Aicpa Rel Questionss Far 2015

7/25/2019 Aicpa Rel Questionss Far 2015

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AICPA Released Questions from the

2014 Uniform CPA Exam

- Released May 2015 -

FINANCIAL ACCOUNTING & REPORTING

Uniform CPA Examination Questions and unofficial Answers, copyright by American Institute of Certified Public

Accountants, Inc. All rights reserved. Reprinted by Roger CPA Review with permission.
http://www.aicpa.org/Pages/default.aspx


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2015 AICPA Released Financial Accounting & ReportingQuestions

Please note: This document contains all the question information released by the AICPA. The table below each question containsplacement data for the question within the exam template from which the question comes. The Key value is the correct letteranswer for each preceding question. For best study results, the Roger CPA Review team adds comprehensive solution rationaleswhen integrating new questions to your course materials.

MULTPLE CHOICE - DIFFICULT

Clear Co.'s trial balance has the following selected accounts:

Cash (includes $10,000 in bond-sinking fund

for long-term bond payable) $50,000

Accounts receivable 20,000

Allowance for doubtful accounts 5,000

Deposits received from customers 3,000

Merchandise inventory 7,000Unearned rent 1,000

Investment in trading securities 2,000

What amount should Clear report as total current assets in its balance sheet?

A. $64,000B. $67,000C. $72,000D. $74,000

Attribute Value

Item ID 45939

Area 001

Group 003

Topic 001

Key A


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2015 AICPA Released QuestionsFAR

2

Martin Co. had net income of $70,000 during the year. Depreciation expense was $10,000. Thefollowing information is available:

Accounts receivable increase $20,000

Equipment gain on sale increase 10,000

Nontrade notes payable increase 50,000Prepaid insurance increase 40,000

Accounts payable increase 30,000

What amount should Martin report as net cash provided by operating activities in its statementof cash flows for the year?

A. $0B. $ 40,000C. $ 50,000D. $100,000

Attribute Value

Item ID 42987

Area 001

Group 003

Topic 005

Key B

Which of the following should be disclosed in a summary of significant accounting policies?

A. Basis of consolidation.B. Concentration of credit risk of financial instruments.C. Composition of plant assets.D. Adequacy of pension plan assets in relation to vested benefits.

Attribute Value

Item ID 40643

Area 001Group 003

Topic 006

Key A


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3

Each of the following events is required to be reported to the United States Securities andExchange Commission on Form 8-K, except

A. The creation of an obligation under an off-balance sheet arrangement of a registrant.B. The unregistered sale of equity securities.C. A change in a registrant's certifying accountant.

D. The quarterly results of operations and financial condition of a registrant.

Attribute Value

Item ID 51161

Area 001

Group 004

Topic 000

Key D

Garcel, Inc. held unfinished inventory at a cost of $85,000 with a sales value of $125,000. Theinventory will cost $10,500 to complete. The normal profit margin is 30% of sales. Thereplacement cost of the inventory was $75,000. What amount should Garcel report as inventoryon balance sheet?

A. $114,500B. $ 85,000C. $ 77,000D. $ 75,000

Attribute Value

Item ID 44561

Area 002

Group 003

Topic 000

Key C


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Sea Manufacturing Corp. is constructing a new factory building. During the current calendaryear, Sea made the following payments to the construction company:

January 2 $1,000,000

December 31 1,000,000

Sea has an 8%, three-year construction loan of $3,000,000. What is the amount of interestcosts that Sea may capitalize during the current year?

A. $0B. $ 80,000C. $160,000D. $240,000

Attribute Value

Item ID 52983

Area 002

Group 004Topic 000

Key B

Under IFRS, which of the following statements about intangible assets is correct?

A. Internally generated goodwill cannotbe recognized as an asset.B. Intangible assets within a class may be measured differently using either the cost model

or the revaluation model.C. Research and development costs are capitalized as incurred.D. Intangible assets with indefinite lives must be amortized annually.

Attribute Value

Item ID 53823

Area 002

Group 006

Topic 000

Key A


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A note payable was issued in payment for services received. The services had a fair value lessthan the face amount of the note payable. The note payable has no stated interest rate. Howshould the note payable be presented in the statement of financial position?

