FAR (CPA) Exam Study Questions and Correct Solutions 2026

FAR (CPA) Exam Study Questions and Correct Solutions 2026 What does comprehensive income exclude? - Correct Answer Changes related to owner distribution and owner investment How to report gain/loss from unusual and infrequent transaction on the income statement? - Correct Answer It is reported pretax as a separate component of income from continuing operations. What does selling expense include? - Correct Answer Selling expense includes advertising, freight out, sales salaries, any rent expense. What type of incomes does net income include? - Correct Answer Net income include incomes from continuing operations and discontinued operations When a company can report a discontinued operation? - Correct Answer When it is classified as held-for-sale. Has a commitment plan to sell, component is available for immediate sale, has an active program to locate buyer, sale is probable within on year, sale is being actively marketed, unlikely plan to sell is changed or withdrawn How is accumulated other comprehensive income reported? - Correct Answer It is a balance sheet item and is reported in the equity section after retained earning Describe the relationships between net income and retained earning, OCI and accumulated OCI: - Correct Answer Net income is closed out to retained earning on balance sheet. OCI is closed out to accumulated OCI. Retained earning and accumulated OCI are the undistributed earning of corporation What is comprehensive income and what does other comprehensive income include? - Correct Answer Comprehensive income shows all non-owner changes in stockholder's equity. It includes net income plus OCI. Other comprehensive income includes: pension adj, unrealized gain and loss AFS debt securities, foreign currency, instrument credit risk.