CPA FAR FULL EXAM SIMULATION LATEST 2026 UPDATE
FAST REVIWED FROM ACTUAL TEST 100 QUESTIONS AND
100% VERIFIED ANSWERS| A+ GRADE Q&A | INSTANT
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1. Which financial statement provides information about a company’s financial position at a
specific point in time?
A. Statement of Income
B. Statement of Financial Position
C. Statement of Cash Flows
D. Statement of Changes in Equity
The Statement of Financial Position (Balance Sheet) reports assets, liabilities, and equity at a
point in time.
2. Under accrual accounting, revenue is recognized when:
A. Cash is received
B. Earned and realizable
C. Goods are manufactured
D. A sale is recorded in inventory
Revenue is recognized when earned and measurable, regardless of cash receipt.
3. Which inventory method results in the highest net income during rising price levels?
A. LIFO
B. FIFO
C. Weighted Average
D. Specific Identification
FIFO uses oldest (lowest) costs first, increasing profit when prices rise.
4. A capital lease is characterized by all EXCEPT:
A. Transfer of ownership
B. Bargain purchase option
C. Lease term ≥ 75% of asset life
D. Rental classification only
A capital lease is treated as a purchase, not merely a rental.
5. What is the correct treatment of development costs under GAAP?
A. Expensed as incurred
B. Capitalized
C. Expensed unless criteria met
D. Deferred indefinitely
Development costs are expensed unless criteria for capitalization are met.
6. Which item is a current asset?
A. Goodwill
B. Equipment
,C. Prepaid Insurance (within 1 year)
D. Bonds Payable
Prepaids used within one year are current assets.
7. EPS (Earnings per Share) is computed using:
A. Average total assets
B. Weighted average shares outstanding
C. Ending shares
D. Beginning shares
Weighted average shares adjusts for issuance and repurchase during period.
8. Under IFRS, property, plant, and equipment are initially recognized at:
A. Historical cost
B. Fair value
C. Cost including borrowing costs
D. Net realizable value
IFRS includes certain borrowing costs in initial asset cost.
9. Which is a deferred tax liability cause?
A. Permanent differences
B. Temporary differences
C. Change in tax rate
D. Permanent book loss
Temporary differences create timing differences in tax reporting.
10. What measurement basis is most appropriate for trading securities?
A. Amortized cost
B. Fair value
C. Historical cost
D. Net realizable value
Trading securities are reported at fair value with changes in earnings.
11. Which concept requires financial statements be prepared assuming the entity will continue?
A. Historical cost
B. Going concern
C. Monetary unit
D. Full disclosure
Going concern assumes continued operation.
12. When is revenue recognized under the completed-contract method?
A. Proportionally over time
B. When contract is complete
C. At contract signing
D. When 25% complete
Completed-contract recognizes revenue only upon completion.
, 13. A contingent liability is recorded when it is:
A. Probable and estimable
B. Remote
C. Possible
D. Reasonably possible
Probable and estimable contingencies are recorded.
14. Goodwill is tested for impairment:
A. Annually
B. Only when indicators exist
C. At least annually
D. Never
Goodwill must be tested annually or when indicators exist.
15. Which ratio measures liquidity?
A. Debt to equity
B. Current ratio
C. Price/earnings
D. Return on assets
Current ratio assesses ability to meet short-term obligations.
16. Straight-line depreciation expense equals:
A. Cost − Salvage
B. (Cost − Salvage) ÷ Useful life
C. Cost × Rate
D. Units × Rate
Straight-line evenly allocates cost over life.
17. Which cost flow assumption approximates physical flow of perishables?
A. FIFO
B. Specific Identification
C. LIFO
D. Weighted average
Perishables often tracked by specific identification.
18. Unrealized holding gains on available-for-sale securities are reported in:
A. Net income
B. Other comprehensive income
C. Retained earnings
D. Cash flows
AFS securities go through OCI, not current earnings.
