Authentic AICPA FAR Exam Dumps PDF - 2023 Updated
Get Prepared for Your FAR Exam With Actual 165 Questions
The benefit of obtaining the Financial Accounting and Reporting (FAR) Exam Certification
This qualification helps both new and seasoned accountants to test their qualifications, develop their abilities, and enhance their understanding of the overall discipline. Via their local state board, prospective applicants can learn more about the licensing process specifics and visit the NASBA website for information about the standardized CPA test. The growing demand for CPAs across the job market is motivated by many factors, so the trend is likely to continue soon. Accountants winning their FAR earn 10 percent more on average than non-FAR colleagues and have more chances to grow their careers. In job searching, being FAR certified can also be a big boon as it shows professional dedication and makes the candidate stand out from others. Among several other specialist fields, FAR certification demonstrates qualification for auditing, business strategy, bookkeeping, and forensic accounting. Becoming accredited opens the doors to hundreds of various career paths and is essential for foreign positions in particular.
Many accountants joining the profession are curious about the advantages of being Financial Accounting and Reporting (FAR) certified so that they can determine if the time and energy to undertake this achievement are worth devoting. The certification process may undoubtedly be rigorous and difficult, but for those employed in industry or finance, success offers some notable advantages. In the US, several states have their board that regulates the certification in their jurisdiction of public accountants.
How to Prepare For Financial Accounting and Reporting (FAR) Exam
Preparation Guide for Financial Accounting and Reporting (FAR) Exam
Introduction
The Financial Accounting and Reporting FAR exam test is part of the uniform CPA examination and is administered by the American Institute of Certified Public Accountants (AICPA). The American Institute of Certified Public Accountants (AICPA) is the United States national professional association of Certified Public Accountants (CPAs), with more than 418,000 members in business and industry, public practice, government, education, student affiliates, and foreign associates in 143 countries. Established in 1887, the association sets ethical guidelines for audits of private businesses, non-profit organizations, federal, state, and local governments for the profession and U.S. auditing standards. It also establishes the Standardized CPA Test and rates it. The AICPA has offices in New York City; Durham, NC; Washington DC; and Ewing, NJ.
For practitioners aspiring to become CPAs, the Standardized Certified Public Accountant test is a credentialing exam. It is graded and governed by the American Institute of Certified Public Accountants (AICPA) and by the National Association of State Accountancy Boards (NASBA).
This exam guide is intended to get you to know about the exam details and help you to prepare for the Financial Accounting and Reporting FAR exam test successfully. This guide includes information on the certification test target audience, recommended preparation FAR exam dumps and documentation, and a full list of exam targets, all to help you obtain a passing grade. To increase your chances of passing the test, AICPA strongly recommends a mix of on-the-job experience, course attendance, and self-study.
NEW QUESTION # 75
Which of the following is correct concerning financial statement disclosure of accounting policies?
- A. Disclosures should be limited to principles and methods peculiar to the industry in which the company
operates. - B. Disclosures should duplicate details disclosed elsewhere in the financial statements.
- C. The format and location of accounting policy disclosures are fixed by generally accepted accounting
principles. - D. Disclosure of accounting policies is an integral part of the financial statements.
Answer: D
Explanation:
Choice "b" is correct. Disclosure of accounting policies (and all other disclosure also) is an integral part of
the financial statements. Choice "a" is incorrect. For disclosure of accounting policies, disclosure should
not be limited to principles and methods peculiar to the industry in which the company operates. All
material accounting policies should be disclosed. Choice "c" is incorrect. For disclosure of accounting
policies, the format and location of accounting policies are not fixed by GAAP. Accounting policy
disclosures are normally Note 1, but that is a (reasonable and very general) practice and not a "rule." It
does make sense to disclose the "why" before the "what." Choice "d" is incorrect. Disclosure of
accounting policies should not duplicate details disclosed elsewhere in the financial statements.
Interim Financial Reporting
NEW QUESTION # 76
In Baer Food Co.'s 1990 single-step income statement, the section titled "Revenues" consisted of the
following:
In the revenues section of its 1990 income statement, Baer Food should have reported total revenues of:
- A. $215,400
- B. $216,300
- C. $201,900
- D. $203,700
Answer: C
Explanation:
Choice "d" is correct. $201,900.
