CPA Final Exam - Questions and Answers
1.Which of the following is the list of the basic financial statements?
A. Balance sheet, income statement, statement of changes in retained earnings
B. Statement of financial position, income statement, and statement of changes in retained earnings
C. Balance sheet, statement of financial position, income statement, and statement of changes in
retained earnings
D. Balance sheet, income statement, and statement of cash flows (Chapter 1, pg. 2)
2. Which of the following is NOT true? The objectives of financial reporting are to provide information
A. That is useful to those making investment and credit decisions.
B. To internal managers in planning, controlling, and making a variety of management decisions.
(Chapter 1, pg. 2)
C. That is helpful to current and potential investors and creditors in assessing the amount, timing, and
uncertainty of future cash flows.
D. That discloses economic resources, claims to those resources, and the changes therein.
3 Which of the following is the typical way to date an income statement?
A. For the year ended December 31, 20XX (Chapter 1, pg. 2)
B. At December 31, 20XX
C. As of December 31, 20XX
D. During the period 20X4 -20XX
4 What organizations must present a statement of cash flows?
A. Only Publicly held business enterprises (Chapter 1.8, pg. 38)
B. Only Privately held business enterprises
C. Business enterprises only
D. All business enterprises and not-for-profit organizations
,5 Which of the following financial statements includes investing, operating activities, and financial
activities?
A. Statement of cash flows ( Chapter 1, Page 18)
B. Balance sheet
C. Income statement
D. Statement of shareholders’ equity
6 What is the purpose of a statement of cash flows?
A. To evaluate a firm’s liquidity, solvency, and financial flexibility ( Chapter 1, Page 18)
B. To evaluate a firm’s economic resources and obligations
C. To determine a firm’s components of income from operations
D. To determine whether insiders have sold or purchased the firm’s stock
7 Which of the following is NOT a condition for reporting a segment?
A. Revenue is 10% or more of total corporate revenue.
B. Operating profit is 10% or more of total corporate operating profit.
C. Identifiable assets are 10% or more of total corporate assets.
D. Foreign operations provide 3% or more of total corporate sales. (Chapter 1 pg. 21)
8 When preparing interim financial statements, a company should comply with which of the following
requirements?
A. Defer recognition of seasonal revenue.
B. Disregard permanent decreases in the market value of its inventory.
C. Allocate revenues and expenses evenly over the quarters, regardless of when they actually occurred.
D. Apply the same accounting principles used in the last year''s annual report. (Chapter 1, pg. 21)
, 9 Wilson Corp. experienced a $50,000 decline in the market value of its inventory in the first quarter of
its fiscal year. Wilson had expected this decline to reverse in the third quarter, and the third quarter
recovery exceeded the previous decline by $10,000. Wilson''s inventory did not experience any other
declines in market value during the fiscal year. What amounts of loss or gain should Wilson report in its
interim financial statements for the first and third quarters?
A. $0 in first quarter, and $0 in third quarter
B. $0 in first quarter, and $10,000 gain in third quarter
C. $50,000 loss in first quarter, and $50,000 gain in third quarter
D. $50,000 loss in first quarter, and $60,000 gain in third quarter
10 Groups impacted by the Sarbanes-Oxley Act (SOX) include: CPA’s CPA firms auditing publicly
companies, public traded companies, their employees, officers, owners, attorneys who work for clients
at publicly traded companies. Which of the following is another group also impacted?
A. Investment bankers (Chapter 1.8, pg. 34)
B. Sole proprietors
C. Agents and agencies
D. Federal officers
11 The Sarbanes-Oxley Act of 2002 addressed all of the following issues EXCEPT:
A. Created a public accounting oversight Board
B. Increased the accuracy of corporate tax returns (Chapter 1.8, pg. 34)
C. Strengthened the independence of firms that audit public companies
D. Increased corporate responsibility
12 What are the regulatory bodies responsible for monitoring and enforcing the Sarbanes-Oxley Act?
A. SEC, PCAOB (Chapter 1.8, pg. 34)
B. CEO, CFO
C. AICPA, FASB
D. S&P, Moody’s
1.Which of the following is the list of the basic financial statements?
