AICPA CPA Financial Accounting and Reporting - FAR Exam Questions

QUESTION NO: 1
A planned volume variance in the first quarter, which is expected to be absorbed by the end of the fiscal
period, ordinarily should be deferred at the end of the first quarter if it is:

QUESTION NO: 2
Financial reporting by a development stage enterprise differs from financial reporting for an established
operating enterprise in regard to footnote disclosures:

QUESTION NO: 3
According to the FASB conceptual framework, what does the concept of reliability in financial reporting
include?

QUESTION NO: 4
Income tax-basis financial statements differ from those prepared under GAAP in that income tax-basis
financial statements:

QUESTION NO: 5
On August 31, 1992, Harvey Co. decided to change from the FIFO periodic inventory system to the
weighted average periodic inventory system. Harvey is on a calendar year basis. The cumulative effect of
the change is determined:

QUESTION NO: 6
According to the FASB conceptual framework, which of the following situations violates the concept of
reliability?

QUESTION NO: 7
During 1990, Fuqua Steel Co. had the following unusual financial events occur:
. Bonds payable were retired five years before their scheduled maturity, resulting in a $260,000 gain.
Fuqua has frequently retired bonds early when interest rates declined significantly.
. A steel forming segment suffered $255,000 in losses due to hurricane damage. This was the fourth
similar loss sustained in a 5-year period at that location.
. A component of Fuqua's operations, steel transportation, was sold at a net loss of $350,000.
This was Fuqua's first divestiture of one of its operating segments.
Before income taxes, what amount should be disclosed as the gain (loss) from extraordinary items in
1 990?

QUESTION NO: 8
During the first quarter of the calendar year, Worth Co. had income before taxes of $100,000, and its
effective income tax rate was 15%. Worth's effective annual income tax rate for the previous year was
3 0%. Worth expects that its effective annual income tax rate for the current year will be 25%. The
statutory tax rate for the current year is 35%. In its first quarter interim income statement, what amount of
income tax expense should Worth report?