CPA EXAM REVIEW FINANCIAL ACCOUNTING & REPORTING (FAR) QUESTIONS AND VERIFIED SOLUTIONS GRADED A+

CPA EXAM REVIEW FINANCIAL
ACCOUNTING & REPORTING (FAR)
QUESTIONS AND VERIFIED
SOLUTIONS GRADED A+
Which of the following is not a comprehensive basis of accounting other than generally accepted
accounting principles?


A. Basis of accounting used by an entity to comply with the financial reporting requirements of a
government regulatory agency


B. Cash receipts and disbursements basis of accounting


C. Basis of accounting used by an entity to file its income tax return


D. Basis of accounting used by an entity to comply with the financial reporting requirements of a
lending institution
D.


The following accounting bases may be used to prepare financial statements in conformity with a
comprehensive basis of accounting other that GAAP:


1. income tax basis of accounting
2. cash basis of accounting
3. modified cash basis of accounting
4. basis of accounting used by an entity to comply with the financial reporting requirements of a
government regulatory agency.
5. a definite set of criteria having substantial support that is applied to all material items in the
financial statements.

,An other comprehensive basis of accounting (OCBOA) outside of the permitted bases listed
above is prohibited. A basis of accounting used by an entity to comply with the financial
reporting requirements of a lending institution is not a permitted OCBOA.




One criterion for a capital lease is that the term of the lease must equal a minimum percentage of
the leased property's economic life at the inception of the lease. The minimum percentage is:


A. 75%
B. 41%
C. 50%
D. 90%
A.


A lease is classified as a capital lease if one of the following criteria is met:


1. the title is transferred to the lease at the end of the lease period.
2. a bargain purchase option exists
3. the lease period is a t least 75% of the asset's life.
4. the present value of the minimum lease payments is at least 90% of the fair value of the asset




On January 15, Year 5 Rice Co. declared its annual cash dividend on common stock for the year
ended January 31, Year 5. The dividend was paid on February 9, Year 5, to stockholders of
record as of January 28, Year 5. On what date should Rice decrease retained earnings by the
amount of the dividend?


A. January 15, year 5
B. January 31, year 5

, C. January 28, year 5
D. February 9, year 5
A.


Retained earnings is decreased and a current liability for the cash dividend is recorded on the
declaration date, in this case, January 15, year 5




For interim financial reporting, a company's income tax provision for the second quarter of a
given year should be determined using the:


A. Statutory tax rate for the year


B. effective tax rate expected to be applicable for the second quarter of the year


C. effective tax rate expected to be applicable for the full year, as estimated at the end of the first
quarter of the year


D. effective tax rate expected to be applicable for the full year, as estimated at the end of the
second quarter of the year.
D.


The company should use the effective tax rate expected to be applicable for the full year as
estimated at the end of the second quarter of the year because the interim period is considered an
integral part of the accounting year




What type of bond matures at different points in time?


A. Bearer Bonds