's diluted earnings per share for the year?
  14. What amount should the Regional Waste Management Authority recognize as additional closure cost expense for fiscal year 2024?
  15. A company has a $100,000 net operating loss (NOL) carryforward. The enacted tax rate is 25%. Management determines it is more likely than not that the full NOL will be utilized. What is the correct balance sheet presentation?
  16. In this transaction, TravelSite.com is acting as an agent. How much revenue should TravelSite.com recognize from this booking?
  17. Under ASC 842, which of the following costs incurred by the lessor in originating a sales-type lease are expensed at lease commencement?
  18. On November 15, 2024, Sunrise Corporation was notified by its insurance company that its annual insurance premium would increase from $48,000 to $60,000 effective January 1, 2025. Sunrise pays insurance premiums quarterly in advance. The company paid $12,000 on October 1, 2024, covering October through December 2024. What journal entry should Sunrise record on December 31, 2024, related to this insurance matter?
  19. What is the appropriate accounting treatment for the building's depreciation expense?
  20. What is the carrying amount of the bonds payable on June 30, Year 1, after the first interest payment?

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