CPA FAR |ACTUAL QUESTIONS AND VERIFIED
ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
External events do not include
a. improvement in technology by a competitor.
b. using buildings and machinery in operations.
c. a change in the price of a good or service that an entity buys or sells, a flood or
earthquake.
d. interaction between an entity and its environment.
CORRECT ANSWER
interaction between an entity and its environment
Question 2
An accrued expense can best be described as an amount
a. not paid and currently matched with earnings.
b. paid and currently matched with earnings.
c. not paid and not currently matched with earnings.
d. paid and not currently matched with earnings.
CORRECT ANSWER
not paid and currently matched with earnings
Question 3
1
,Preparation of consolidated financial statements when a parent-subsidiary relationship
exists is an example of the
a. neutrality characteristic.
b. economic entity assumption.
c. comparability characteristic.
d. relevance characteristic.
CORRECT ANSWER
economic entity assumption
Question 4
Dot Point, Inc. is a retailer of washers and dryers and offers a three-year service contract
on each appliance sold. Although Dot Point sells the appliances on an installment basis, all
service contracts are cash sales at the time of purchase by the buyer. Collections received
for service contracts should be recorded as
a. a reduction in installment accounts receivable.
b. deferred service revenue.
c. a direct addition to retained earnings.
d. service revenue.
CORRECT ANSWER
deferred service revenue
Question 5
Which of the following is not an accurate representation concerning revenue recognition?
a. Revenue from selling products is recognized at the date of sale, usually interpreted to
mean the date of delivery to customers.
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, b. Revenue from permitting others to use enterprise assets is recognized as time passes or as
the assets are used.
c. Revenue from disposing of assets other than products is recognized at the date of sale.
d. Revenue from services rendered is recognized when cash is received or when services
have been performed.
CORRECT ANSWER
Revenue from services rendered is recognized when cash is received or when services
have been performed
Question 6
Revenue is generally recognized when realized or realizable and earned. This statement
describes the
a. revenue recognition principle.
b. relevance characteristic.
c. consistency characteristic.
d. matching principle.
CORRECT ANSWER
revenue recognition principle
Question 7
The allowance for doubtful accounts, which appears as a deduction from accounts
receivable on a balance sheet and which is based on an estimate of bad debts, is an
application of the
a. matching principle.
b. materiality constraint.
c. revenue recognition principle.
d. consistency characteristic.
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ANSWERS|BRAND NEW 2026-2027
UPDATE|GRADED A+
Question 1
External events do not include
a. improvement in technology by a competitor.
b. using buildings and machinery in operations.
c. a change in the price of a good or service that an entity buys or sells, a flood or
earthquake.
d. interaction between an entity and its environment.
CORRECT ANSWER
interaction between an entity and its environment
Question 2
An accrued expense can best be described as an amount
a. not paid and currently matched with earnings.
b. paid and currently matched with earnings.
c. not paid and not currently matched with earnings.
d. paid and not currently matched with earnings.
CORRECT ANSWER
not paid and currently matched with earnings
Question 3
1
,Preparation of consolidated financial statements when a parent-subsidiary relationship
exists is an example of the
a. neutrality characteristic.
b. economic entity assumption.
c. comparability characteristic.
d. relevance characteristic.
CORRECT ANSWER
economic entity assumption
Question 4
Dot Point, Inc. is a retailer of washers and dryers and offers a three-year service contract
on each appliance sold. Although Dot Point sells the appliances on an installment basis, all
service contracts are cash sales at the time of purchase by the buyer. Collections received
for service contracts should be recorded as
a. a reduction in installment accounts receivable.
b. deferred service revenue.
c. a direct addition to retained earnings.
d. service revenue.
CORRECT ANSWER
deferred service revenue
Question 5
Which of the following is not an accurate representation concerning revenue recognition?
a. Revenue from selling products is recognized at the date of sale, usually interpreted to
mean the date of delivery to customers.
2
, b. Revenue from permitting others to use enterprise assets is recognized as time passes or as
the assets are used.
c. Revenue from disposing of assets other than products is recognized at the date of sale.
d. Revenue from services rendered is recognized when cash is received or when services
have been performed.
CORRECT ANSWER
Revenue from services rendered is recognized when cash is received or when services
have been performed
Question 6
Revenue is generally recognized when realized or realizable and earned. This statement
describes the
a. revenue recognition principle.
b. relevance characteristic.
c. consistency characteristic.
d. matching principle.
CORRECT ANSWER
revenue recognition principle
Question 7
The allowance for doubtful accounts, which appears as a deduction from accounts
receivable on a balance sheet and which is based on an estimate of bad debts, is an
application of the
a. matching principle.
b. materiality constraint.
c. revenue recognition principle.
d. consistency characteristic.
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