CPA-Financial Exam Questions & Answers
CPA Financial Accounting and Reporting • AICPA
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Sample CPA-Financial Questions
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Tack, Inc. reported a retained earnings balance of $150,000 at December 31,1990. In June 1991, Tack discovered that merchandise costing $40,000 had not been included in inventory in its 1990 financial statements. Tack has a 30% tax rate. What amount should Tack report as adjusted beginning retained earnings in its statement of retained earnings at December 31, 1991?
Choice 'b' is correct. $178,000.
On January 1, 1991, Brecon Co. installed cabinets to display its merchandise in customers' stores. Brecon expects to use these cabinets for five years. Brecon's 1991 multi-step income statement should include:
Choice 'b' is correct. One-fifth of the cabinet costs (depreciation expense) should be included in selling, general, and administrative expenses for 1991.
Choice 'a' is incorrect. Merchandise display cabinets in stores relate to selling activities, not to the purchase cost of goods sold.
Choices 'c' and 'd' are incorrect. Merchandise display cabinets are fixed assets whose cost should be allocated systematically over their five-year useful life.
Kell Corp.'s $95,000 net income for the quarter ended September 30, 1990, included the following aftertax items:
* A $60,000 extraordinary gain, realized on April 30, 1990, was allocated equally to the second, third, and fourth quarters of 1990.
* A $16,000 cumulative-effect loss resulting from a change in inventory valuation method was recognized on August 2, 1990.
In addition, Kell paid $48,000 on February 1, 1990, for 1990 calendar-year property taxes. Of this amount, $12,000 was allocated to the third quarter of 1990.
For the quarter ended September 30, 1990, Kell should report net income of:
Choice 'a' is correct. $91,000 net income for the third quarter ended 9-30-90.
Rules: The entire amount of an 'extraordinary' item should be reported during the period incurred.
A 'cumulative effect' type accounting change is not included in the net income of the period of change; instead, the beginning of the year retained earnings is restated.
Expenses, which benefit more than one interim period, such as property taxes, are allocated among the periods benefited.
APB Opinion No. 28, Interim Financial Reporting, concluded that interim financial reporting should be viewed primarily in which of the following ways?
Choice 'c' is correct. Interim financial reporting should be viewed as reporting for an integral part of an annual period.
Choices 'a', 'b', and 'd' are incorrect, per the above rule.
Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies?
Choice 'c' is correct. Yes - No.
Yes - 'Depreciation methods' should be disclosed in the 'summary of significant accounting policies.'
No - Composition of fixed assets (or any other account) should not be disclosed in the 'summary of significant accounting policies.'
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