The various amounts from discontinued operations should be included in discontinued operations, not in
revenues.
NEW QUESTION # 77
What is the purpose of information presented in notes to the financial statements?
- A. To provide recognition of amounts not included in the totals of the financial statements.
- B. To correct improper presentation in the financial statements.
- C. To present management's responses to auditor comments.
- D. To provide disclosures required by generally accepted accounting principles.
Answer: D
NEW QUESTION # 78
Which of the following should be disclosed in a summary of significant accounting policies?
- A. Future minimum lease payments in the aggregate and for each of the five succeeding fiscal years.
- B. Depreciation expense.
- C. Composition of sales by segment.
- D. Basis of profit recognition on long-term construction contracts.
Answer: D
Explanation:
Choice "a" is correct. The summary of significant accounting policies should disclose policies. The only
policy in this question is the "basis" of profit recognition on long-term construction contracts.
The other disclosures are accounting details and would be disclosed in other footnotes, but not in the
summary of significant accounting policies.
Choice "b" is incorrect. The future minimum lease payments should be disclosed, but not in the summary
of significant accounting policies.
Choice "c" is incorrect. Depreciation expense should certainly be disclosed, but not in the summary of
significant accounting policies.
Choice "d" is incorrect. The composition of sales by segment should be disclosed, but not in the summary
of significant accounting policies.
NEW QUESTION # 79
Which of the following is true regarding the comparison of managerial to financial accounting?
- A. Managerial accounting need not follow generally accepted accounting principles (GAAP) while
financial accounting must follow them. - B. Managerial accounting is generally more precise.
- C. The emphasis on managerial accounting is relevance and the emphasis on financial accounting is
timeliness. - D. Managerial accounting has a past focus and financial accounting has a future focus.
Answer: A
Explanation:
Choice "d" is correct. Public companies must follow GAAP for (external) financial reporting purposes.
GAAP need not be followed for (internal) managerial accounting purposes.
Choice "a" is incorrect. Financial accounting is generally more precise.
Choice "b" is incorrect. Managerial accounting has a future focus, while financial accounting focuses on
reporting past results.
Choice "c" is incorrect. The emphasis of financial accounting is providing useful information to financial
statement users (including the characteristic of relevance), while the emphasis of managerial accounting
is providing timely information to management decision makers.
NEW QUESTION # 80
Which of the following must be included in a company's summary of significant accounting policies in the
notes to the financial statements?
- A. Schedule of fixed assets.
- B. Revenue recognition policies.
- C. Summary of long-term debt outstanding.
- D. Description of current year equity transactions.
Answer: B
Explanation:
Choice "d" is correct. The summary of significant accounting policies should include "policies." The only
policy in the choices listed is the revenue recognition policies.
Choice "a" is incorrect. A description of current year equity transactions is not a policy. It should be
disclosed somewhere in the footnotes but not in the summary of significant accounting policies.
Choice "b" is incorrect. A summary of long-term debt outstanding is not a policy. It should be disclosed
somewhere in the footnotes but not in the summary of significant accounting policies.
Choice "c" is incorrect. A schedule of fixed assets is not a policy. It should be disclosed somewhere in the
footnotes but not in the summary of significant accounting policies.
NEW QUESTION # 81
Which of the following information should be included in Melay, Inc.'s 1992 summary of significant
accounting policies?
- A. Property, plant, and equipment is recorded at cost with depreciation computed principally by the
straight-line method. - B. During 1992, the Delay component was sold.
- C. Future common share dividends are expected to approximate 60% of earnings.
- D. Business segment 1992 sales are Alay $1M, Belay $2M, and Celay $3M.
Answer: A
Explanation:
Choice "a" is correct. Computing depreciation principally by the straight-line method is a GAAP method of
depreciation that should be described in the "summary of significant accounting policies." Choice "b" is
incorrect. Disclosing the sale of a component of a business is required (and is covered in the lecture on
"discontinued operations" in the F1 class) but is not a "significant accounting policy."
Choice "c" is incorrect. Disclosing "sales" of segments is required, but is not a "significant accounting
policy."
