Free CPA FAR (Financial Accounting & Reporting) Select Balance Sheet Accounts Practice Questions
Select balance sheet accounts on the CPA FAR exam cover cash, receivables, inventory (FIFO, LIFO, weighted average), fixed assets, intangible assets, lease accounting (ASC 842), and accounting for investments and financial instruments.
Sample Questions
Question 1
Easy
Under ASC 350, how should goodwill be treated subsequent to acquisition?
Solution
A is correct.
Under ASC 350, goodwill is an indefinite-lived intangible asset that is not amortized. Instead, it is tested for impairment at least annually at the reporting unit level (and between annual tests if a triggering event occurs). Under the current one-step approach, an impairment loss is recognized when the carrying amount of the reporting unit exceeds its fair value, with the loss limited to the carrying amount of goodwill.
Under ASC 350, goodwill is an indefinite-lived intangible asset that is not amortized. Instead, it is tested for impairment at least annually at the reporting unit level (and between annual tests if a triggering event occurs). Under the current one-step approach, an impairment loss is recognized when the carrying amount of the reporting unit exceeds its fair value, with the loss limited to the carrying amount of goodwill.
Question 2
Medium
Which of the following sales of an HTM debt security would NOT trigger the tainting rule under ASC 320?
Solution
B is correct.
ASC 320 carves out a de minimis exception for sales within three months of maturity, because the bond is functionally a cash equivalent at that point. A sale two months before maturity falls within the safe harbor and does not taint the remaining portfolio.
ASC 320 carves out a de minimis exception for sales within three months of maturity, because the bond is functionally a cash equivalent at that point. A sale two months before maturity falls within the safe harbor and does not taint the remaining portfolio.
Question 3
Hard
On January 1, Year 1, Parker Corp. acquired equipment for $500,000 with a useful life of 10 years and no salvage value. Parker uses the double-declining-balance method. What is the depreciation expense for Year 2?
Solution
A is correct.
Under the double-declining-balance method, the rate is 2 / 10 = 20%. Year 1 depreciation = $500,000 × 20% = $100,000. Book value at end of Year 1 = $500,000 − $100,000 = $400,000. Year 2 depreciation = $400,000 × 20% = $80,000.
Under the double-declining-balance method, the rate is 2 / 10 = 20%. Year 1 depreciation = $500,000 × 20% = $100,000. Book value at end of Year 1 = $500,000 − $100,000 = $400,000. Year 2 depreciation = $400,000 × 20% = $80,000.