Certified Public Accountant Uniform Examination
Comprehensive Practice Examination – Version 2.0
Advanced/Hard Difficulty | Core & Discipline Sections |
2026 AICPA Blueprint Aligned updated 2025/2026
graded A+ well written
SECTION I: FINANCIAL ACCOUNTING AND REPORTING (FAR) – Core Section
Questions 1–35
Question 1
Under ASC 606, a performance obligation is a promise to transfer to a customer:
A) A good or service that is highly interdependent with other goods or services in the contract
B) A good or service that is not separately identifiable from other goods or services in the
contract
C) A good or service that is distinct
D) Any good or service specified in the contract regardless of distinctness
Correct Answer: C
Rationale: Under ASC 606, a performance obligation is a promise to transfer a distinct good or
service (or a bundle of distinct goods or services) to the customer. A good or service is distinct if
,the customer can benefit from it on its own or with other readily available resources and it is
separately identifiable from other goods or services in the contract.
Question 2
Under ASC 842, a lessee recognizes a right-of-use asset and a lease liability at the
commencement date measured at:
A) The present value of the lease payments not yet paid
B) The fair value of the underlying asset
C) The undiscounted sum of all lease payments
D) The carrying amount of the underlying asset
Correct Answer: A
Rationale: Under ASC 842, the lease liability is measured at the present value of the lease
payments not yet paid, discounted using the rate implicit in the lease or the lessee's
incremental borrowing rate. The right-of-use asset is initially measured at the lease liability
amount plus any initial direct costs and prepayments.
Question 3
Which of the following is a characteristic of a defined benefit pension plan?
A) The employer's contribution is fixed
B) The employee bears the investment risk
C) The employer's obligation is to pay a specified benefit amount
D) The plan assets are not reported on the employer's balance sheet
Correct Answer: C
Rationale: In a defined benefit plan, the employer promises to pay a specified benefit amount
(usually based on salary and years of service). The employer bears the investment risk, and
contributions are actuarially determined to fund the promised benefits. Plan assets are
reported on the employer's balance sheet (as a net asset or liability).
Question 4
,A company with a December 31 year-end enters into a transaction that qualifies as a cash flow
hedge of a forecasted foreign currency transaction. The effective portion of the hedging
instrument's gain or loss should be reported in:
A) Net income immediately
B) Other comprehensive income
C) Retained earnings
D) A separate component of stockholders' equity
Correct Answer: B
Rationale: For a cash flow hedge, the effective portion of the gain or loss on the hedging
instrument is reported in other comprehensive income (OCI) and reclassified into earnings
when the forecasted transaction affects earnings. The ineffective portion is recognized
immediately in earnings.
Question 5
Under U.S. GAAP, which of the following is NOT a component of other comprehensive income?
A) Foreign currency translation adjustments
B) Unrealized holding gains on available-for-sale debt securities
C) Gains from the sale of treasury stock
D) Pension plan actuarial gains and losses
Correct Answer: C
Rationale: Gains from the sale of treasury stock are reported as an increase in additional paid-in
capital, not in other comprehensive income. OCI includes foreign currency translation
adjustments, unrealized gains/losses on available-for-sale securities, and certain pension
adjustments.
Question 6
Under the acquisition method of accounting for business combinations, which of the following
is recorded at fair value at the acquisition date?
A) Identifiable assets acquired
B) Liabilities assumed
C) Noncontrolling interest
D) All of the above
, Correct Answer: D
Rationale: Under ASC 805, all identifiable assets acquired, liabilities assumed, and any
noncontrolling interest in the acquiree are measured at fair value at the acquisition date.
Question 7
A governmental entity's enterprise fund uses which basis of accounting?
A) Modified accrual
B) Full accrual
C) Cash basis
D) Tax basis
Correct Answer: B
Rationale: Enterprise funds are proprietary funds and use the full accrual basis of accounting
with an economic resources measurement focus. This is the same basis used by for-profit
businesses.
Question 8
Under ASC 740, a deferred tax liability is recognized for:
A) All temporary differences that will result in future taxable amounts
B) Temporary differences that will result in future deductible amounts
C) Only temporary differences related to depreciable assets
D) Only temporary differences that are not expected to reverse
Correct Answer: A
Rationale: A deferred tax liability is recognized for all taxable temporary differences—temporary
differences that will result in future taxable amounts. Deferred tax assets are recognized for
deductible temporary differences.