19. The allowance for doubtful accounts is a:
A. Contra-revenue
B. Contra-asset
C. Liability
FAST REVIWED FROM ACTUAL TEST 100 QUESTIONS AND
100% VERIFIED ANSWERS| A+ GRADE Q&A | INSTANT
DOWNLOAD PDF
1. Which financial statement provides information about a company’s financial position at a
specific point in time?
A. Statement of Income
B. Statement of Financial Position
C. Statement of Cash Flows
D. Statement of Changes in Equity
The Statement of Financial Position (Balance Sheet) reports assets, liabilities, and equity at a
point in time.
2. Under accrual accounting, revenue is recognized when:
A. Cash is received
B. Earned and realizable
C. Goods are manufactured
D. A sale is recorded in inventory
Revenue is recognized when earned and measurable, regardless of cash receipt.
3. Which inventory method results in the highest net income during rising price levels?
A. LIFO
B. FIFO
C. Weighted Average
D. Specific Identification
FIFO uses oldest (lowest) costs first, increasing profit when prices rise.
4. A capital lease is characterized by all EXCEPT:
A. Transfer of ownership
B. Bargain purchase option
C. Lease term ≥ 75% of asset life
D. Rental classification only
A capital lease is treated as a purchase, not merely a rental.
5. What is the correct treatment of development costs under GAAP?
A. Expensed as incurred
B. Capitalized
C. Expensed unless criteria met
D. Deferred indefinitely
Development costs are expensed unless criteria for capitalization are met.
6. Which item is a current asset?
A. Goodwill
B. Equipment
,C. Prepaid Insurance (within 1 year)
D. Bonds Payable
Prepaids used within one year are current assets.
7. EPS (Earnings per Share) is computed using:
A. Average total assets
B. Weighted average shares outstanding
C. Ending shares
D. Beginning shares
Weighted average shares adjusts for issuance and repurchase during period.
8. Under IFRS, property, plant, and equipment are initially recognized at:
A. Historical cost
B. Fair value
C. Cost including borrowing costs
D. Net realizable value
IFRS includes certain borrowing costs in initial asset cost.
9. Which is a deferred tax liability cause?
A. Permanent differences
B. Temporary differences
C. Change in tax rate
D. Permanent book loss
Temporary differences create timing differences in tax reporting.
10. What measurement basis is most appropriate for trading securities?
A. Amortized cost
B. Fair value
C. Historical cost
D. Net realizable value
Trading securities are reported at fair value with changes in earnings.
11. Which concept requires financial statements be prepared assuming the entity will continue?
A. Historical cost
B. Going concern
C. Monetary unit
D. Full disclosure
Going concern assumes continued operation.
12. When is revenue recognized under the completed-contract method?
A. Proportionally over time
B. When contract is complete
C. At contract signing
D. When 25% complete
Completed-contract recognizes revenue only upon completion.
, 13. A contingent liability is recorded when it is:
A. Probable and estimable
B. Remote
C. Possible
D. Reasonably possible
Probable and estimable contingencies are recorded.
14. Goodwill is tested for impairment:
A. Annually
B. Only when indicators exist
C. At least annually
D. Never
Goodwill must be tested annually or when indicators exist.
15. Which ratio measures liquidity?
A. Debt to equity
B. Current ratio
C. Price/earnings
D. Return on assets
Current ratio assesses ability to meet short-term obligations.
16. Straight-line depreciation expense equals:
A. Cost − Salvage
B. (Cost − Salvage) ÷ Useful life
C. Cost × Rate
D. Units × Rate
Straight-line evenly allocates cost over life.
17. Which cost flow assumption approximates physical flow of perishables?
A. FIFO
B. Specific Identification
C. LIFO
D. Weighted average
Perishables often tracked by specific identification.
18. Unrealized holding gains on available-for-sale securities are reported in:
A. Net income
B. Other comprehensive income
C. Retained earnings
D. Cash flows
AFS securities go through OCI, not current earnings.
19. The allowance for doubtful accounts is a:
A. Contra-revenue
B. Contra-asset
C. Liability