A. At the face amount.B. At the face amount with a separate deferred asset for the discount calculated at the

imputed interest rate.C. At the face amount with a separate deferred credit for the discount calculated at the

imputed interest rate.D. At the face amount minus a discount calculated at the imputed interest rate.

Attribute Value

Item ID 50025

Area 002

Group 009

Topic 001

Key D

Which of the following statements is correct regarding valuation allowances in accounting forincome taxes?

A. The effect of a change in the opening balance of a valuation allowance that results froma change of circumstances ordinarily is included in income from operations.

B. Both deferred tax assets and deferred tax liabilities can be reduced by a valuation

allowance.C. Only negative evidence, not positive evidence, should be considered when determining

whether a valuation allowance is needed.D. A valuation allowance is necessary when the realistic probability standard of evidence is

satisfied.

Attribute Value

Item ID 47985

Area 002

Group 014

Topic 000Key A


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A company issues $1,500,000 of par bonds at 98 on January 1, year 1, with a maturity date ofDecember 31, year 30. Bond issue costs are $90,000, and the stated interest rate of the bondsis 6%. Interest is paid semiannually on January 1 and July 1. Ten years after the issue date, theentire issue was called at 102 and canceled. The company uses the straight-line method ofamortization for bond discounts and issue costs, and the result of this method is not materiallydifferent from the effective interest method. The company should classify what amount as the

loss on extinguishment of debt at the time the bonds are called?

A. $ 30,000B. $ 50,000C. $ 90,000D. $110,000

Attribute Value

Item ID 49785

Area 002

Group 009Topic 004

Key D

On day 1, Clothes Co., sells clothing to Link Corp. for $40,000. Clothes ships the clothing onday 1 and Link is obligated to pay Clothes within six months. Link is given 12 months to returnany of the clothing for a refund if they experience low demand. Link is also given 18 months toexchange any clothing due to low demand. At the time of sale, Clothes cannot reasonably

estimate returns, but estimates $5,000 in exchanged goods. Clothes should recognize revenuefor the aforementioned transaction

A. On the day of the sale.B. Six months after the date of sale.C. 12 months after the date of sale.D. 18 months after the date of sale.

Attribute Value

Item ID 48943

Area 002

Group 011

Topic 000

Key C


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At the beginning of year 1, a company amends its defined benefit pension plan for an additional$500,000 in prior service cost. The amendment covers employees with a 10-year averageremaining service life. At the end of year 1, what is the net entry to accumulated othercomprehensive income, ignoring income tax effects?

A. A $450,000 debit.

B. A $500,000 debit.C. A $550,000 credit.D. A $450,000 credit.

Attribute Value

Item ID 48105

Area 002

Group 013

Topic 004

Key A

A company recorded a decommissioning liability and recognized the amount recorded as part ofthe cost of the related property. After the property was fully depreciated, the decommissioningliability was reviewed and adjusted. How should this change in the decommissioning liability berecognized under IFRS?

A. The change in the liability is recognized in other comprehensive income.B. The change in the liability is recognized in profit or loss.

C. The change in the liability is recognized as a change in the carrying amount of theproperty if the liability increases but is otherwise recognized in profit or loss.

D. The change in the decommissioning liability is notrecognized until it is settled.

Attribute Value

Item ID 53561

Area 003

Group 002

Topic 000

Key B


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A company incurred the following costs to complete a business combination in the current year:

Issuing debt securities $30,000

Registering debt securities 25,000

Legal fees 10,000

Due diligence costs 1,000

What amount should be reported as current-year expenses, notsubject to amortization?

A. $ 1,000B. $11,000C. $36,000D. $66,000

Attribute Value

Item ID 56149

Area 003Group 003

Topic 000

Key B

Based on the stock transactions below, what is the weighted average number of sharesoutstanding as of December 31, year 1, that should be used in the calculation of basic earningsper share in financial statements issued on March 1, year 2?

Date TransactionsJanuary 1, year 1 Beginning balance 100,000

April 1, year 1 Issued 30,000 shares for cash

June 1, year 1 50% stock dividend

February 15, year 2 2 for 1 stock split

March 15, year 2 Issued 40,000 shares for cash

A. 147,500B. 183,750C. 295,000D. 367,500

Attribute Value

Item ID 43903

Area 003

Group 006

Topic 000

Key D


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Which of the following phrases best describes a Level 1 input for measuring the fair value of anasset or liability?

