FAR (CPA) 2025 QUESTIONS AND CORRECT ANSWERS

FAR (CPA) 2025 QUESTIONS AND
CORRECT ANSWERS
WhatA2doesA2comprehensiveA2incomeA2exclude?A2-A2Ans--
ChangesA2relatedA2toA2ownerA2distributionA2andA2ownerA2investment

HowA2toA2reportA2gain/
lossA2fromA2unusualA2andA2infrequentA2transactionA2onA2theA2incomeA2statement?A2-
A2Ans--
ItA2isA2reportedA2pretaxA2asA2aA2separateA2componentA2ofA2incomeA2fromA2continuingA2op
erations.

WhatA2doesA2sellingA2expenseA2include?A2-A2Ans--
SellingA2expenseA2includesA2advertising,A2freightA2out,A2salesA2salaries,A2anyA2rentA2expe
nse.

WhatA2typeA2ofA2incomesA2doesA2netA2incomeA2include?A2-A2Ans--
NetA2incomeA2includeA2incomesA2fromA2continuingA2operationsA2andA2discontinuedA2oper
ations

WhenA2aA2companyA2canA2reportA2aA2discontinuedA2operation?A2-A2Ans--
WhenA2itA2isA2classifiedA2asA2held-for-sale.
HasA2aA2commitmentA2planA2toA2sell,A2componentA2isA2availableA2forA2immediateA2sale,A2h
asA2anA2activeA2programA2toA2locateA2buyer,A2saleA2isA2probableA2withinA2onA2year,A2saleA2
isA2beingA2activelyA2marketed,A2unlikelyA2planA2toA2sellA2isA2changedA2orA2withdrawn

HowA2isA2accumulatedA2otherA2comprehensiveA2incomeA2reported?A2-A2Ans--
ItA2isA2aA2balanceA2sheetA2itemA2andA2isA2reportedA2inA2theA2equityA2sectionA2afterA2retaine
dA2earning

DescribeA2theA2relationshipsA2betweenA2netA2incomeA2andA2retainedA2earning,A2OCIA2and
A2accumulatedA2OCI:A2-A2Ans--
NetA2incomeA2isA2closedA2outA2toA2retainedA2earningA2onA2balanceA2sheet.A2OCIA2isA2clos
edA2outA2toA2accumulatedA2OCI.A2
RetainedA2earningA2andA2accumulatedA2OCIA2areA2theA2undistributedA2earningA2ofA2corpo
ration

WhatA2isA2comprehensiveA2incomeA2andA2whatA2doesA2otherA2comprehensiveA2incomeA2i
nclude?A2-A2Ans--ComprehensiveA2incomeA2showsA2allA2non-
ownerA2changesA2inA2stockholder'sA2equity.A2ItA2includesA2netA2incomeA2plusA2OCI.A2Othe
rA2comprehensiveA2incomeA2includes:A2pensionA2adj,A2unrealizedA2gainA2andA2lossA2AFSA
2debtA2securities,A2foreignA2currency,A2instrumentA2creditA2risk.

,HowA2areA2foreignA2transactionA2andA2translationA2gain/lossesA2reported?A2-A2Ans--
ForeignA2transactionA2gain/
lossA2isA2reportedA2inA2netA2income.A2ForeignA2translationA2gain/
lossA2isA2reportedA2inA2OCI

HowA2doesA2priorA2serviceA2costA2notA2recognizedA2inA2netA2periodicA2pensionA2costA2affe
ctA2OCI?A2-A2Ans--ItA2willA2reduceA2OCI

WhatA2isA2presentationA2ofA2comprehensiveA2income?A2-A2Ans--
ItA2canA2beA2presentedA2eitherA2onA2incomeA2statementA2afterA2netA2incomeA2orA2inA2aA2se
parateA2"statementA2ofA2comprehensiveA2income"

HowA2areA2componentsA2ofA2otherA2comprehensiveA2incomeA2regardingA2toA2taxA2issuesA
2reported?A2-A2Ans--
EitherA2reportA2componentsA2netA2ofA2taxA2orA2reportA2componentsA2beforeA2taxA2basisA2w
ithA2oneA2amountA2shownA2afterA2forA2theA2aggregateA2taxA2effects.

WhatA2areA2exchangeA2rateA2directA2methodA2andA2indirectA2method?A2-A2Ans--
DirectA2methodA2isA21A2foreignA2currencyA2toA2domesticA2price.A2
IndirectA2methodA2isA21A2domesticA2priceA2toA2foreignA2currency

WhatA2doesA2formA28-KA2usedA2for?A2-A2Ans--
ToA2reportA2majorA2corporateA2eventsA2likeA2assetA2acquisitions/
disposals,A2managementA2changes,A2accountantA2changes,A2financialA2statementA2chan
ges

HowA2isA2cumulativeA2preferredA2stockA2treatedA2toA2calculatedA2basisA2EPS?A2-A2Ans--
WhenA2preferredA2stockA2isA2cumulative,A2theA2accumulativeA2dividendA2inA2theA2periodA2i
sA2subtractA2fromA2netA2incomeA2toA2calculatedA2basisA2EPS,A2notA2theA2amountA2paidA2or
A2declared.


