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CPA Exam (Becker F1) 2024/2025 Detailed Questions And Expert Answers, Exams of Nursing

CPA Exam (Becker F1) 2024/2025 Detailed Questions And Expert Answers

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2024/2025

Available from 09/01/2024

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CPA Exam (Becker F1)
Who has the legal authority to establish U.S. GAAP? - ANS>The SEC
The SEC was established by the _________________. - ANS>Securities
Exchange Act of 1934
How many board members does the FASB have? How long can they
serve on the board? - ANS>The FASB has seven full-time members who
serve for five-year terms and may be reappointed to one additional five-
year term.
What is the Committee on Accounting Procedures (CAP)? - ANS>The
CAP was a part-time committee of the AICPA that promulgated
Accounting Research Bulletins (ARBs), which determined GAAP from
1939 - 1959.
What is the Accounting Principles Board? - ANS>The APB was a part-
time committee of the AICPA that issued opinions (APBOs) and
interpretations (APBIs), which determine GAAP from 1959 - 1973.
What is the FASB? - ANS>The FASB is an independent full-time
organization that was established in 1973 and has determine GAAP
since then.
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CPA Exam (Becker F1)

Who has the legal authority to establish U.S. GAAP? - ANS>The SEC The SEC was established by the _________________. - ANS>Securities Exchange Act of 1934 How many board members does the FASB have? How long can they serve on the board? - ANS>The FASB has seven full-time members who serve for five-year terms and may be reappointed to one additional five- year term. What is the Committee on Accounting Procedures (CAP)? - ANS>The CAP was a part-time committee of the AICPA that promulgated Accounting Research Bulletins (ARBs), which determined GAAP from 1939 - 1959. What is the Accounting Principles Board? - ANS>The APB was a part- time committee of the AICPA that issued opinions (APBOs) and interpretations (APBIs), which determine GAAP from 1959 - 1973. What is the FASB? - ANS>The FASB is an independent full-time organization that was established in 1973 and has determine GAAP since then.

T or F: If it's not in the FASB Accounting Standards Codification, it's not GAAP. - ANS>T The codification is comprised of the following literature (hint: FEDPRIA):

  • ANS>1. Financial Accounting Standards Board (FASB)
  1. Emerging Issues Task Force (EITF) Abstracts and Topic D
  2. Derivative Implementation Group Issues
  3. Accounting Principles Board Opinions
  4. Accounting Research Bulletins
  5. Accounting Interpretations
  6. American Institute of Certified Public Accountants (AICPA) What SEC Standards are included in the Codification (hint: Regulation For Accounting I-S Emerging)? - ANS>1. Regulation S-X
  7. Financial Reporting Releases (FRR)
  8. Accounting Series Releases (ASR)
  9. Interpretive Releases (IR)
  10. Staff Accounting Bulletins (SAB)
  11. EITF Topic D and SEC Staff Observer Comments

In addition to the IASB, the IFRS Foundation sponsors the ______________. - ANS>International Financial Reporting Interpretations Committee (IFRIC). What does the IFRIC do? - ANS>The IFRIC provides guidance on newly identified financial reporting issues not addressed in the IFRSs and assists the IASB in achieving international convergence of accounting standards. What does the term International Financial Reporting Standards encompass? - ANS>International Financial Reporting Standards, International Accounting Standards, and Interpretations developed by the IFRIC and the former SIC. The IASB is developing the Conceptual Framework for Financial Reporting, which does what? - ANS>The Conceptual Framework for Financial Reporting describes the basic concepts that underlie the preparation and presentation of financial statements for EXTERNAL USERS. What was the goal of the international convergence of accounting standards between the IASB and the FASB? - ANS>The goal was a single set of high-quality, international accounting standards that companies could use for both domestic and cross-border financial reporting.

An IFRS must be approved by at least __________ members of the ___________. - ANS>9, IASB T or F: Both the IFRS Conceptual Framework and U.S. GAAP Conceptual Framework can and should be applied to specific accounting issues. - ANS>F: Under IFRS, entities should consider applicability of the Framework. Under U.S. GAAP, the Framework CANNOT be applied to specific accounting issues. The Conceptual Frameworks Underlying Financial Accounting are also known as ____________. - ANS>basic reasoning Who created the conceptual framework underlying financial accounting in the U.S.? - ANS>The FASB What is the purpose of the conceptual framework created by the FASB?