A. Inputs for the asset or liability based on the reporting entity's internal data.B. Quoted prices for similar assets or liabilities in active markets.C. Inputs that are principally derived from or corroborated by observable market data.

D. Unadjusted quoted prices for identical assets or liabilities in active markets.

Attribute Value

Item ID 48237

Area 003

Group 009

Topic 000

Key D

On June 1, year 1, ABC Co. issued a 200,000 euro purchase order for equipment to be suppliedby a German company. ABC's functional currency is the U.S. dollar. The equipment wasdelivered to ABC on November 1, year 1, and ABC recorded a payable due to the Germancompany. ABC paid for the equipment on January 31, year 2. The following are the exchangerates in effect:

June 1, year 1 1 euro = 1.40 U.S. dollars

November 1, year 1 1 euro = 1.50 U.S. dollars

December 31, year 1 1 euro = 1.35 U.S. dollarsJanuary 31, year 2 1 euro = 1.30 U.S. dollars

Under IFRS, what is the foreign currency gain or loss that ABC should record for the year endedDecember 31, year 1?

A. A loss of $30,000.B. A loss of $20,000.C. A gain of $10,000.D. A gain of $30,000.

Attribute Value

Item ID 53439Area 003

Group 011

Topic 000

Key D


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A company leases a machine from Leasing, Inc. on January 1, year 1. The lease terms includea $100,000 annual payment beginning January 1, year 1. The machine's fair value is $500,000and the residual value is estimated at $20,000. The company guarantees the residual value.The useful life of the machine is six years, and the lease term is five years. The implicit rate ofinterest is 6% and is known by the company. The following present value factors are provided:

Five years Six years

Present value of $1 at 6% 0.7473 0.7050

Present value of an annuity due at 6% 4.4651 5.2124

Present value of an ordinary annuity at 6% 4.2124 4.9173

What is the value of the machine in the company's balance sheet at lease inception?A. $446,510B. $461,456C. $520,000D. $535,340

Attribute Value

Item ID 48111

Area 003

Group 014

Topic 000

Key B

Isle Co. owned a copy machine that cost $5,000 and had accumulated depreciation of $2,000.

Isle exchanged the copy machine for a computer that cost $4,000. Isle's future cash flows arenot expected to change significantly as a result of the exchange. What amount of gain or lossshould Isle report and at what amount should it record the asset?

A. No gain or loss in the income statement; $3,000 asset in the balance sheet.B. No gain or loss in the income statement; $4,000 asset in the balance sheet.C. $1,000 gain in the income statement; $3,000 asset in the balance sheet.D. $1,000 gain in the income statement; $4,000 asset in the balance sheet.

Attribute Value

Item ID 46375

Area 003

Group 016

Topic 000

Key A


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On January 1, year 1, a company capitalized $100,000 of costs for software that is to be sold.The company amortizes the software costs on a straight-line basis over five years. The carryingvalue of the software costs on January 1, year 3, was $60,000. As of December 31, year 3, theestimated future gross revenue to be generated from the sale of the software is $23,000, andthe estimated future cost of disposing of the software is $8,000. What amount should thecompany expense related to the software costs for the year ended December 31, year 3?

A. $18,400B. $20,000C. $37,000D. $45,000

Attribute Value

Item ID 49919

Area 003

Group 021

Topic 000Key D

Which of the following is a required part of a local government's management's discussion andanalysis (MD&A) as part of its financial statements?

A. The MD&A should be presented with other required supplementary information.B. The MD&A should compare current-year results to the prior year with emphasis on the

current year.C. The MD&A should include an analysis for each fund.D. The MD&A should present condensed financial information from the fund financial

statements.

Attribute Value

Item ID 43203

Area 004

Group 002

Topic 006

Key B


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A city government reported a $9,000 increase in net position in the motor pool internal servicefund, a $12,000 increase in net position in the water enterprise fund, and a $7,000 increase inthe employee pension fund. The motor pool internal service fund provides service primarily tothe police department. What amount should the city report as the change in net position forbusiness-type activities in its statement of activities?

