Free CPA FAR (Financial Accounting & Reporting) Financial Reporting Practice Questions

C is correct. The accrual basis recognizes revenues when they are earned (performance obligations are met) and expenses when they are incurred (resources are consumed or obligations are created), without regard to the timing of cash flows. This is the foundation of GAAP and provides the most complete picture of financial position and performance over a period. Choice A describes cash basis accounting, not accrual basis. Choice B describes the tax basis, a special purpose framework that does not always align with GAAP. Choice D is not a recognized accounting basis — it misstates both revenue and expense recognition triggers and does not describe any GAAP or GAAP-adjacent framework.

B is correct. ASC 280-10-50 requires disclosure of several items for each reportable segment, including: revenues from external customers, intersegment revenues, a measure of segment profit or loss reviewed by the chief operating decision maker (CODM), and total assets. Option A is incomplete because intersegment revenues must be separately disclosed even though they are eliminated in consolidation. Option C overstates the requirement; ASC 280 does not mandate a detailed natural classification breakdown of all expenses. Option D incorrectly assumes geographic regions are the primary basis; ASC 280 uses a management approach based on how the CODM organizes the entity.

B is correct. Under the double-declining-balance method, the rate is 2 / 10 = 20%. Year 1 depreciation = \$500,000 \times 20% = \$100,000. Book value at end of Year 1 = \$500,000 − \$100,000 = \$400,000. Year 2 depreciation = \$400,000 \times 20% = \$80,000.
Choice A is incorrect because \$64,000 would be the Year 3 depreciation (\$320,000 \times 20%).
Choice D is incorrect because \$100,000 is the Year 1 depreciation, not Year 2. Under DDB, each year's depreciation is applied to the declining book value.
Choice C is incorrect because \$90,000 does not correspond to any correct application of the DDB method for this asset.