Financial Accounting and Reporting (FAR) — Core Concepts Practice Questions
This topic covers the essential principles of Financial Accounting and Reporting (FAR) as tested in the CPA Exam.
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Sample questions
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Which of the following items would generally be considered a cash equivalent for financial reporting purposes?
Examiner's Design Intent
Tests candidate understanding of ASC 305-10-20 cash equivalent criteria, specifically the 90-day maturity rule and investment vs. operating asset distinction required for financial position reporting
Azure Company uses the periodic inventory system. For the month of October, the following inventory data is available:Beginning Inventory: 100 units @ $10/unitPurchases:October 10: 200 units @ $12/unitOctober 25: 150 units @ $13/unitSales for October: 300 units.If Azure uses the FIFO (First-In, First-Out) method, what is the cost of goods sold for October?
Examiner's Design Intent
Tests candidate ability to apply FIFO inventory costing in periodic systems with multiple purchase layers, ensuring understanding of cost flow assumptions and systematic calculation methodology
On January 1, 20X1, Summit Corp. acquired 1,000 shares of Peak Co. common stock for $25 per share, intending to sell them in the near future to profit from short-term price fluctuations. At December 31, 20X1, the fair value of Peak Co. stock was $28 per share. How should Summit Corp. classify this investment and recognize the unrealized gain at December 31, 20X1?
Examiner's Design Intent
Tests candidate ability to distinguish between investment security classifications based on management intent and apply correct subsequent measurement and recognition rules
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