CPA FINAL EXAM WITH COMPLETE
QUESTIONS AND ANSWERS [GRADED
A+]
Fundamental Characteristics of Accounting Information - ✔✔1. Relevance
2. Reliability (faithful representation)
Comprehensive Income - ✔✔NI + OCI
Unrealized G/L AFS Securities - ✔✔OCI: Not on income statement
Unusual, frequent items - ✔✔No separate disclosures
Aspects of Relevance - ✔✔Predictive Value, Confirmatory Value,
Materiality
©morren2025/2026.Year published 2026.
,Aspects of Reliability - ✔✔Comparability (consistency), verifiability,
timeliness, understandability
Single source of US GAAP
Amended through - ✔✔FASB Accounting Standards Codification
Accounting Standards Updates
All US public companies - ✔✔Required to follow US GAAP
Accounting standards update issued - ✔✔Only after majority vote by
members of FASB
Replacement Cost - ✔✔Amount of cash or cash equivalent
Continued vs. discontinued income - ✔✔Predictive value
Royalties paid - ✔✔Reported as expense in the period incurred
©morren2025/2026.Year published 2026.
,Disposal on component of a business - ✔✔Discontinued
Overdraft reported as - ✔✔Current liability
Cash account for payment into a bond sinking fund - ✔✔Noncurrent asset
Non current asset - ✔✔Cash realized time beyond operating cycle or 1
year
Deposits received from customer - ✔✔Liabilities
Service Contracts sold - ✔✔Deferred revenue increases, but service
revenue doesn't increase until services are performed
JE when contract is performed - ✔✔None
Journal entries sales of service contract - ✔✔Cash received:
Dr. Cash 15000
©morren2025/2026.Year published 2026.
, Cr. Unearned Sales revenue 15000
Product transferred:
Dr. Unearned Sales Revenue 15000
Cr. Sales Revenue 15000
Dr. COGS 9000
Cr. Inventory 9000
Revenue recognition process - ✔✔ISTAR
1. Identify Contract
2. Separate performance obligations
3. Transaction price expected to be entitled to
4. Allocate to separate performance obligations
5. Recognize revenue based on either a point in time or over time
Bill and hold - ✔✔Recognize all revenue now. 0 unearned
Discount - ✔✔Allocated
©morren2025/2026.Year published 2026.
QUESTIONS AND ANSWERS [GRADED
A+]
Fundamental Characteristics of Accounting Information - ✔✔1. Relevance
2. Reliability (faithful representation)
Comprehensive Income - ✔✔NI + OCI
Unrealized G/L AFS Securities - ✔✔OCI: Not on income statement
Unusual, frequent items - ✔✔No separate disclosures
Aspects of Relevance - ✔✔Predictive Value, Confirmatory Value,
Materiality
©morren2025/2026.Year published 2026.
,Aspects of Reliability - ✔✔Comparability (consistency), verifiability,
timeliness, understandability
Single source of US GAAP
Amended through - ✔✔FASB Accounting Standards Codification
Accounting Standards Updates
All US public companies - ✔✔Required to follow US GAAP
Accounting standards update issued - ✔✔Only after majority vote by
members of FASB
Replacement Cost - ✔✔Amount of cash or cash equivalent
Continued vs. discontinued income - ✔✔Predictive value
Royalties paid - ✔✔Reported as expense in the period incurred
©morren2025/2026.Year published 2026.
,Disposal on component of a business - ✔✔Discontinued
Overdraft reported as - ✔✔Current liability
Cash account for payment into a bond sinking fund - ✔✔Noncurrent asset
Non current asset - ✔✔Cash realized time beyond operating cycle or 1
year
Deposits received from customer - ✔✔Liabilities
Service Contracts sold - ✔✔Deferred revenue increases, but service
revenue doesn't increase until services are performed
JE when contract is performed - ✔✔None
Journal entries sales of service contract - ✔✔Cash received:
Dr. Cash 15000
©morren2025/2026.Year published 2026.
, Cr. Unearned Sales revenue 15000
Product transferred:
Dr. Unearned Sales Revenue 15000
Cr. Sales Revenue 15000
Dr. COGS 9000
Cr. Inventory 9000
Revenue recognition process - ✔✔ISTAR
1. Identify Contract
2. Separate performance obligations
3. Transaction price expected to be entitled to
4. Allocate to separate performance obligations
5. Recognize revenue based on either a point in time or over time
Bill and hold - ✔✔Recognize all revenue now. 0 unearned
Discount - ✔✔Allocated
©morren2025/2026.Year published 2026.
