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Wall Street Prep Accounting Crash Course
Exam Version 4 | 2025-2026 Edition | Actual
Exam Questions with Verified Answers |
WSP Certification | Pass Guarantee
SECTION A – MULTIPLE CHOICE (25 × 2 pts = 50 pts)
Select the BEST answer. All amounts in $ millions unless noted. GAAP/IFRS
references are to standards effective for fiscal years beginning on or after 1 Jan
2025.
1. On 1 Jan 2026 Lessee Corp. signs a 5-year equipment lease with a 5-year
renewal option that is “reasonably certain” to be exercised. The incremental
borrowing rate is 6 % and the implicit rate (known) is 5 %. Which rate must
be used to discount lease payments under ASC 842?
A. 5 % B. 6 % C. 4 % (risk-free) D. Lessee may elect either 5
% or 6 %
2. Under IFRS 15, a software contract includes a licence, installation and 3 -
year updates. The standalone selling prices are $80, $20 and $60
respectively. The contract price is $120. How much is allocated to the
licence?
A. $60 B. $80 C. $48 D. $72
3. On 1 Jan 2025 Entity A issues $500 of 4 % convertible bonds (conversion
price $25) when its share price is $20. The liability component is measured
at $450. What is the debt discount that will be amortised over the bond life?
A. $50 B. $0 C. $450 D. $500
4. Which of the following is NOT an acceptable hedge-accounting method
under ASC 815 for 2025?
A. Fair-value hedge B. Cash-flow hedge C. Net-investment hedge
D. Macro hedge without specific documentation
5. A calendar-year company acquires 30 % of Target for $600 on 30 Sep
2025. Target reports net income of $100 for 2025 and pays no
dividends. The fair value of the investment is $650 on 31 Dec 2025. Under
the equity method the investor’s 31 Dec 2025 carrying amount is
A. $615 B. $600 C. $607.5 D. $650
, 2
6. Deferred tax assets should be recognised for temporary differences and:
A. Operating-loss carry-backs only B. Operating-loss carry-forwards
only C. Both carry-backs and carry-forwards D. Neither, only for
temporary differences
7. A company uses LIFO for tax and FIFO for internal reporting. At 31 Dec
2025 the LIFO reserve is $120, up from $90 at 31 Dec 2024. The statutory
tax rate is 25 %. The 2025 adjustment to retained earnings for the change in
the LIFO reserve is
A. +$22.5 B. –$22.5 C. +$30 D. –$30
8. Which statement best describes the accounting for negative goodwill
(bargain purchase) under IFRS 3?
A. Immediately recycle through OCI B. Recognise in profit or loss on
acquisition date C. Amortise over 10 years D. Offset against non-
current assets
9. Parent owns 80 % of Sub. During 2025 Sub sells inventory to Parent for
$200 costing $150. Parent resells 60 % of the inventory in 2025. The
unrealised profit eliminated in consolidated net income is
A. $10 B. $16 C. $20 D. $40
10. A firm’s 2025 effective tax rate reconciliation shows a “domestic production
deduction” line. This adjustment is classified as
A. Permanent difference B. Temporary difference C. Valuation
allowance D. Change in tax law
11. Which ratio uses NOPAT in the numerator?
A. ROE B. ROA C. ROIC D. Current ratio
12. Under ASC 350 an entity elects to perform a qualitative assessment for
goodwill impairment. Which of the following is NOT a relevant factor?
A. Macroeconomic conditions B. Industry outlook C. Market
capitalisation decline > 50 % D. Planned synergies from recent
acquisition
13. A company issues $1,000 of 3-year, 5 % bonds when the market rate is 6
%. Interest is paid annually. The initial carrying amount is closest to
A. $1,000 B. $973 C. $1,027 D. $950
14. IFRS 9 requires expected-credit-loss recognition for debt instruments at
FVOCI. The loss allowance is presented
A. As a liability B. As a reduction of the asset’s amortised cost C.
In OCI D. As a separate component of equity
15. A calendar-year public company adopts the new ASU 2024-XX on crypto-
asset fair-value accounting on 1 Jan 2025. The cumulative-effect adjustment
is recorded
A. Retrospectively to 2023 comparatives B. Prospectively with
, 3
disclosure only C. As an adjustment to opening retained earnings 1 Jan
2025 D. In cumulative-effect line within 2025 net income
16. Which section of the cash-flow statement is NOT affected by the choice of
interest paid classification under IAS 7?