A. $ 9,000B. $12,000C. $21,000D. $28,000

Attribute Value

Item ID 55843

Area 004

Group 002

Topic 001

Key B

Land and other real estate held as investments by endowments in a government's permanentfund should be reported at

A. Historical cost.B. The lower of cost and net realizable value.C. Fair value.

D. Fair value less costs of disposal.

Attribute Value

Item ID 44569

Area 004

Group 002

Topic 002

Key C


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A statement of financial position for a nongovernmental not-for-profit organization reportsamounts for which of the following classes of net assets?

A. Current.B. Long-term.C. Permanently restricted.

D. Temporarily unrestricted.

Attribute Value

Item ID 53081

Area 005

Group 001

Topic 001

Key C

A nongovernmental not-for-profit college has a portfolio of bond investments that had an originalcost of $2,000,000. The college's board of trustees voted to hold the principal of this fund intactin perpetuity and designated the earnings to reimburse faculty for travel to academicconferences. During the year, interest of $50,000 was earned in cash. The fair value of thebonds was $1,980,000. What amount should the college report as permanently restricted netassets at year end?

A. $0B. $1,980,000

C. $2,000,000D. $2,030,000

Attribute Value

Item ID 43899

Area 005

Group 002

Topic 002

Key A


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MULTIPLE CHOICE - MODERATE

The FASB's due process for setting accounting standards includes which of the following procedures?

A. The FASB can seek information about accounting and reporting issues by holding public forums,usually based on an exposure draft.

B. The FASB delegates topics to the Financial Accounting Foundation for research and reporting.C. The FASB's Emerging Issues Task Force ratifies amendments to the Accounting Standards

Codification.D. The FASB obtains approval from the International Accounting Standards Board in setting its

agenda.

Attribute Value

Item ID 51371

Area 001

Group 001

Topic 002

Key A

Which of the following items should be shown as a component of comprehensive income?

A. Dividend paid to a shareholder.B. Foreign-currency translation adjustment.C. Additional capital contribution.D. Deferred revenue.

Attribute Value


Group 003

Topic 003

Key B


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Dunbarn Co. had the following activities during the year:

Purchase of inventory $120,000

Purchase of equipment 80,000

Purchase of available-for-sale securities 60,000

Purchase of treasury stock 70,000

Issuance of common stock 150,000

What amount should Dunbarn report as cash provided (used) by investing activities in its statement ofcash flows for the year?

A. $(120,000)B. $(140,000)C. $(210,000)D. $ 150,000

Attribute ValueItem ID 42973

Area 001

Group 003

Topic 005

Key B

Savor Co. had $100,000 in accrual basis pretax income for the year. At year end, accounts receivable

had increased by $10,000 and accounts payable had decreased by $6,000 from their prior year-endbalances. Under the cash basis of accounting, what amount of pretax income should Savor report for theyear?

A. $ 84,000B. $ 96,000C. $104,000D. $116,000

Attribute Value

Item ID 41063

Area 001

Group 006

Topic 000

Key A


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A firm's ending inventory balance was overstated by $1,000. Which of the following statements is correctaccording to a periodic inventory system?

The retained earnings were overstated by $1,000.The cost of goods sold was overstated by $1,000.The cost of goods available for sale was overstated by $1,000.The gross margin was understated by $1,000.

Attribute Value

Item ID 44861

Area 002

Group 003

Topic 000

Key A

Quick Co. acquired the following assets from a liquidating competitor for a $200,000 lump-sum purchaseprice:

Competitors carryingamount Fair value

Inventory $ 70,000 $ 50,000

Land 40,000 50,000

Building 110,000 150,000

$220,000 $250,000

What amount should Quick report as the cost of the building?

A. $100,000B. $120,000C. $150,000D. $200,000

Attribute Value

Item ID 43583

Area 002

Group 004

Topic 000

Key B


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At the beginning of year 2, a company invested $40,000 in a marketable equity security. At that time thesecurity was appropriately classified as an available-for-sale security. At the end of year 2, the securityhad a fair value of $28,500. The change in fair value is deemed temporary. How should this change in fairvalue be reported in the financial statements?