  • ANS>It serves as a BASIS FOR ALL FASB PRONOUNCEMENTS. The conceptual framework created by the FASB is set forth in pronouncements called _______________. - ANS>Statements of Financial Accounting Concepts (SFAC) Are SFAC GAAP? - ANS>No, but they provide a basis for GAAP.

To be relevant, financial information must have _____________ and/or ______________, and must be ______________. - ANS>predictive value, confirming value, material What three characteristics does faithful representation require? - ANS>1. Completeness

  1. Neutrality
  2. Freedom from error Neutrality is one of the three required characteristics for financial information to be faithfully represented. What does it mean for financial information to be neutral? - ANS>Neutral financial information is FREE FROM BIAS. List the steps to apply the fundamental qualitative characteristics. - ANS>1. Identify the phenomena that has the potential to be useful to the users of a reporting entity's financial information
  3. Identify the type of information about the phenomena that would be most relevant
  4. Determine whether the information is available and can be faithfully represented What are the four enhancing qualitative characteristics of financial information? - ANS>1. Comparability
  1. Verifiability
  2. Timeliness
  3. Understandability What is included in a full set of financial statements? - ANS>1. Statement of financial position (balance sheet)
  4. Statement of earnings (income statement)
  5. Statement of other comprehensive income
  6. Statement of cash flows
  7. Statement of changes in owners' equity How is PP&E measured on the balance sheet? - ANS>Historical cost How is A/R measured on the balance sheet? - ANS>Net realizable value How are marketable securities measured on the balance sheet? - ANS>Current market value How is long-term debt measured on the balance sheet? - ANS>Present value of future cash flows

4. LOSSES

5. ASSETS

6. LIABILITIES

7. EQUITY

  1. INVESTMENTS by owners
  2. DISTRIBUTIONS to owners T or F: Investments by owners and distributions to owners are excluded from comprehensive income. - ANS>T What are capital maintenance adjustments? - ANS>Capital maintenance adjustments is an additional element of the financial statements under the IASB Framework for the Preparation and Presentation of Financial Statements. They include increases and decreases in equity that arise from the revaluation or restatement of assets and liabilities. Another name for current cost is __________. - ANS>replacement cost The income statement is useful in determining ____________, _____________, and _______________. - ANS>profitability, value for investment purposes, credit worthiness

What is the presentation order of the major components of an income and retained earnings statement (hint: IDEA)? - ANS>1. INCOME (or loss) from continuing operations

  1. Income (or loss) from DISCONTINUED operations
  2. EXTRAORDINARY items
  3. Cumulative effect of change in ACCOUNTING principle Income (or loss) from continuing operations includes ___________, ____________, and _____________. - ANS>operating activities, non- operating activities, income taxes T or F: Income from continuing operations is only shown gross of tax. - ANS>F: Individual line items show gross of tax and then the total is reported net of tax. T or F: Income from discontinued operations, extraordinary items, and the cumulative effect of change in accounting principles are all shown net of tax. - ANS>T T or F: The cumulative effect of change in accounting principles is shown on the income statement AFTER extraordinary items. - ANS>F: The cumulative effect of change in accounting principles is shown on the Statement of Retained Earnings

What three items are included in the (normally) loss from discontinued operations? - ANS>1. Impairment loss

  1. Gain/loss from actual operations
  2. Gain/loss on disposal What is a component of an entity? - ANS>A part of an entity (the lowest level) for which operations and cash flows can be clearly distinguished, both operationally and for financial reporting purposes, from the rest of the entity. List five synonymous terms for "component." - ANS>1. Operating segment
  3. Reportable segment (segment reporting)
  4. Reportable unit (goodwill impairment testing)
  5. Subsidiary
  6. Asset group Under IFRS, what is a component of an entity? - ANS>1. A separate major line of business or geographical area of operations
  7. A subsidiary acquired with a view to resale

What is the difference between a business and a nonprofit activity? - ANS>A business is conducted and managed for the purpose of providing a return to investors. A nonprofit activity is conducted and managed for the purpose of providing benefits, OTHER THAN goods or services at a profit, to fulfill an entity's purpose or mission. What criteria must be met for a component to be classified as "held for sale?" - ANS>1. Mgmt. commits to a plan to sell the component

