Free FAR CPA Practice Question Walkthroughs

Free FAR CPA Practice Question Walkthroughs

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On this page you’ll find free FAR CPA practice question walkthroughs on topics from the AICPA CPA exam blueprints for the FAR exam.

FAR I: Financial Reporting

A1

Application: Prepare a classified balance sheet from a trial balance and supporting documentation.

Application: Adjust the balance sheet to correct identified errors.

A2

Application: Prepare a single-step or multi-step income statement (e.g., operating, nonoperating, discontinued operations) from a trial balance and supporting documentation.

Application: Adjust the income statement to correct identified errors.

Application: Calculate transaction gains or losses recognized from monetary transactions denominated in a foreign currency.

A3

Remembering & Understanding: Recall the purpose, objectives and structure of the statement of comprehensive income.

Remembering & Understanding: Identify items classified as other comprehensive income.

A4

Application: Prepare a statement of changes in equity from a trial balance and supporting documentation.

Application: Adjust the statement of changes in equity to correct identified errors.

A5

Application: Prepare a statement of cash flow using the indirect method and required disclosures from supporting documentation.

Application: Adjust a statement of cash flows to correct identified errors.

A6

Application: Prepare consolidated financial statements (adjustments, and/or eliminations) from supporting documentation.

Application: Adjust consolidated financial statements to correct identified errors.

A7

Application: Adjust the notes to the financial statements to correct identified errors and omissions.

B1

Remembering & Understanding: Recall the purpose and objectives of the statement of financial position for a nongovernmental, not-for-profit entity.

Application: Prepare a statement of financial position for a nongovernmental, not-for-profit entity from a trial balance and supporting documentation.

Application: Adjust the statement of financial position for a nongovernmental, not-for-profit entity to correct identified errors.

B2

Remembering & Understanding: Recall the purpose and objectives of the statement of activities for a nongovernmental, not-for-profit entity.

Application: Prepare a statement of activities for a nongovernmental, not-for-profit entity, including donor restrictions and releases from donor restrictions, from a trial balance and supporting documentation.

Application: Adjust the statement of activities for a nongovernmental, not-for-profit entity to correct identified errors.

B3

Remembering & Understanding: Recall the purpose and objectives of the statement of cash flows for a nongovernmental, not-for-profit entity.

Application: Prepare a statement of cash flows and required disclosures using the direct method or indirect method for a nongovernmental, not-for-profit entity.

Application: Adjust the statement of cash flows for a nongovernmental, not-for-profit entity to correct identified errors.

C

Remembering & Understanding: Recall the measurement focus and basis of accounting used by state and local governments for fund and government-wide financial reporting.

Application: Determine the appropriate fund(s) that a state or local government should use to record its activities.

D

Remembering & Understanding: Recall the purpose of forms 10-Q, 10-K and 8-K that a U.S. registrant is required to file with the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934.

Remembering & Understanding: Identify the items of Form 10-Q (Part I Items 1 through 3) and Form 10-K (Part II Items 7, 7A and 8) filed with the U.S. Securities and Exchange Commission.

Application: Calculate basic earnings per share and diluted earnings per share considering the impact of stock options, preferred stock, convertible preferred stock and/or convertible debt.

E

Remembering & Understanding: Recall appropriate financial statement titles to be used for the financial statements prepared under a special purpose framework.

Application: Perform calculations to convert cash basis or modified cash basis financial statements to accrual basis financial statements.

Application: Prepare financial statements using the cash basis or modified cash basis of accounting.

Application: Prepare financial statements using the income tax basis of accounting.

F

Remembering & Understanding: Identify the appropriate financial statement ratio or performance metric to perform a specified type of analysis.

Application: Calculate profitability ratios (e.g., gross profit margin, return on sales, return on assets, return on equity).

Application: Calculate liquidity ratios (e.g., current, quick, accounts receivable turnover, inventory turnover, accounts payable turnover).

Application: Calculate solvency ratios (e.g., debt-to-equity, total debt, times interest earned).

Application: Calculate performance metrics (e.g., EBITDA, price-to-earnings, dividend payout, asset turnover).

Application: Calculate variances between budget and actual results.

FAR II: Select Balance Sheet Accounts

A

Analysis: Reconcile the cash balance per the bank statement to the general ledger.

B

Application: Calculate trade receivables and allowances (e.g., credit losses, sales returns) and prepare journal entries.

Application: Prepare any required journal entries to record the transfer of trade receivables (secured borrowings, factoring, assignment, pledging).

C

Application: Calculate the carrying amount of inventory and prepare journal entries using various costing methods.

Calculating COGS Using Different Costing Methods

Application: Use the lower of cost and net realizable value or the lower of cost or market approach to calculate the carrying amount of inventory.

D

Application: Calculate the gross and net property, plant and equipment balances and prepare journal entries.

Application: Calculate impairment losses on long-lived assets to be recognized in the financial statements.

E2

Application: Calculate the carrying amount of investments measured at amortized cost and prepare journal entries (excluding impairment).

Application: Calculate impairment losses to be recognized on investments reported at amortized cost in the financial statements.

E3

Application: Calculate the carrying amount of equity method investments and prepare journal entries (excluding impairment).

F

Application: Calculate the carrying amount of finite-lived intangible assets reported in the financial statements (initial measurement, amortization and impairment) and prepare journal entries.

G

Application: Calculate the carrying amount of payables (e.g., accounts payable, dividends payable) and accrued liabilities (e.g., accrued wages, accrued vacation, accrued bonuses, self-insurance liabilities) and prepare journal entries.

H1

Application: Calculate the interest expense attributable to notes and bonds payable reported in the financial statements (e.g., discounts, premiums, debt issuance costs).

H2

Application: Perform debt covenant calculations as stipulated in a debt agreement to ascertain compliance.

I

Application: Prepare journal entries to recognize equity transactions in the financial statements (e.g., equity issuance, stock dividends, stock splits, treasury stock, capital account activity in pass-through entities).

FAR III: Select Transactions

A

Application: Calculate a required adjustment to the financial statements due to an accounting change (change in accounting principle or change in accounting estimate) or error correction and determine whether it requires prospective or retrospective application.

B

Application: Calculate amounts of contingencies and prepare journal entries.

C

Application: Determine the amount and timing of revenue to be recognized using the five-step model and prepare journal entries.

Application: Determine the amount and timing of revenue to be recognized by a nongovernmental, not-for-profit entity for contributed services received and prepare journal entries.

Application: Calculate the amount to be recognized for contributions (financial assets and nonfinancial assets) to a nongovernmental, not-for-profit entity.

D

Application: Calculate the income tax expense and current taxes payable/receivable.

Application: Calculate deferred tax assets/liabilities resulting from book to tax basis differences (e.g., allowance for credit losses, inventory costing methods, property, plant and equipment).

E

Remembering & Understanding: Recall assumptions (e.g., highest and best use, market participant assumptions, unit of account) and approaches (cost, income, market) used to measure fair value.

Application: Use the fair value hierarchy to determine the classification of a fair value measurement.

F

Remembering & Understanding: Identify the criteria for classifying a lease arrangement for a lessee.

Application: Calculate the carrying amount of lease-related assets and liabilities and prepare journal entries that a lessee should record.

Application: Calculate the lease costs that a lessee should recognize in the income statement.

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