A. Operating B. Investing C. Financing D. None; the total
change in cash is unaffected
17. A lessee’s right-of-use asset is impaired. After recognising the impairment
loss, the asset is amortised over
A. Original lease term B. Original lease term less elapsed term C.
Remaining lease term D. Useful life of the underlying asset
18. In a step acquisition Parent increases ownership from 15 % to 55 %. The
previously held 15 % equity interest is remeasured to fair value $120,
producing a $30 gain. Under IFRS the gain is recognised
A. In OCI B. In profit or loss C. Directly in equity D. As
negative goodwill
19. A company declares a 2-for-1 stock split on 15 Feb 2026, payable 15 Mar
2026. For EPS calculation purposes the weighted-average shares are
retroactively adjusted to the
A. Beginning of fiscal year B. Declaration date C. Payment date
D. Earliest period presented
20. Which item is added back to net income when calculating CFO under the
indirect method?
A. Amortisation of bond premium B. Gain on sale of equipment C.
Increase in deferred tax asset D. Equity income from associate
21. The presentation currency is the currency
A. Of the primary economic environment in which the entity operates B.
In which the entity presents its financial statements C. Used for tax
reporting D. Used for dividend declarations
22. A firm’s 2025 EBITDA is $400, depreciation $80, interest $40, tax rate 25
%. The interest-coverage ratio is
A. 10.0× B. 8.0× C. 7.5× D. 6.0×
23. Which of the following is a change in accounting estimate?
A. Switch from straight-line to DDB depreciation B. Correction of math
error in depreciation schedule C. Change in salvage value D.
Change from LIFO to FIFO
24. A company issues restricted stock with a two-year cliff vest. The fair value
at grant date is $10 per share for 1 million shares. The total compensation
cost recognised over the vesting period is
A. $10 million B. $5 million C. Remeasured each reporting date
D. Zero until vested
, 4
25. For a defined-benefit plan, actuarial gains/losses under IFRS may be
recognised
A. Immediately in profit or loss B. Immediately in OCI with no
recycling C. In profit or loss using corridor approach only D.
Directly in retained earnings
SECTION B – FINANCIAL STATEMENT ANALYSIS EXERCISES
(10 exercises × 3 pts = 30 pts)
Use the following 2025 fiscal-year data for AlphaTech Inc. ($ millions except per-
share):
Income Statement
Revenue 8,400
COGS 5,040
Gross profit 3,360
SG&A 840
R&D 504
EBITDA 2,016
D&A 336
EBIT 1,680
Interest exp. 168
Wall Street Prep Accounting Crash Course
Exam Version 4 | 2025-2026 Edition | Actual
Exam Questions with Verified Answers |
WSP Certification | Pass Guarantee
SECTION A – MULTIPLE CHOICE (25 × 2 pts = 50 pts)
Select the BEST answer. All amounts in $ millions unless noted. GAAP/IFRS
references are to standards effective for fiscal years beginning on or after 1 Jan
2025.
1. On 1 Jan 2026 Lessee Corp. signs a 5-year equipment lease with a 5-year
renewal option that is “reasonably certain” to be exercised. The incremental
borrowing rate is 6 % and the implicit rate (known) is 5 %. Which rate must
be used to discount lease payments under ASC 842?
A. 5 % B. 6 % C. 4 % (risk-free) D. Lessee may elect either 5
% or 6 %
2. Under IFRS 15, a software contract includes a licence, installation and 3 -
year updates. The standalone selling prices are $80, $20 and $60
respectively. The contract price is $120. How much is allocated to the
licence?
A. $60 B. $80 C. $48 D. $72
3. On 1 Jan 2025 Entity A issues $500 of 4 % convertible bonds (conversion
price $25) when its share price is $20. The liability component is measured
at $450. What is the debt discount that will be amortised over the bond life?
A. $50 B. $0 C. $450 D. $500
4. Which of the following is NOT an acceptable hedge-accounting method
under ASC 815 for 2025?
A. Fair-value hedge B. Cash-flow hedge C. Net-investment hedge
D. Macro hedge without specific documentation
5. A calendar-year company acquires 30 % of Target for $600 on 30 Sep
2025. Target reports net income of $100 for 2025 and pays no
dividends. The fair value of the investment is $650 on 31 Dec 2025. Under
the equity method the investor’s 31 Dec 2025 carrying amount is
A. $615 B. $600 C. $607.5 D. $650
, 2
6. Deferred tax assets should be recognised for temporary differences and:
A. Operating-loss carry-backs only B. Operating-loss carry-forwards
only C. Both carry-backs and carry-forwards D. Neither, only for
temporary differences
7. A company uses LIFO for tax and FIFO for internal reporting. At 31 Dec
2025 the LIFO reserve is $120, up from $90 at 31 Dec 2024. The statutory
tax rate is 25 %. The 2025 adjustment to retained earnings for the change in
the LIFO reserve is
A. +$22.5 B. –$22.5 C. +$30 D. –$30
8. Which statement best describes the accounting for negative goodwill
(bargain purchase) under IFRS 3?
