Free AICPA FAR Practice Test & Real Exam Questions
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?
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?
Correct Answer: D
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On August 31, 1992, Harvey Co. decided to change from the FIFO periodic inventory system to the
weighted average periodic inventory system. Harvey is on a calendar year basis. The cumulative effect of
the change is determined:
weighted average periodic inventory system. Harvey is on a calendar year basis. The cumulative effect of
the change is determined:
Correct Answer: A
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Which of the following should be reported as a prior period adjustment?
Correct Answer: B
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Lore Co. changed from the cash basis of accounting to the accrual basis of accounting during 1994. The
cumulative effect of this change should be reported in Lore's 1994 financial statements as a:
cumulative effect of this change should be reported in Lore's 1994 financial statements as a:
Correct Answer: A
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Belle Co. determined after four years that the estimated useful life of its labeling machine should be 10
years rather than 12 years. The machine originally cost $46,000 and had an estimated salvage value of
$ 1,000. Belle uses straight-line depreciation. What amount should Belle report as depreciation expense
for the current year?
years rather than 12 years. The machine originally cost $46,000 and had an estimated salvage value of
$ 1,000. Belle uses straight-line depreciation. What amount should Belle report as depreciation expense
for the current year?
Correct Answer: C
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The summary of significant accounting policies should disclose the:
Correct Answer: C
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Opto Co. is a publicly-traded, consolidated enterprise reporting segment information. Which of the
following items is a required enterprise-wide disclosure regarding external customers?
following items is a required enterprise-wide disclosure regarding external customers?
Correct Answer: B
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Coffey Corp.'s trial balance of Income Statement Accounts for the year ended December 31, 1988 as
follows:
Coffey's income tax rate is 30%. The gain on debt extinguishment is considered a usual and recurring part
of Coffey's operations. The hurricane is considered an unusual and infrequent event. Coffey prepares a
multiple-step income statement for 1988.
Net income is:
follows:
Coffey's income tax rate is 30%. The gain on debt extinguishment is considered a usual and recurring part
of Coffey's operations. The hurricane is considered an unusual and infrequent event. Coffey prepares a
multiple-step income statement for 1988.
Net income is:
Correct Answer: B
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According to the FASB conceptual framework, the objectives of financial reporting for business
enterprises are based on:
enterprises are based on:
Correct Answer: B
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Which of the following information should be included in Melay, Inc.'s 1992 summary of significant
accounting policies?
accounting policies?
Correct Answer: A
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The following items were among those that were reported on Lee Co.'s income statement for the year
ended December 31, 1989:
The office space is used equally by Lee's sales and accounting departments. What amount of the above
listed items should be classified as general and administrative expenses in Lee's multiple-step income
statement?
ended December 31, 1989:
The office space is used equally by Lee's sales and accounting departments. What amount of the above
listed items should be classified as general and administrative expenses in Lee's multiple-step income
statement?
Correct Answer: D
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Which of the following must be included in a company's summary of significant accounting policies in the
notes to the financial statements?
notes to the financial statements?
Correct Answer: C
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How should the effect of a change in accounting estimate be accounted for?
Correct Answer: D
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How should the effect of a change in accounting principle that is inseparable from the effect of a change in
accounting estimate be reported?
accounting estimate be reported?
Correct Answer: D
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