Choice "d" is incorrect. "Estimates of future common share dividends" are not appropriate disclosures for
the financial statements. They might be appropriate for the "presidents letter to shareholders."
NEW QUESTION # 82
Hyde Corp. has three manufacturing divisions, each of which has been determined to be a reportable
segment. In 1989, Clay division had sales of $3,000,000, which was 25% of Hyde's total sales, and had
operating costs of $1,900,000, as reported to the CFO. In 1989, Hyde incurred operating costs of
$ 500,000 that were not directly traceable to any of the divisions. In addition, Hyde incurred corporate
interest expense of $300,000 in 1989. In reporting segment information, what amount should be shown as
Clay's operating profit for 1989?
- A. $1,100,000
- B. $975,000
- C. $900,000
- D. $875,000
Answer: A
Explanation:
Choice "d" is correct. $1,100,000 operating profit for clay.
Rule: Operating profit by segments is based on the measure of profit reported to the "chief operating
decision maker."
Allocations for general operating costs and interest, etc., should not be made solely for purposes of
segment disclosures.
NEW QUESTION # 83
YIV, Inc. is a multidivisional corporation, which has both intersegment sales and sales to unaffiliated
customers. YIV should report segment financial information for each division meeting which of the
following criteria?
- A. Segment operating profit or loss is 10% or more of consolidated profit or loss.
- B. Segment revenue is 10% or more of consolidated revenue.
- C. Segment revenue is 10% or more of combined revenue of all the company segments.
- D. Segment operating profit or loss is 10% or more of combined operating profit or loss of all company
segments.
Answer: C
Explanation:
Choice "c" is correct. Segment revenue is 10% or more of combined revenue of all the company
segments.
Rule: To be significant enough to report on, a segment must be at least 10% of:
1 . Combined revenues (whether intersegment or affiliated customers) or
2 . Operating profit (of all segments not having an operating loss), or
3 . Identifiable assets.
Choice "a" is incorrect. Rule is 10% of "operating profit," not "consolidated profit."
Choice "b" is incorrect. Segments with "operating losses" are not combined with those having "operating
profits" in determining a segment.
Choice "d" is incorrect. "Consolidated revenue" would not include "intersegment revenue." Rule is
"combined revenue," not "consolidated revenue."
NEW QUESTION # 84
In general, an enterprise preparing interim financial statements should:
- A. Allocate revenues and expenses evenly over the quarters, regardless of when they actually occurred.
- B. Use the same accounting principles followed in preparing its latest annual financial statements.
- C. Defer recognition of seasonal revenue.
- D. Disregard permanent decreases in the market value of its inventory.
Answer: B
Explanation:
Choice "d" is correct. Generally accepted accounting principles that were used in the most recent annual
report of an enterprise should be applied to interim financial statements of the current year, unless a
change in accounting principle is adopted in the current year.
Choices "a", "b", and "c" are incorrect, per above.
NEW QUESTION # 85
What is the purpose of information presented in notes to the financial statements?
- A. To provide recognition of amounts not included in the totals of the financial statements.
- B. To correct improper presentation in the financial statements.
- C. To present management's responses to auditor comments.
- D. To provide disclosures required by generally accepted accounting principles.
Answer: D
Explanation:
Choice "a" is correct. Information presented in notes to the financial statements have the purpose of
providing disclosures required by generally accepted accounting principles. SFAC 5 para. 7
NEW QUESTION # 86
Grum Corp., a publicly-owned corporation, is subject to the requirements for segment reporting. In its
income statement for the year ended December 31, 1991, Grum reported revenues of $50,000,000,
operating expenses of $47,000,000, and net income of $3,000,000. Operating expenses include payroll
costs of $ 15,000,000. Grum's combined identifiable assets of all industry segments at December 31,
1 991, were $40,000,000.
Cott Co.'s four business segments have revenues and identifiable assets expressed as percentages of
Cott's total revenues and total assets as follows:
Which of these business segments are deemed to be reportable segments?
- A. Ebon, Fair, and Gel only.
- B. Ebon, Fair, Gel, and Hak.
- C. Ebon and Fair only.
- D. Ebon only.