A. Balance sheet, income statement, statement of changes in retained earnings
B. Statement of financial position, income statement, and statement of changes in retained earnings
C. Balance sheet, statement of financial position, income statement, and statement of changes in
retained earnings
D. Balance sheet, income statement, and statement of cash flows (Chapter 1, pg. 2)
2. Which of the following is NOT true? The objectives of financial reporting are to provide information
A. That is useful to those making investment and credit decisions.
B. To internal managers in planning, controlling, and making a variety of management decisions.
(Chapter 1, pg. 2)
C. That is helpful to current and potential investors and creditors in assessing the amount, timing, and
uncertainty of future cash flows.
D. That discloses economic resources, claims to those resources, and the changes therein.
3 Which of the following is the typical way to date an income statement?
A. For the year ended December 31, 20XX (Chapter 1, pg. 2)
B. At December 31, 20XX
C. As of December 31, 20XX
D. During the period 20X4 -20XX
4 What organizations must present a statement of cash flows?
A. Only Publicly held business enterprises (Chapter 1.8, pg. 38)
B. Only Privately held business enterprises
C. Business enterprises only
D. All business enterprises and not-for-profit organizations
,5 Which of the following financial statements includes investing, operating activities, and financial
activities?
A. Statement of cash flows ( Chapter 1, Page 18)
B. Balance sheet
C. Income statement
D. Statement of shareholders’ equity
6 What is the purpose of a statement of cash flows?
A. To evaluate a firm’s liquidity, solvency, and financial flexibility ( Chapter 1, Page 18)
B. To evaluate a firm’s economic resources and obligations
C. To determine a firm’s components of income from operations
D. To determine whether insiders have sold or purchased the firm’s stock
7 Which of the following is NOT a condition for reporting a segment?
A. Revenue is 10% or more of total corporate revenue.
B. Operating profit is 10% or more of total corporate operating profit.
C. Identifiable assets are 10% or more of total corporate assets.
D. Foreign operations provide 3% or more of total corporate sales. (Chapter 1 pg. 21)
8 When preparing interim financial statements, a company should comply with which of the following
requirements?
A. Defer recognition of seasonal revenue.
B. Disregard permanent decreases in the market value of its inventory.
C. Allocate revenues and expenses evenly over the quarters, regardless of when they actually occurred.
D. Apply the same accounting principles used in the last year''s annual report. (Chapter 1, pg. 21)
, 9 Wilson Corp. experienced a $50,000 decline in the market value of its inventory in the first quarter of
its fiscal year. Wilson had expected this decline to reverse in the third quarter, and the third quarter
recovery exceeded the previous decline by $10,000. Wilson''s inventory did not experience any other
declines in market value during the fiscal year. What amounts of loss or gain should Wilson report in its
interim financial statements for the first and third quarters?
A. $0 in first quarter, and $0 in third quarter
B. $0 in first quarter, and $10,000 gain in third quarter
C. $50,000 loss in first quarter, and $50,000 gain in third quarter
D. $50,000 loss in first quarter, and $60,000 gain in third quarter
10 Groups impacted by the Sarbanes-Oxley Act (SOX) include: CPA’s CPA firms auditing publicly
companies, public traded companies, their employees, officers, owners, attorneys who work for clients
at publicly traded companies. Which of the following is another group also impacted?
A. Investment bankers (Chapter 1.8, pg. 34)
B. Sole proprietors
C. Agents and agencies
D. Federal officers
11 The Sarbanes-Oxley Act of 2002 addressed all of the following issues EXCEPT:
A. Created a public accounting oversight Board
B. Increased the accuracy of corporate tax returns (Chapter 1.8, pg. 34)
C. Strengthened the independence of firms that audit public companies
D. Increased corporate responsibility
12 What are the regulatory bodies responsible for monitoring and enforcing the Sarbanes-Oxley Act?
A. SEC, PCAOB (Chapter 1.8, pg. 34)
B. CEO, CFO
C. AICPA, FASB
D. S&P, Moody’s
