CPA — Practice Questions, FAR flashcards

6 of 70 questions free to study here · 21 topics · the whole deck is built into Willys

Multiple-choice practice questions, one best answer each, on revenue, statements, cash flows, assets, leases, bonds, income taxes, equity, EPS, consolidations, and governmental and NFP reporting. Since 2024, lessor accounting, consolidations and much governmental accounting are tested in BAR.

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Practice deck · part of CPA Exam (core) · written against: AICPA CPA Exam Blueprints under CPA Evolution (2024 core: FAR, AUD, REG); no year-indexed tax figures. Updated 2026-10-10.

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6 questions from the deck as they are. Flip, rate yourself, filter by topic; your progress stays in this browser.

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An analyst can line up two retailers' financial statements and identify the similarities and differences between them because both apply the same accounting methods. Which qualitative characteristic does this illustrate?

A) Verifiability
B) Comparability
C) Predictive value
D) Neutrality

B) Comparability

Comparability is the enhancing characteristic that lets users identify similarities and differences among items, across entities or across periods. Predictive value is an ingredient of relevance, not of comparing entities.
Conceptual Framework
A donor makes an unconditional written pledge of 30,000 dollars to fund a not-for-profit's literacy program next year. How does the NFP report the pledge when it is received?

A) A refundable advance until the program begins
B) Contribution revenue with donor restrictions now
C) Contribution revenue without donor restrictions now
D) No entry until the donor pays the cash

B) Contribution revenue with donor restrictions now

An unconditional promise to give is recognized as revenue and a receivable when received; because it is for a specific program and a future period, it increases net assets with donor restrictions. Deferring it would treat an unconditional promise as if it were conditional.
Not-for-Profit
On January 1 an investor pays 400,000 dollars for 25% of an investee's voting stock and gains significant influence; cost equals its share of book value, and fair values equal book values. The investee earns 160,000 and pays 60,000 of dividends during the year. What is the investment's December 31 carrying amount?

A) 455,000
B) 400,000
C) 425,000
D) 440,000

C) 425,000

Under the equity method, the account rises by 25% of income (40,000) and falls by dividends received (15,000): 400,000 + 40,000 − 15,000 = 425,000. Ignoring the dividends gives 440,000.
Investments
A company bought 2,000 of its own shares at 30 dollars each under the cost method. It later reissues all of them at 26 dollars each. Additional paid-in capital from earlier treasury stock sales is 4,000. What is the effect on retained earnings?

A) No effect on retained earnings
B) An 8,000 decrease in retained earnings
C) An 8,000 loss reported in net income
D) A 4,000 decrease in retained earnings

D) A 4,000 decrease in retained earnings

The 8,000 shortfall below cost is charged first to APIC from treasury stock (4,000) and the rest to retained earnings (4,000). Treasury stock transactions never produce a gain or loss in income.
Stockholders' Equity
A company's lawyers say a loss on a lawsuit is probable and estimate it at 300,000 to 900,000 dollars, with 500,000 the best estimate within that range. How much does the company accrue under US GAAP?

A) 500,000
B) 300,000
C) 900,000
D) 600,000

A) 500,000

When one amount in the range is a better estimate than any other, that amount is accrued. The minimum of the range (300,000) is accrued only when no amount in the range is more likely than another.
Contingencies
On December 1 a US company sells goods to a German customer for 100,000 euros, to be paid in January. The rate is 1.10 dollars per euro on December 1 and 1.08 on December 31. What does the company report for the year ended December 31?

A) No gain or loss until the cash is collected
B) A 2,000 transaction loss in OCI
C) A 2,000 transaction loss in net income
D) A 2,000 transaction gain in net income

C) A 2,000 transaction loss in net income

The euro receivable is a foreign currency transaction, remeasured at the year-end rate: 110,000 falls to 108,000, and the loss goes to net income. OCI is used for translation adjustments of foreign subsidiaries, not for transaction gains and losses.
Foreign Currency

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About these cards

Review status: Second-reader reviewed, with corrections applied.

Checked against:

Checked against the AICPA CPA Exam FAR blueprint (topic list only; no text copied).
Checked against FASB Concepts Statement 8, the FASB ASC topic structure (Topics 205, 220, 230, 250, 260, 320, 321, 323, 330, 350, 360, 450, 470, 505, 606, 715, 740, 805, 810, 830, 842, 855, 958) and GASB Statement 34 and 84 concepts; reference only, no codification or standards text copied.
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