CPA EXAM COMPREHENSIVE STUDY GUIDE: 2025|2026 HIGH-YIELD NOTES FOR ALL FOUR SECTIONS QUESTIONS AND ANSWERS ||ALREADY GRADED A++

CPA EXAM COMPREHENSIVE STUDY GUIDE: 2025|2026
HIGH-YIELD NOTES FOR ALL FOUR SECTIONS
QUESTIONS AND ANSWERS ||ALREADY GRADED A++

Fundamental Characteristics of Accounting Information - CORRECT ANSWERS - 1.
Relevance
2. Reliability (faithful representation)


Comprehensive Income - CORRECT ANSWERS - NI + OCI


Unrealized G/L AFS Securities - CORRECT ANSWERS - OCI: Not on income statement


Unusual, frequent items - CORRECT ANSWERS - No separate disclosures


Aspects of Relevance - CORRECT ANSWERS - Predictive Value, Confirmatory Value,
Materiality


Aspects of Reliability - CORRECT ANSWERS - Comparability (consistency),
verifiability, timeliness, understandability


Single source of US GAAP


Amended through - CORRECT ANSWERS - FASB Accounting Standards Codification


Accounting Standards Updates


All US public companies - CORRECT ANSWERS - Required to follow US GAAP


Accounting standards update issued - CORRECT ANSWERS - Only after majority vote
by members of FASB


Replacement Cost - CORRECT ANSWERS - Amount of cash or cash equivalent

,Continued vs. discontinued income - CORRECT ANSWERS - Predictive value


Royalties paid - CORRECT ANSWERS - Reported as expense in the period incurred


Disposal on component of a business - CORRECT ANSWERS - Discontinued


Overdraft reported as - CORRECT ANSWERS - Current liability


Cash account for payment into a bond sinking fund - CORRECT ANSWERS - Noncurrent
asset


Non current asset - CORRECT ANSWERS - Cash realized time beyond operating cycle
or 1 year


Deposits received from customer - CORRECT ANSWERS - Liabilities


Service Contracts sold - CORRECT ANSWERS - Deferred revenue increases, but service
revenue doesn't increase until services are performed


JE when contract is performed - CORRECT ANSWERS - None


Journal entries sales of service contract - CORRECT ANSWERS - Cash received:
Dr. Cash 15000
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 - CORRECT ANSWERS - 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 - CORRECT ANSWERS - Recognize all revenue now. 0 unearned


Discount - CORRECT ANSWERS - Allocated


Consignment - CORRECT ANSWERS - No unearned revenue--didn't sell anything


Service contracts - CORRECT ANSWERS - Deferred revenue= Unearned Liability
Service revenue= earned income


Milestones achieved - CORRECT ANSWERS - Output method to recognize revenue


Incremental costs - CORRECT ANSWERS - Can recover costs. Would not have been
incurred if didn't enter the contract. Recognized as an asset


Revenue recognition:


1. Principal


2. Agent - CORRECT ANSWERS - 1. Gross consideration entity expects to receive


2. Fee or commission performing the agent function

, Forward or Call Option


Repurchase price > Original Selling Price - CORRECT ANSWERS - Financing
arrangement


Forward or call option Financing arrangement JE - CORRECT ANSWERS - Dr. Cash
350000
Cr. Financial Liability 350000


Recognize interest exp:n 385000 (RP) - 350000 (Cash received)


Dr. Interest exp 35000
Cr. Financial Liability 35000


Option lapses unexercised: Derecognize liability and record sale


Dr. Financial Liability 385000
Cr. Revenue 385000


If you get extended warranty - CORRECT ANSWERS - Separate performance obligation.
Longer the coverage period, higher likelihood it's a performance obligation


Forward - CORRECT ANSWERS - Obligation to repurchase the asset


Call option - CORRECT ANSWERS - Right to repurchase the asset


Forward or call option


Repurchase Price < Original SP - CORRECT ANSWERS - Lease


Forward or call option