FAR CPA Exam Final Review
Comprehensive Questions with
Verified Answers Graded A+
1. How discontinued operations are reported Answer: Net of tax
2. In order for a trading securities to be discontinued operations
it must be classified as Answer: Held for sale
3. How change in accounting principle is reported Answer: Retroactively, ne
of tax
4. Change in depreciation method, change to LIFO are change in Answer:
Accounting estimate (prospective)
5. Change in entity-treatment Answer: Restate financial statements
6. In order for an occurrence to reduce income from continuing
,operations it must be Answer: Unusual OR infrequent (does not have to be both)
7. Comprehensive income Answer: Includes all changes in equity during the period
except transactions with owners (no dividends)
8. Comprehensive income formula Answer: Net income + Other comprehensive
income
9. Components of Other Comprehensive Income (PUFIE) Answer:
Pension adjustments Unrealized G/L on Available-For-Sale Securities
Foreign currency items
Instrument specific credit risk
Ettective portion of Cash Flow hedges
10. First note to financial statements Answer: Summary of significant accounting
policies (methods, policies, criteria)
11. Other notes to financial statements (relevant to decision
makers) Answer: Change in stockholder's equity, contingencies, contractual obligations,
events post Balance Sheet date but prior to financial statement issuance, related parties, significant
estimates & risks
12. Cash Flows from Investing (CFI) Answer: Change in non-current assets;
increase=assets going up (buying more) so $ outflow, decrease=assets going down (selling) so $
,inflow
13. Cash Flows from Financing Answer: Change in debt & equity; increase=issuing
debt/stock, decrease=repaying debt/repurchasing stock/paying cash dividend
14. Supplemental Disclosure Required for Direct Method Stmt of
Cash Flows Answer: -
Reconciliation of Cash to Net Income
15. Supplemental Disclosure Required for Indirect Method Stmt of
Cash Flows-
Answer: Interest paid & taxes paid
, 16. Operating activities reconciliation-cash flows Answer: +Net income +
Depreciation - Gains & Amor- tization of Premium + Losses - Equity earnings in excess of cash
received - Change in Operating Assets + Change in Operating Liabilities
17. Cash from customers (direct method) Answer: Decrease to Accounts
Receivable (Cash coming in, if increase no $ received) + Increase in Deferred Revenue (Cash
received, if decrease no $ received)
18. Cash paid to suppliers & employees Answer: Increase in Inventory (buying
more, so $ outflow; if decrease selling more so $ inflow) + Decrease in Accounts/Wages Payable
(repayment so $ outflow; if increase borrowing so $ inflow)
19. Statement of Cash Flows Supplemental Disclosures Answer: Assets
purchased with a note, entering into a capital lease, exchanging bonds for stock
20. Cash & Cash Equivalents (90 days) location on Stmt of Cash
Flows Answer: Cash section, not operating activities
21. Requirements when issuing new securities Answer: Submit registration
statement to SEC; include disclosures about securities being ottered
22. Days after Year End (YE) for Large Accelerated Filers (>$700M)
to file financial statements Answer: 60 for 10K, 40 for 10Q
Comprehensive Questions with
Verified Answers Graded A+
1. How discontinued operations are reported Answer: Net of tax
2. In order for a trading securities to be discontinued operations
it must be classified as Answer: Held for sale
3. How change in accounting principle is reported Answer: Retroactively, ne
of tax
4. Change in depreciation method, change to LIFO are change in Answer:
Accounting estimate (prospective)
5. Change in entity-treatment Answer: Restate financial statements
6. In order for an occurrence to reduce income from continuing
,operations it must be Answer: Unusual OR infrequent (does not have to be both)
7. Comprehensive income Answer: Includes all changes in equity during the period
except transactions with owners (no dividends)
8. Comprehensive income formula Answer: Net income + Other comprehensive
income
9. Components of Other Comprehensive Income (PUFIE) Answer:
Pension adjustments Unrealized G/L on Available-For-Sale Securities
Foreign currency items
Instrument specific credit risk
Ettective portion of Cash Flow hedges
10. First note to financial statements Answer: Summary of significant accounting
policies (methods, policies, criteria)
11. Other notes to financial statements (relevant to decision
makers) Answer: Change in stockholder's equity, contingencies, contractual obligations,
events post Balance Sheet date but prior to financial statement issuance, related parties, significant
estimates & risks
12. Cash Flows from Investing (CFI) Answer: Change in non-current assets;
increase=assets going up (buying more) so $ outflow, decrease=assets going down (selling) so $
,inflow
13. Cash Flows from Financing Answer: Change in debt & equity; increase=issuing
debt/stock, decrease=repaying debt/repurchasing stock/paying cash dividend
14. Supplemental Disclosure Required for Direct Method Stmt of
Cash Flows Answer: -
Reconciliation of Cash to Net Income
15. Supplemental Disclosure Required for Indirect Method Stmt of
Cash Flows-
Answer: Interest paid & taxes paid
, 16. Operating activities reconciliation-cash flows Answer: +Net income +
Depreciation - Gains & Amor- tization of Premium + Losses - Equity earnings in excess of cash
received - Change in Operating Assets + Change in Operating Liabilities
17. Cash from customers (direct method) Answer: Decrease to Accounts
Receivable (Cash coming in, if increase no $ received) + Increase in Deferred Revenue (Cash
received, if decrease no $ received)
18. Cash paid to suppliers & employees Answer: Increase in Inventory (buying
more, so $ outflow; if decrease selling more so $ inflow) + Decrease in Accounts/Wages Payable
(repayment so $ outflow; if increase borrowing so $ inflow)
19. Statement of Cash Flows Supplemental Disclosures Answer: Assets
purchased with a note, entering into a capital lease, exchanging bonds for stock
20. Cash & Cash Equivalents (90 days) location on Stmt of Cash
Flows Answer: Cash section, not operating activities
21. Requirements when issuing new securities Answer: Submit registration
statement to SEC; include disclosures about securities being ottered
22. Days after Year End (YE) for Large Accelerated Filers (>$700M)
to file financial statements Answer: 60 for 10K, 40 for 10Q