A. As a realized loss of $11,500 as part of net income.B. As a realized loss of $11,500 as part of other comprehensive income.C. As an unrealized loss of $11,500 as part of net income.D. As an unrealized loss of $11,500 as part of other comprehensive income.

Attribute Value

Item ID 49911

Area 002

Group 005

Topic 002

Key D

Anchor Co. is experiencing financial difficulties. Anchor negotiated a settlement of $100,000 in debt owedto Bowden, Inc. in exchange for Anchor's gross receivables of $100,000. The receivables have anallowance for uncollectible accounts of $25,000. The impact of this transaction on Anchor's net income isa $25,000

A. Increase in bad debt expense.B. Gain on restructuring of payables.C. Loss on restructuring of payables.D. Decrease in bad debt expense.

Attribute Value


Group 009

Topic 005

Key B


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Aldrich Co. distributes cash dividends to its shareholders during the current year. The dividends aredeclared on March 9 and are payable to shareholders as of the date of record, which is April 15. Thedividends are actually paid on May 19. At which of the following dates would the dividends become aliability to Aldrich?

A. March 9B. April 15C. May 19D. December 31

Attribute Value

Item ID 52755

Area 002

Group 010

Topic 000

Key A

In February, Colt Corp. sold merchandise to Sink Co. for $10,000. Colt is using the cost recovery methodto account for this sale, which had cost of goods sold of $2,500. Colt received the following paymentsfrom Sink during the year:

Date Amount

June $1,000

August 1,500

October 200

December 700$3,400

What amounts of gross profit should Colt recognize in its June 30 and December 31 income statements?

June 30 December 31

A. $0 $0B. $0 $900C. $1,000 $2,400D. $1,000 $3,400

Attribute Value


Group 011

Topic 000

Key B


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Harmony Co. has a single-employer defined benefit pension plan. Harmony should report a liabilityrelated to the plan equal to which of the following amounts?

A. The unfunded projected benefit obligation.B. The accumulated benefit obligation.C. The projected benefit obligation.D. The unfunded vested benefit obligation.

Attribute Value

Item ID 47229

Area 002

Group 013

Topic 004

Key A

Which of the following circumstances would result in a deferred tax asset for the current year?

A. Expenses that are recognized in financial income this year and deductible next year.B. Expenses that are deductible this year and recognized in financial income next year.C. Revenues that are recognized in financial income this year and taxable next year.D. Revenues that are recognized in financial income this year but are notsubject to taxation.

Attribute Value

Item ID 45531

Area 002

Group 014

Topic 000

Key A


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Which of the following examples would require restatement of prior years' financial statements?

A. A calculation change of warranty obligations based on updated claim information for the prioryear.

B. A change from the income tax basis of accounting to the accrual basis.C. An insurance premium that was due in the prior year but that lapsed because the policy was not

paid.D. An intangible asset with a remaining estimated amortization period of two years, which is

determined to be obsolete.

Attribute Value

Item ID 55473

Area 003

Group 001

Topic 000

Key B

The per-share amount must be reported on the face of a public company's income statement for which ofthe following items?

A. Income from continuing operations.B. Preferred stock dividend.C. U.S. Treasury stock.D. Compensation effect of fair value on stock options.

Attribute Value

Item ID 43957

Area 003Group 006

Topic 000

Key A


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A foreign subsidiary of a U.S. parent company should measure its assets, liabilities and operations using

A. The subsidiary's local currency.B. The subsidiary's functional currency.C. The U.S. dollar.D. The best available spot rate.

Attribute Value

Item ID 41599

Area 003

Group 011

Topic 000

Key B

Which of the following is a criterion for classifying a lease as a capital lease by a lessee?

A. The lease term is equal to 75% or more of the estimated economic life of the leased property.B. The present value of the minimum lease payments is 75% or more of the fair value of the leased

property.C. The lease agreement contains an option to purchase the leased property at its fair value at the

end of the lease term.D. The lease agreement requires that title of the leased property remains with the lessor at the end

of the lease term.