Answer: B
Explanation:
Rule: A segment must be at least 10% of:
1 . Combined revenues (whether intersegment or unaffiliated customers), or
2 . Operating income (of all segments not having an operating loss), or
3 . Identifiable assets.
Choice "d" is correct. Ebon, Fair, Gel, and Hak, since all four companies meet at least one of the criteria.
NEW QUESTION # 87
FASB Interpretations of Statements of Financial Accounting Standards have the same authority as the
FASB:
- A. Statements of Financial Accounting Concepts.
- B. Technical Bulletins.
- C. Emerging Issues Task Force Consensus.
- D. Statements of Financial Accounting Standards.
Answer: D
Explanation:
Choice "d" is correct. FASB interpretations of the "statements of financial accounting standards" (SFAS)
have the same authority as the FASB statements of financial accounting standards (SFAS), which by
themselves determine GAAP. Choice "a" is incorrect. Statements of financial accounting concepts (FAC's)
have much less authority (fifth floor) and do not by themselves determine GAAP as is the case with
SFASs and interpretations of SFASs. Choice "b" is incorrect. Emerging issues task force (EITF)
consensus is in the nature of a "third floor" authority. The EITF was established in 1984 to aid the FASB in
identifying and implementing emerging issues before they become widespread and ultimately require
action by the FASB. After discussing the issues and the relevant accounting pronouncements, the group
can sometimes reach a consensus on an issue, in which case no action by the FASB is usually needed.
Choice "c" is incorrect. Technical bulletins of the FASB (second floor) do not by themselves determine
GAAP.
NEW QUESTION # 88
On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with
Quo's president and outside accountants, made changes in accounting policies, corrected several errors
dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List B represents the general accounting treatment
required for these transactions. These treatments are:
. Cumulative effect approach - Include the cumulative effect of the adjustment resulting from the
accounting change or error correction in the 1993 financial statements, and do not restate the 1992
financial statements.
. Retroactive or retrospective restatement approach - Restate the 1992 financial statements and adjust
1 992 beginning retained earnings if the error or change affects a period prior to 1992.
. Prospective approach - Report 1993 and future financial statements on the new basis but do not restate
1 992 financial statements.
During 1993, Quo increased its investment in Worth, Inc. from a 10% interest, purchased in 1992, to 30%,
and acquired a seat on Worth's board of directors. As a result of its increased investment, Quo changed
its method of accounting for investment in Worth, Inc. from the cost method to the equity method.
List B
- A. Retroactive or retrospective restatement approach.
- B. Prospective approach.
- C. Cumulative effect approach.
Answer: A
Explanation:
Choice "B" is correct. The equity method of accounting is applied retroactively when the investor has
acquired 20% ownership. Prior to acquiring the ability to influence the investee, the cost method is proper.
The retroactive restatement approach does not mean that this change is the correction of an error (which
is now treated retroactively), a change in accounting principle (which is now treated retrospectively), or a
change in accounting entity (which is now treated retrospectively). It just means that retroactive
restatement is the proper treatment.
NEW QUESTION # 89
According to the FASB conceptual framework, comprehensive income includes which of the following?
- A. Option D
- B. Option C
- C. Option A
- D. Option B
Answer: D
Explanation:
Choice "b" is correct. Comprehensive income is the change in equity of a business during a period from
transactions and other events and circumstances from non-owner sources. It includes all changes in
equity except those resulting from investments by owners and distributions to owners. SFAC 6 para 70.
NEW QUESTION # 90
The following question is based on the following:
Vane Co.'s trial balance of income statement accounts for the year ended December 31, 2002, included
the following: Vane's income tax rate is 30%.
In Vane's 2002 multiple-step income statement, what amount should Vane report as income from
continuing operations?
- A. $140,000
- B. $147,000
- C. $126,000
- D. $129,500
Answer: A
Explanation:
Choice "c" is correct, $140,000.
NEW QUESTION # 91
A segment of Ace Inc. was discontinued during 1992. Ace's loss from discontinued operations should not:
- A. Include operating losses of the current period up to the date the decision to dispose of the segment
was made. - B. Include additional pension costs associated with the decision to dispose.