WhatA2isA2dliutedA2EPS?A2-A2Ans--
DilutedA2EPSA2includeA2EPSA2andA2anyA2possibleA2conversionsA2securityA2thatA2willA2decr
easeA2EPS.A2AnyA2possibleA2conversionA2securityA2thatA2willA2increaseA2EPSA2isA2notA2inc
ludedA2becauseA2ofA2antidilusionA2rule.

WhatA2areA2outA2ofA2theA2moneyA2stockA2options?
A2HowA2doesA2itA2affectA2dilutedA2EPSA2calculation?A2-A2Ans--
OutA2ofA2theA2moneyA2stockA2optionsA2takeA2placeA2whenA2stock'sA2exerciseA2priceA2isA2m
oreA2thanA2marketA2price.A2ItA2itA2antidiluteA2andA2excludedA2fromA2dilutedA2EPSA2calculati
on.

WhichA2followingA2periodsA2isA2requiredA2toA2fileA2balanceA2sheetsA2onA2formA210-
QA2besideA2mostA2recentA2quarterA2end?A2-A2Ans--
BalanceA2sheetA2ofA2theA2endA2ofA2lastA2fiscalA2year.A2IfA2seasonalA2fluctuationA2present,A2
itA2mayA2includeA2correspondingA2quarterA2ofA2lastA2fiscalA2year.

, HowA2isA2EPSA2reportedA2whenA2anA2entityA2hasA2aA2discontinuedA2operation?A2-A2Ans--
CompanyA2willA2showA2theA2basisA2andA2dilutedA2EPSA2onA2theA2incomeA2statementA2orA2i
nA2theA2notes.

WhoA2requiresA2toA2discloseA2EPS?A2-A2Ans--
CompanyA2hasA2publiclyA2tradedA2commonA2stock,A2potentialA2commonA2stock,A2inA2theA2
processA2ofA2filingA2withA2regulatoryA2agency

WhatA2doA2weA2doA2withA2interestA2expenseA2forA2convertibleA2bondsA2inA2dilutedA2EPSA2c
alculation?A2-A2Ans--
WeA2needA2toA2addA2backA2(netA2tax)A2toA2netA2incomeA2becauseA2weA2won'tA2needA2toA2p
ayA2interestA2ifA2theA2bondsA2areA2convertible

WhatA2doA2weA2doA2withA2(convertible)A2preferredA2stockA2dividendA2paidA2inA2dilutedA2EP
SA2calculation?A2-A2Ans--
WeA2willA2notA2needA2toA2subtractA2fromA2netA2incomeA2andA2addA2numberA2ofA2preferredA
2stockA2intoA2totalA2sharesA2forA2dilutedA2EPSA2calculationA2becauseA2weA2assumeA2wereA
2convertedA2toA2commonA2share


WhatA2isA2theA2numeratorA2inA2dilutedA2EPSA2calculation?A2-A2Ans--
IncomeA2availableA2toA2commonA2shareholderA2plusA2anyA2afterA2taxA2interestA2expenseA2
thatA2wouldA2notA2haveA2incurredA2ifA2theA2bondsA2converted

WhenA2aA2bankA2account'sA2overdraftA2canA2beA2nettedA2againstA2anotherA2bankA2accoun
t?A2-A2Ans--
WhenA2thereA2isA2aA2legalA2rightA2toA2offsetA2existsA2atA2aA2differentA2bank.A2Otherwise,A2t
heA2overdraftA2isA2reportedA2asA2currentA2liability

WhatA2isA2appropriatedA2retainedA2earning?A2-A2Ans--
TheA2purposeA2ofA2appropriatedA2retainedA2earningA2isA2toA2alert/
discloseA2shareholdersA2thatA2someA2ofA2itA2retainedA2earningA2isA2notA2availableA2toA2pay
A2dividendsA2becauseA2theyA2areA2restrictedA2forA2certainA2purposes.A2WhenA2theA2purpos
eA2ofA2appropriationA2isA2completed,A2itA2willA2beA2reclassedA2toA2unappropriatedA2retaine
dA2earnings

WhatA2isA2theA2costA2methodA2inA2equityA2transactionA2accounting?
A2AndA2howA2doesA2itA2affectA2incomeA2statement/balanceA2sheet?A2-A2Ans--
CalculationA2ofA2paid-
inA2capitalA2forA2itsA2treasuryA2stockA2isA2basedA2onA2theA2amountA2treasuryA2stockA2wereA
2bought.A2ItA2doesn'tA2affectA2incomeA2statementA2butA2itA2isA2recordedA2onA2balanceA2she
etA2asA2APIC-T/SA2andA2lossesA2areA2firstA2eliminatedA2inA2APIC-
T/SA2thenA2decreaseA2retainedA2earnings

HowA2doesA2ownedA2treasuryA2stockA2affectA2stockholder'sA2equity?A2-A2Ans--
OwningA2itsA2ownA2stockA2reducesA2stockholder'sA2equity