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Prepare for the AICPA CPA Financial Accounting and Reporting exam with our extensive collection of questions and answers. These practice Q&A are updated according to the latest syllabus, providing you with the tools needed to review and test your knowledge.
QA4Exam focus on the latest syllabus and exam objectives, our practice Q&A are designed to help you identify key topics and solidify your understanding. By focusing on the core curriculum, These Questions & Answers helps you cover all the essential topics, ensuring you're well-prepared for every section of the exam. Each question comes with a detailed explanation, offering valuable insights and helping you to learn from your mistakes. Whether you're looking to assess your progress or dive deeper into complex topics, our updated Q&A will provide the support you need to confidently approach the AICPA CPA-Financial exam and achieve success.
The questions for CPA-Financial were last updated on Jan 20, 2025.
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FASB's conceptual framework explains both financial and physical capital maintenance concepts. Which capital maintenance concept is applied to currently reported net income, and which is applied to comprehensive income?
Choice 'c' is correct. Financial capital - Financial capital.
Financial capital maintenance is considered to be an element of both 'currently reported net income' and 'comprehensive income.' This was a rare instance in which this type of information was asked on the exam.
Which of the following statements best describes an operating procedure for issuing a new Financial Accounting Standards Board (FASB) statement?
Choice 'c' is correct. A new statement from the FASB is issued only after a majority vote of the members of the FASB.
Choice 'a' is incorrect. There is no necessity for the EITF to approve a discussion memorandum
(presumably the question means a discussion memorandum of the FASB statement itself and not an EITF statement) before it is disseminated to the public.
Choice 'b' is incorrect. There is no necessity for an exposure draft to be modified per public opinion before issuing the discussion memorandum (a question can be raised here as to 'what' discussion memorandum'). Exposure drafts are quite/most often modified before they are issued as FASB statements, but they do not have to be. Whether they are or are not modified is a function of whether the FASB thinks they should be modified, partly due to the public comments that have been received.
Choice 'd' is incorrect. There is no way to rescind a new FASB statement, although, in reality, a FASB statement can be rescinded by the issuance of a new statement on the same subject. However, even if there was a way to rescind a new FASB statement, it would not be by a majority vote of the AICPA membership, but by a majority vote of the members of the FASB.
Reporting Net Income
On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with Quo's president and outside accountants, made changes in accounting policies, corrected several errors dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List B represents the general accounting treatment required for these transactions. These treatments are:
* Cumulative effect approach - Include the cumulative effect of the adjustment resulting from the accounting change or error correction in the 1993 financial statements, and do not restate the 1992 financial statements.
* Retroactive or retrospective restatement approach - Restate the 1992 financial statements and adjust 1992 beginning retained earnings if the error or change affects a period prior to 1992.
* Prospective approach - Report 1993 and future financial statements on the new basis but do not restate 1992 financial statements.
Item to Be Answered
During 1993, Quo determined that an insurance premium paid and entirely expensed in 1992 was for the period January 1, 1992, through January 1, 1994.
List B (Select one)
Choice 'B' is correct. If comparative FS are issued, restate prior year's FS. If comparative FS are not issued, restate prior year-end's retained earnings account by 'adjusting' (net of tax) the opening balance of the current retained earnings statement.
A planned volume variance in the first quarter, which is expected to be absorbed by the end of the fiscal period, ordinarily should be deferred at the end of the first quarter if it is:
Choice 'd' is correct. Yes - Yes.
Rule: Volume variances that are planned or expected to be absorbed by the end of the year should be deferred at interim whether favorable or unfavorable.
In which of the following situations should a company report a prior-period adjustment?
Choice 'b' is correct. Prior period adjustments consist of: corrections of errors in the financial statements of prior periods, retroactive restatements required by new GAAP pronouncements, and changes from a non-GAAP method of accounting to a GAAP method of accounting (which are corrections of errors).
Choice 'a' is incorrect. This change is a change in accounting estimate.
Choice 'c' is incorrect. This change is a change for one GAAP method of depreciation to another GAAP method of depreciation. Under SFAS No. 154, it is treated as a change in accounting estimate effected by a change in accounting principle and is handled prospectively, and not as a prior-period adjustment.
Choice 'd' is incorrect. This is a business activity ordinary in nature.
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