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that is tested on the CPA Exam evolves and as we improve our materials. CPA Resources at terney.info to learn if a newer. CPA Exam Notes from Glomont CPA Review. Last Minute CPA Exam Notes Financial Accounting and Reporting (FAR) in PDF and Textbook format. You can . Chapter 1: Beginning Your CPA Review Program. General Comments on the Examination. Attributes of Examination Success. Purpose and Organization of This.

Fiscal Year After completing this unit you should be able to do the following: Understand the differences between U. Generally Accepted Accounting Principles U. Know the objectives of general-purpose financial reporting, its primary users, and the purpose of financial reports 4. Understand the fundamental and enhancing qualitative characteristics of financial reports 5. Know the role of financial statements, each of their elements, and their importance to business entities 6. Calculate amounts for financial statement components 7. Know how to report income from continuing operations and discontinued operations 8.

XBRL exhibits enable investors to compare information between companies using analytic software. Securities and Exchange Commission 1. The SEC was created under which of the following acts? The Securities Act of b. The Securities Exchange Act of c. Both the Securities Act of and the Securities Exchange Act of were designed to restore investor confidence subsequent to the stock market crash. The Act contains accounting and disclosure requirements for the initial offering of a stock or bond.

The Securities Exchange Act of also identifies and prohibits certain types of conduct in the markets and provides the Commission with disciplinary powers over regulated entities and the persons associated with these entities.

The Securities Exchange Act of empowers the SEC to require companies that issue publicly traded securities to report certain information on a periodic basis. FASB Interpretations c. Derivatives Implementation Group Issues Correct answer: Accounting literature that is not included in the Codification will be considered non-authoritative.

To be relevant to the investors, creditors, lenders, and other users, accounting information must be capable of making a difference in a decision. Ande Co. This practice follows which of the following accounting concepts? Matching b. Going concern c. Consistency d. Substance over form Correct answer: For an accounting period, net income or loss is determined by the process of associating realized revenues with the expenses and expired costs that were necessary to generate them.

This often requires estimates and allocations. The matching principle states that income or loss is determined by a process of associating realized revenues with the expenses necessary to generate them. According to the IASB Framework, an item that meets the definition of an element should be recognized in the financial statements if: It is probable that any future economic benefit associated with the item will flow to or from the entity; or II. The item has a cost or value that can be measured with reliability.

Please choose one of the following: I and II d. None of the above Correct answer: If the item meets the definition of an element and can be reliably measured, then it will be incorporated into the income statement or the statement of financial position.

Under U. GAAP, an item that meets the definition of an element should be recognized in the financial statements if the item: If an item possesses the characteristics that define an element, then this is a necessary but not sufficient condition for formally recognizing the item in the financial statements.

Which capital-maintenance concept is applied to currently reported net income and which is applied to comprehensive income? Currently reported net Comprehensive income income a. Financial capital Physical capital b. Physical capital Physical capital c. Financial capital Financial capital d.

Physical capital Financial capital. The major difference between them involves the effects of price changes on assets held and liabilities owed during a period. These two concepts are: Financial Capital Concept: Physical Capital Concept: The physical capital maintenance concept supports current cost accounting. Under the physical capital concept, adjustments would be a separate element rather than gains and losses. Financial capital maintenance is the basis for U.

Which of the following is not a characteristic of an asset? A probable future benefit in a contribution to future net cash inflows b. An entity can obtain and control access to this benefit c. A transaction or an event that has already occurred that leads to control by the entity d. Little or no discretion is needed to avoid future sacrifice Correct answer: Little or no discretion required to avoid future sacrifice is a characteristic of liabilities.

An asset continues to be an asset until it is collected, transferred, used, or destroyed. Entities that incur liabilities face probable future sacrifices of economic benefits. Which of the following is not a characteristic of liabilities? Little or no discretion to avoid future sacrifice b. A legal, equitable, or constructive duty to transfer assets in the future c. A transaction or event that has already occurred for the obligated enterprise d. A probable future benefit in a contribution to future net cash inflows Correct answer: When an asset is classified as held for sale, it is measured at the lower of either its carrying amount or its fair value less the costs incurred to sell the asset.

So, a loss should be recognized for any initial or subsequent write-down to fair value less the cost incurred to sell the asset. Wand Inc. So, Wand Inc. The results of the operations of a component that is classified as held for sale should be reported in discontinued operations, in the period s in which they occur. Which of the following is are considered to be a change in accounting principle?

The initial adoption of an accounting principle in order to recognize events or transactions that have occurred for the first time or that previously were immaterial in their effect II. An adoption or modification of an accounting principle that is necessitated by transactions or events that are clearly different in substance from those previously occurring III. At the beginning of 20x7, entity A decides to adopt the first-in, first-out FIFO method of inventory valuation.