- C. Exclude operating losses from the date the decision to dispose of the segment was made until the end
of 1992. - D. Include employee relocation costs associated with the decision to dispose.
Answer: C
Explanation:
Choice "b" is correct. Ace's loss on discontinued operations should not exclude operating losses from the
date the decision to dispose of the segment was made until the end of 1992. All 1992 operating losses
should be included.
Choice "a" is incorrect. Employee relocation costs associated with the decision to dispose should be
included in the loss from discontinued operations.
Choice "c" is incorrect. Additional pension costs associated with the decision to dispose should be
included in the loss from discontinued operations.
Choice "d" is incorrect. Ace's loss on discontinued operations should include operating losses of the
current period up to the date the decision to dispose of the segment was made and also after that date.
All 1992 operating losses should be included.
NEW QUESTION # 92
On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with
Quo's president and outside accountants, made changes in accounting policies, corrected several errors
dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List A represents possible clarifications of these
transactions as: a change in accounting principle, a change in accounting estimate, a correction of an
error in previously presented financial statements, or neither an accounting change nor an accounting
error.
Item to Be Answered
During 1993, Quo determined that an insurance premium paid and entirely expensed in 1992 was for the
period January 1, 1992, through January 1, 1994.
List A (Select one)
- A. Change in accounting principal.
- B. Neither an accounting change nor an accounting error.
- C. Correction of an error in previously presented financial statements.
- D. Change in accounting estimate.
Answer: C
Explanation:
Choice "c" is correct. Expensing insurance premiums when paid (rather than allocating them to the
periods benefited) is a correction of an error in previously presented financial statements.
NEW QUESTION # 93
The effect of a material transaction that is infrequent in occurrence but not unusual in nature should be
presented separately as a component of income from continuing operations when the transaction results
in a:
- A. Option D
- B. Option C
- C. Option B
- D. Option A
Answer: D
Explanation:
Choice "a" is correct, Yes - Yes. A material transaction that is "infrequent in occurrence" but not "unusual
in nature" should be presented separately as a component of "income from continuing operations" when
the transaction results in a gain or loss.
NEW QUESTION # 94
Coffey Corp.'s trial balance of Income Statement Accounts for the year ended December 31, 1988 as
follows:
Coffey's income tax rate is 30%. The gain on debt extinguishment is considered a usual and recurring part
of Coffey's operations. The hurricane is considered an unusual and infrequent event. Coffey prepares a
multiple-step income statement for 1988.
Net income is:
- A. $140,000
- B. $200,000
- C. $168,000
- D. $161,000
Answer: A
Explanation:
Choice "a" is correct. $140,000.
Net income is the "bottom line" amount after all has been considered on the income statement.
Without showing all the line items as required for the income statement, the "bottom line" amount of
$ 140,000 is derived as follows:
NEW QUESTION # 95
What is the underlying concept that supports the immediate recognition of a contingent loss?
- A. Substance over form.
- B. Consistency.
- C. Matching.
- D. Conservatism.
Answer: D
Explanation:
Choice "d" is correct. Conservatism is a prudent reaction to uncertainty to try to ensure that uncertainty
and risks inherent in business situations are adequately considereD. Recognition of a contingent loss is
the recording of an amount representing uncertainty and risk in a business situation. SFAC 2, SFAS 5
para. 82 Choice "a" is incorrect. The substance over form concept presumes that the transaction form
may not dictate the accounting treatment. Choice "b" is incorrect. Consistency is conformity from period to
period with unchanging policies and procedures. SFAC 2 Choice "c" is incorrect. The matching principle
dictates that expenses be matched with the related revenues generated or the time period in which the
expense is incurred and known. SFAS #5 cites matching as the one concept supporting the immediate
recognition of a contingent loss, but it is not the primary underlying concept. SFAS 5 para. 76
NEW QUESTION # 96
According to the FASB conceptual framework, which of the following attributes would not be used to
measure inventory?
- A. Present value of future cash flows.
- B. Replacement cost.
- C. Net realizable value.
- D. Historical cost.
Answer: A
Explanation:
Choice "d" is correct. The present value of future cash flows is used to measure long-term receivables or
payables, not inventory, because inventory is a short-term asset, which has more immediate cash flows.