Attribute Value

Item ID 52381

Area 003

Group 014Topic 000

Key A


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Jensen performed legal services to assist Balm Co. in accomplishing its initial organization. Jensenaccepted 1,000 shares of $5 par common stock in Balm as payment for his services. The Balm shareswere not yet publicly traded, but they had a book value of $4 per share. Jensen provided 48 hours ofservice, which is normally billed at $125 per hour. By what amount should the common stock accountincrease?

A. $1,000B. $4,000C. $5,000D. $6,000

Attribute Value

Item ID 45375

Area 003

Group 016

Topic 000

Key C

The following information relates to two projects performed by Miley Co. during the year for laboratoryresearch aimed at discovering new knowledge:

Likelihood that effort will result in

Project Costs future benefits

I. $100,000 Probable

II. $ 50,000 Reasonably possible

What should Miley report as research and development expenses in its income statement for the year?A. $0B. $ 50,000C. $100,000D. $150,000

Attribute Value

Item ID 42069

Area 003

Group 018

Topic 000

Key D


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A company began developing computer software to be sold as a separate product on January 1, year 1.During the planning, coding, and testing phases, the company incurred $1,300,000 of costs. On June 30,year 1, the product was determined to be technologically feasible. The company began producing productmasters of the software and incurred an additional $750,000 of costs from July 1, year 1, throughSeptember 30, year 1. After the software was available for release on October 1, year 1, the companyincurred an additional $275,000 of costs relating to maintenance and customer support. What amount ofsoftware-related costs should be capitalized?

A. $275,000B. $750,000C. $1,300,000D. $2,050,000

Attribute Value

Item ID 49667

Area 003

Group 021

Topic 000

Key B

Which basis of accounting is required for a city's government-wide financial statements?

A. Cash.B. Modified cash.C. Modified accrual.D. Accrual.

Attribute Value


Group 001

Topic 001

Key D


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A city government would report each of the following categories in its government-wide statement of netposition except

A. Governmental activities.B. Business-type activities.C. Fiduciary activities.D. Component units.

Attribute Value

Item ID 55745

Area 004

Group 002

Topic 001

Key C

Which of the following funds of a local government would report transfers to other funds as an otherfinancing use?

A. Enterprise.B. Internal service.C. Pension trust.D. General.

Attribute Value

Item ID 42315

Area 004

Group 004

Topic 005

Key D


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A storm damaged the roof of a nongovernmental, not-for-profit organization's building. A professionalroofer repaired the roof at no charge. How should the roof repairs be recognized in the statement ofactivities?

A. As an increase in expenses and an increase in contributions from donated services.B. As an increase in the building account and an increase in unrestricted net assets.C. As an increase in fixed assets and an increase in contributions from donated services.D. No recognition is required in the financial statements, but a note disclosure is required.

Attribute Value

Item ID 43041

Area 005

Group 002

Topic 001

Key A

A donor gives $10,000 to a nongovernmental, not-for-profit organization with instructions that it must beused to fund the organizations general operating expenses during the following fiscal year. The donationwill increase the organization's

A. Unrestricted net assets.B. Temporarily restricted net assets.C. Restricted net assets.D. Restricted retained earnings.

Attribute Value

Item ID 44095

Area 005Group 002

Topic 002

Key B


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A nongovernmental, not-for-profit organization provided the following data in regard to $500,000 ofdonations received during the year:

Purchase of investments to be held in perpetuity atthe donor's request $100,000

Future repairs to the organization's building andequipment at the donor's request 250,000

General operations at the discretion of the board ofdirectors 100,000

Specific program services as indicated by the donor 50,000

In order to properly reflect receipt of the donations, net assets should increase in the amount of

A. $400,000 unrestricted and $100,000 permanently restricted.B. $150,000 unrestricted, $250,000 temporarily restricted, and $100,000 permanently restricted.C. $100,000 unrestricted, $300,000 temporarily restricted, and $100,000 permanently restricted.D. $100,000 unrestricted and $400,000 permanently restricted.

Attribute Value

Item ID 44541

Area 005

Group 002

Topic 003

Key C


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TASK-BASED SIMULATIONS (TBS)

Task 7123_01


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Task 7123_01Selection List Column A


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Task 5017_01


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Task 4428_01Key 1


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Task 4428_01Key2

Aicpa Rel Questionss Far 2015

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