But, since its inception on January 1, 20x5, entity A had been using the last-in, first-out LIFO method for financial and tax reporting. Entity A concluded that the FIFO method is the preferable inventory valuation method for its inventory. Select the best answer: III b. A presumption exists that an accounting principle, once adopted, should not be changed in the accounting of events and transactions of a similar type.

Consistent use of the same accounting principle, from one accounting period to another, enhances the utility of financial statements, for users, by facilitating the analysis and understanding of the comparative accounting data of an entity.

Neither of the following is considered to be a change in accounting principle: Based on the following information, what journal entry should Beta Co. For the years 20x1 to 20x3, it appropriately reported income under the completed-contract method. In 20x4, Beta Co. Cumulative effect: The credit to the Retained Earnings account is the cumulative effect of the change in the accounting method as of the beginning of the year in which the accounting change is made, which is 20x4.

The credit to the Income Taxes Payable account assumes that the same change is made for tax purposes. The debit to the construction-in-progress account is the cumulative effect before income taxes as of the beginning of the year in which the accounting change is made, which is 20x4. The change in the accounting method for long-term construction contracts took place in 20x4. After reading the following, please answer all of questions 1 to 5. On January 1, 20x1, Mitchell Co.

The machine was depreciated by the double-declining- balance method. On January 1, 20x3, Mitchell changed to the straight-line method. Mitchell Co. What should be the depreciation expense on this machine for the year-ended December 31, 20x3? What is the accumulated depreciation for this machine at December 31, 20x3? In its 20x3 income statement, what amount should Mitchell Co.

On January 1, 20x3, what amount should Mitchell report as the deferred income tax liability as a result of this change? Prepare the journal entry to record the change from the double-declining balance method to the straight-line method in 20x3.

Changes in accounting estimates should be accounted for and reported pro- spectively. The entity should not account for a change in the accounting estimate by restating or retrospectively adjusting the amounts reported in the financial state- ments of prior periods or by reporting the pro forma amounts for the prior periods. In addition, the cumulative effect of the change in the depreciation method would not be recognized in either the income statement or in the retained earnings statement.

In addition, the cumu- lative effect of the change in the depreciation method would not be recognized in either the income statement or in the retained earnings statement. Therefore, there are no deferred income-tax-liability effects.

Under IFRS, which of the following is not a disclosure requirement related to the correction of a material prior-period error: The impact of the correction on basic and diluted earnings per share for each period presented c.

Free CPA Exam Questions

The nature of the error d. The amount of the correction at the beginning of the earliest period presented. Under IFRS, disclosures relating to error correction include: Althouse Co. The equipment should have been depreciated over five years with no salvage value.

This is done by restating all prior years that are affected by the error. Corrections of errors must not be included in net income, therefore, no adjustment to depreciation expense should be made for the prior-period errors. A company reported the following information for year 20x You can download this from https: Flag for inappropriate content. Related titles. Revenue Recognition 1.

Jump to Page. Search inside document. Fiscal Year 21 1. XBRL Overview 83 1. The pages below are random excerpts. Related question 1 1. Type of Accounting Change and Effect on Financial Statements accounting treatment Type of accounting change Accounting treatment Change in accounting principle Retrospective application, except when it is impracticable to determine.

Prospective if impracticable to determine Change in accounting estimate Prospective Application Change in reporting entity Retrospective Application 1. Cumulative effect 1. Comparative financial statements If comparative financial statements are being presented, then the cumulative effect of a change is reported as an adjustment to the beginning-of-year retained-earnings balance of the earliest year presented.

Non-Comparative financial statements If non-comparative financial statements are being presented, then the cumulative effect of the change is reported as an adjustment to the beginning-of-year retained- earnings balance.

The key benefit of a good CPA prep course is the ability to master the material by regularly taking practice questions that include clear answer explanations. The best prep courses offer detailed analytical data to help you focus your studying on your weakest areas. The challenge can be sorting through the different options and price points. We created a detailed comparison of the best CPA exam prep courses to help you compare the prices and features.

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CPA Exam Notes Financial (FAR) FREE PDF

Little or no discretion required to avoid future sacrifice is a characteristic of liabilities. An asset continues to be an asset until it is collected, transferred, used, or destroyed. Entities that incur liabilities face probable future sacrifices of economic benefits.

Which of the following is not a characteristic of liabilities? Little or no discretion to avoid future sacrifice b. A legal, equitable, or constructive duty to transfer assets in the future c.

CPA Exam Study Materials

A transaction or event that has already occurred for the obligated enterprise d. A probable future benefit in a contribution to future net cash inflows Correct answer: d. So, a loss should be recognized for any initial or subsequent write-down to fair value less the cost incurred to sell the asset.

Wand Inc. So, Wand Inc. The results of the operations of a component that is classified as held for sale should be reported in discontinued operations, in the period s in which they occur. Which of the following is are considered to be a change in accounting principle?

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