  1. The component is available for immediate sale
  2. There is an active program to locate a buyer
  3. The sale is probable and expected to be complete within one year (there are limited exceptions to one-year rule)
  4. The sale of the component is being actively marketed
  5. It is unlikely that significant changes to the plan will be made or that the plan will be withdrawn What is the difference between IFRS and U.S. GAAP in classifying a component as "held for sale?" - ANS>IFRS requires that the individual assets and liabilities be remeasured, and any resulting gains and losses must be recognized. U.S. GAAP conducts an impairment analysis of the entire component.

Review pg. 23 LECTURE - ANS>OK T or F: Assets within a component that is held for sale are depreciated/amortized until the component is sold. - ANS>F: Assets within a component that is held for sale are no longer depreciated or amortized. Review example on pg. 24 (listen to lecture and read) - ANS>OK When are anticipated gains/losses from the sale of a component recognized? - ANS>Anticipated gains/losses are recognized when they occur. How is a component classified as held for sale measured and valued? - ANS>It is measured at the LOWER OF its CARRYING VALUE or FAIR VALUE LESS COSTS TO SELL. Another term for "fair value less costs to sell" is ________________. - ANS>net realizable value Downsizing is considered a(n) ____________ or ___________ activity. - ANS>exit, disposal

Closing a hub is considered a(n) __________ or ______________ activity. - ANS>exit, disposal U.S. GAAP requires recognition of a liability for the costs associated w/ an exit or disposal activity. How is this liability measured? - ANS>PV of future payments (exit/disposal costs) List three common exit and disposal costs. - ANS>1. Involuntary employee termination benefits

  1. Costs to terminate a contract that is not a capital lease
  2. Costs to CONSOLIDATE facilities or relocate employees An entity's commitment to an exit or disposal plan, by itself, is not enough to result in liability recognition. What other criteria must be met? - ANS>1. An obligating event as occurred (i.e. profit < budget)
  3. The event results in a present obligation to transfer assets or to provide services in the future (i.e. payment to the landlord for canceling a lease agreement), and
  4. The entity has little or no discretion to avoid the future transfer of assets or providing of services What is the difference between recognizing future COSTS associated w/ an exit or disposal activity and recognizing future OPERATING LOSSES

Give four common examples of extraordinary items. - ANS>1. Infrequent earthquake or infrequent flood

  1. Expropriation of a plant by the government
  2. Prohibition of a product line by a newly enacted law or regulation
  3. Gains or losses from extinguishment of LT-debt IF SPECIFIED AS UNUSUAL AND INFREQUENT T or F: A gain or loss from the sale or abandonment of PP&E used in the business is reported as an extraordinary item, net of tax. - ANS>F: A gain or loss from the sale or abandonment of PP&E used in the business is reported in continuing operations, gross of tax. T or F: Extremely large write-downs or write-offs are reported in continuing operations, gross of tax. - ANS>T T or F: Gains or losses from foreign currency transactions or translations are reported in extraordinary items, net of tax. - ANS>F: Gains or losses from foreign currency transactions or translations are reported in continuing operations, gross of tax. T or F: Losses from major strikes by employees are reported in extraordinary items, net of tax. - ANS>F: Losses from major strikes by employees are reported in continuing operations, gross of tax.

T or F: Long-term debt extinguishments are always reported in extraordinary items, net of tax. - ANS>F: LT debt extinguishments are ONLY reported in extraordinary items if SPECIFICALLY IDENTIFIED AS UNUSUAL AND INFREQUENT. Otherwise, they are reported in continuing operations, gross of tax. Where are items that are unusual but not infrequent, reported on the income statement? - ANS>As a separate non-operating item in continuing operations, gross of tax. Where are items that are infrequent but not unusual, reported on the income statement? - ANS>As a separate non-operating item in continuing operations, gross of tax. T or F: Under IFRS, extraordinary items are reported after income (or loss) from discontinued operations. - ANS>F: Under IFRS, there is no such thing as extraordinary items. T or F: Extraordinary losses should be reported net of insurance proceeds related to the extraordinary losses. - ANS>T What are the three classifications of accounting changes? - ANS>1. Change in accounting estimate