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CPA Exam Review questions and answers|CPA Exam – FAR QUESTIONS AND ANSWERS ALL CORRECT|CPA Practice Exam Questions and Answers 100% correct

Managerial Accounting deals with _____ accounting, while Financial Accounting deals with _____. Correct Answer: Internal; External True or False: Managerial accounting must follow GAAP. Correct Ans... wer: False; Internal accounting so it does not have to follow GAAP. The assumption that a company or other entity will be able to continue operating for a time that is sufficient to carry out its commitments and obligations. Correct Answer: Going Concern The assumption that a company's business cycle can be broken into periods (i.e. one year, one quarter, etc.) Correct Answer: Periodicity Accounting is reported as units of currency (i.e. dollars and cents); not indexed for inflation Correct Answer: Monetary Unit An accounting principle that allows the accountant to keep business separate from personal (excludes legal) Correct Answer: Economic Entity What is the general rule for capitalization of Research & Development costs? Correct Answer: You can't capitalize Cash Correct Answer: Money that is FREE and CLEAR and available to be spend in current operations. Not Cash: Correct Answer: Security deposits & bond sinking funds Three-Month Rule Correct Answer: Highly liquid securities with ORIGINAL maturity dates of three months or less are treated as cash. Bad Debts - Direct Write-Off Method Correct Answer: - No entry for bad debts until customer actually defaults. - At default, the cutomer's account is written off. - Theoretically weak, matching issue - Only allowed if bad debt expense is immaterial Bad Debts - Allowance Method Correct Answer: Income Statement Approach Balance Sheet Approach Income Statement Approach Correct Answer: - Matching Concept - Estimate of bad debt expense is based on the income statement - Allowance account balance has no bearing on the amount of adjustment Balance sheet reporting: Correct Answer: Accounts Receivable Less: Allowance for bad debts = Net realizable value of A/RWhen a CPA examines a client's projected financial statements, the CPA's report should: Correct Answer: state that the CPA performed procedures to evaluate management's assumptions. Davis, CPA, accepted an engagement to audit the financial statements of Tech Resources, a nonpublic entity. Before the completion of the audit, Tech requested Davis to change the engagement to a compilation of financial statements. Before Davis agrees to change the engagement, Davis is required to consider the: additional audit effort necessary to complete the audit. reason given for Tech's request. Correct Answer: Both I and II The GAO standards list several threats to independence. The threat of familiarity is defined as: Correct Answer: when, due to a long or close relationship with management or other personnel, the auditor will be too sympathetic or accepting of work. Which of the following representations does an accountant make implicitly when issuing the standard report for the compilation of a nonissuer's financial statements? Correct Answer: The accountant is independent with respect to the entity. Heath Co.'s current ratio is 4:1. Which of the following transactions would normally increase its current ratio? Correct Answer: Selling inventory on account [Show More]

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