SFAC 5 para. 67 Choice "a" is incorrect. Historical cost can be used to measure inventory because it is a
relevant and reliable measurement attribute of current assets such as inventory. Choice "b" is incorrect.
Replacement (or current) cost can be used to measure inventory because it is a relevant and reliable
measurement attribute of current assets such as inventory. Choice "c" is incorrect. Net realizable value
can be used to measure inventory because it is a relevant and reliable measurement attribute of current
assets such as inventory.
NEW QUESTION # 97
Belle Co. determined after four years that the estimated useful life of its labeling machine should be 10
years rather than 12 years. The machine originally cost $46,000 and had an estimated salvage value of
$ 1,000. Belle uses straight-line depreciation. What amount should Belle report as depreciation expense
for the current year?
- A. $4,500
- B. $3,200
- C. $5,000
- D. $3,750
Answer: C
Explanation:
Choice "d" is correct. A change in estimated useful life is a change in accounting estimate, and is
therefore accounted for prospectively. The revised useful life should be used as of the beginning of the
year of the change and should be applied to the current book value of the fixed asset. The first step in
determining the depreciation expense in the year of the change in estimate is to determine the book value
of the labeling machine at the time of the change:
Original cost $46,000
-Accumulated depreciation 15,000 = [(46,000 - 1,000) / 12] *4 Current book value $31,000 This book
value is then depreciated over the remaining life of the fixed asset based on the new estimated life. In this
problem, the new estimated life is 10 years, four of which have already passed, so the asset must be
depreciated over the remaining 6 years: ($31,000 - 1,000) / 6 = $5,000 Choice "a" is incorrect. This
answer is incorrectly calculated by adding the salvage value to the current book value, and by using the
entire 10 year revised estimated life. Salvage value should always be subtracted and the asset should
only be depreciated over the remaining life of the asset. Choice "b" is incorrect. This is the annual
depreciation before the change in estimated life ($46,000 -$1,000) / 12 = $3,750]. The depreciation after
the change in estimate should be calculated as described above. Choice "c" is incorrect. This would have
been the annual straight-line depreciation if the original useful life of the asset had been 10 years rather
than 12 years. The change in estimated life is applied prospectively, as described above, not
retrospectively.
NEW QUESTION # 98
On January 1, 1991, Brecon Co. installed cabinets to display its merchandise in customers' stores.
Brecon expects to use these cabinets for five years. Brecon's 1991 multi-step income statement should
include:
- A. All of the cabinet costs in cost of goods sold.
- B. One-fifth of the cabinet costs in selling, general, and administrative expenses.
- C. One-fifth of the cabinet costs in cost of goods sold.
- D. All of the cabinet costs in selling, general, and administrative expenses.
Answer: B
Explanation:
Choice "b" is correct. One-fifth of the cabinet costs (depreciation expense) should be included in selling,
general, and administrative expenses for 1991.
Choice "a" is incorrect. Merchandise display cabinets in stores relate to selling activities, not to the
purchase cost of goods sold.
Choices "c" and "d" are incorrect. Merchandise display cabinets are fixed assets whose cost should be
allocated systematically over their five-year useful life.
NEW QUESTION # 99
On January 2, 1989, Union Co. purchased a machine for $264,000 and depreciated it by the straight-line
method using an estimated useful life of eight years with no salvage value. On January 2, 1992, Union
determined that the machine had a useful life of six years from the date of acquisition and will have a
salvage value of $24,000. An accounting change was made in 1992 to reflect the additional data. The
accumulated depreciation for this machine should have a balance at December 31, 1992, of:
- A. $176,000
- B. $146,000
- C. $160,000
- D. $154,000
Answer: B
Explanation:
Choice "d" is correct, $146,000 accumulated depreciation balance at DeC. 31, 1992.
NEW QUESTION # 100
......
What is the duration, language, and format of the Financial Accounting and Reporting (FAR) Exam
- Passing score: 75
- Language of Exam: English
- Duration of Exam: 4 hours
- Format: Multiple choice, Task-based simulations, research prompts
Accurate & Verified New FAR Answers As Experienced in the Actual Test!: https://pass4sure.troytecdumps.com/FAR-troytec-exam-dumps.html