A. Immediately recycle through OCI B. Recognise in profit or loss on
acquisition date C. Amortise over 10 years D. Offset against non-
current assets
9. Parent owns 80 % of Sub. During 2025 Sub sells inventory to Parent for
$200 costing $150. Parent resells 60 % of the inventory in 2025. The
unrealised profit eliminated in consolidated net income is
A. $10 B. $16 C. $20 D. $40
10. A firm’s 2025 effective tax rate reconciliation shows a “domestic production
deduction” line. This adjustment is classified as
A. Permanent difference B. Temporary difference C. Valuation
allowance D. Change in tax law
11. Which ratio uses NOPAT in the numerator?
A. ROE B. ROA C. ROIC D. Current ratio
12. Under ASC 350 an entity elects to perform a qualitative assessment for
goodwill impairment. Which of the following is NOT a relevant factor?
A. Macroeconomic conditions B. Industry outlook C. Market
capitalisation decline > 50 % D. Planned synergies from recent
acquisition
13. A company issues $1,000 of 3-year, 5 % bonds when the market rate is 6
%. Interest is paid annually. The initial carrying amount is closest to
A. $1,000 B. $973 C. $1,027 D. $950
14. IFRS 9 requires expected-credit-loss recognition for debt instruments at
FVOCI. The loss allowance is presented
A. As a liability B. As a reduction of the asset’s amortised cost C.
In OCI D. As a separate component of equity
15. A calendar-year public company adopts the new ASU 2024-XX on crypto-
asset fair-value accounting on 1 Jan 2025. The cumulative-effect adjustment
is recorded
A. Retrospectively to 2023 comparatives B. Prospectively with
, 3
disclosure only C. As an adjustment to opening retained earnings 1 Jan
2025 D. In cumulative-effect line within 2025 net income
16. Which section of the cash-flow statement is NOT affected by the choice of
interest paid classification under IAS 7?
A. Operating B. Investing C. Financing D. None; the total
change in cash is unaffected
17. A lessee’s right-of-use asset is impaired. After recognising the impairment
loss, the asset is amortised over
A. Original lease term B. Original lease term less elapsed term C.
Remaining lease term D. Useful life of the underlying asset
18. In a step acquisition Parent increases ownership from 15 % to 55 %. The
previously held 15 % equity interest is remeasured to fair value $120,
producing a $30 gain. Under IFRS the gain is recognised
A. In OCI B. In profit or loss C. Directly in equity D. As
negative goodwill
19. A company declares a 2-for-1 stock split on 15 Feb 2026, payable 15 Mar
2026. For EPS calculation purposes the weighted-average shares are
retroactively adjusted to the
A. Beginning of fiscal year B. Declaration date C. Payment date
D. Earliest period presented
20. Which item is added back to net income when calculating CFO under the
indirect method?
A. Amortisation of bond premium B. Gain on sale of equipment C.
Increase in deferred tax asset D. Equity income from associate
21. The presentation currency is the currency
A. Of the primary economic environment in which the entity operates B.
In which the entity presents its financial statements C. Used for tax
reporting D. Used for dividend declarations
22. A firm’s 2025 EBITDA is $400, depreciation $80, interest $40, tax rate 25
%. The interest-coverage ratio is
A. 10.0× B. 8.0× C. 7.5× D. 6.0×
23. Which of the following is a change in accounting estimate?
A. Switch from straight-line to DDB depreciation B. Correction of math
error in depreciation schedule C. Change in salvage value D.
Change from LIFO to FIFO
24. A company issues restricted stock with a two-year cliff vest. The fair value
at grant date is $10 per share for 1 million shares. The total compensation
cost recognised over the vesting period is
A. $10 million B. $5 million C. Remeasured each reporting date
D. Zero until vested
, 4
25. For a defined-benefit plan, actuarial gains/losses under IFRS may be
recognised
A. Immediately in profit or loss B. Immediately in OCI with no
recycling C. In profit or loss using corridor approach only D.
Directly in retained earnings
SECTION B – FINANCIAL STATEMENT ANALYSIS EXERCISES
(10 exercises × 3 pts = 30 pts)
Use the following 2025 fiscal-year data for AlphaTech Inc. ($ millions except per-
share):
Income Statement
Revenue 8,400
COGS 5,040
Gross profit 3,360
SG&A 840
R&D 504
EBITDA 2,016
D&A 336
EBIT 1,680
Interest exp. 168