Question 9
A company changes its depreciation method from straight-line to double-declining balance. This
change is accounted for as:
Comprehensive Practice Examination – Version 2.0
Advanced/Hard Difficulty | Core & Discipline Sections |
2026 AICPA Blueprint Aligned updated 2025/2026
graded A+ well written
SECTION I: FINANCIAL ACCOUNTING AND REPORTING (FAR) – Core Section
Questions 1–35
Question 1
Under ASC 606, a performance obligation is a promise to transfer to a customer:
A) A good or service that is highly interdependent with other goods or services in the contract
B) A good or service that is not separately identifiable from other goods or services in the
contract
C) A good or service that is distinct
D) Any good or service specified in the contract regardless of distinctness
Correct Answer: C
Rationale: Under ASC 606, a performance obligation is a promise to transfer a distinct good or
service (or a bundle of distinct goods or services) to the customer. A good or service is distinct if
,the customer can benefit from it on its own or with other readily available resources and it is
separately identifiable from other goods or services in the contract.
Question 2
Under ASC 842, a lessee recognizes a right-of-use asset and a lease liability at the
commencement date measured at:
A) The present value of the lease payments not yet paid
B) The fair value of the underlying asset
C) The undiscounted sum of all lease payments
D) The carrying amount of the underlying asset
Correct Answer: A
Rationale: Under ASC 842, the lease liability is measured at the present value of the lease
payments not yet paid, discounted using the rate implicit in the lease or the lessee's
incremental borrowing rate. The right-of-use asset is initially measured at the lease liability
amount plus any initial direct costs and prepayments.
Question 3
Which of the following is a characteristic of a defined benefit pension plan?
A) The employer's contribution is fixed
B) The employee bears the investment risk
C) The employer's obligation is to pay a specified benefit amount
D) The plan assets are not reported on the employer's balance sheet
Correct Answer: C
Rationale: In a defined benefit plan, the employer promises to pay a specified benefit amount
(usually based on salary and years of service). The employer bears the investment risk, and
contributions are actuarially determined to fund the promised benefits. Plan assets are
reported on the employer's balance sheet (as a net asset or liability).
Question 4
,A company with a December 31 year-end enters into a transaction that qualifies as a cash flow
hedge of a forecasted foreign currency transaction. The effective portion of the hedging
instrument's gain or loss should be reported in:
A) Net income immediately
B) Other comprehensive income
C) Retained earnings
D) A separate component of stockholders' equity
Correct Answer: B
Rationale: For a cash flow hedge, the effective portion of the gain or loss on the hedging
instrument is reported in other comprehensive income (OCI) and reclassified into earnings
when the forecasted transaction affects earnings. The ineffective portion is recognized
immediately in earnings.
Question 5
Under U.S. GAAP, which of the following is NOT a component of other comprehensive income?
A) Foreign currency translation adjustments
B) Unrealized holding gains on available-for-sale debt securities
C) Gains from the sale of treasury stock
D) Pension plan actuarial gains and losses
Correct Answer: C
Rationale: Gains from the sale of treasury stock are reported as an increase in additional paid-in
capital, not in other comprehensive income. OCI includes foreign currency translation
adjustments, unrealized gains/losses on available-for-sale securities, and certain pension
adjustments.
Question 6
Under the acquisition method of accounting for business combinations, which of the following
is recorded at fair value at the acquisition date?
A) Identifiable assets acquired
B) Liabilities assumed
C) Noncontrolling interest
D) All of the above
, Correct Answer: D
Rationale: Under ASC 805, all identifiable assets acquired, liabilities assumed, and any
noncontrolling interest in the acquiree are measured at fair value at the acquisition date.
Question 7
A governmental entity's enterprise fund uses which basis of accounting?
A) Modified accrual
B) Full accrual
C) Cash basis
D) Tax basis
Correct Answer: B
Rationale: Enterprise funds are proprietary funds and use the full accrual basis of accounting
with an economic resources measurement focus. This is the same basis used by for-profit
businesses.
Question 8
Under ASC 740, a deferred tax liability is recognized for:
A) All temporary differences that will result in future taxable amounts
B) Temporary differences that will result in future deductible amounts
C) Only temporary differences related to depreciable assets
D) Only temporary differences that are not expected to reverse
Correct Answer: A
Rationale: A deferred tax liability is recognized for all taxable temporary differences—temporary
differences that will result in future taxable amounts. Deferred tax assets are recognized for
deductible temporary differences.
Question 9
A company changes its depreciation method from straight-line to double-declining balance. This
change is accounted for as:
