FAR New Soft Simulations - FAR Exam Success

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What is the duration, language, and format of the Financial Accounting and Reporting (FAR) Exam

Duration of Exam: 4 hours
Passing score: 75
Language of Exam: English
Format: Multiple choice, Task-based simulations, research prompts

>> FAR New Soft Simulations <<

FAR Exam Success, FAR New Study Questions

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AICPA CPA Financial Accounting and Reporting Sample Questions (Q30-Q35):

NEW QUESTION # 30
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.
Item to Be Answered
The equipment that Quo manufactures is sold with a five-year warranty. Because of a production
breakthrough, Quo reduced its computation of warranty costs from 3% of sales to 1% of sales.
List B (Select one)

A. Prospective approach.
B. Retroactive or retrospective restatement approach.
C. Cumulative effect approach.

Answer: A

Explanation:
Choice "C" is correct. This affects only the prospective (current and subsequent) periods - not prior
periods, not retained earnings.

NEW QUESTION # 31
Opto Co. is a publicly-traded, consolidated enterprise reporting segment information. Which of the
following items is a required enterprise-wide disclosure regarding external customers?

A. The identity of any external customer providing 10% or more of a particular operating segment's
revenue.
B. The identity of any external customer considered to be "major" by management.
C. Information on major customers is not required in segment reporting.
D. The fact that transactions with a particular external customer constitute more than 10% of the total
enterprise revenues.

Answer: D

Explanation:
Choice "a" is correct. In order to conform to GAAP, financial statements for public business enterprises
must report segment information about a company's major customers if that customer provides 10% or
more of the combined revenue, internal and external, of all operating segments.
Choice "b" is incorrect. Revenue is 10% of ALL operating segments not "a particular" segment.
Choice "c" is incorrect. Disclosure is not at management's discretion.
Choice "d" is incorrect. Disclosure is required.

NEW QUESTION # 32
According to the FASB conceptual framework, the quality of information that helps users increase the
likelihood of correctly forecasting the outcome of past or present events is called:

A. Reliability.
B. Predictive value.
C. Representational faithfulness.
D. Feedback value.

Answer: B

Explanation:
Choice "b" is correct. The quality of information that helps users increase the likelihood of correctly
forecasting the outcome of past or present events is called predictive value. Forecasting is predicting.
Choice "a" is incorrect. The quality of information that helps users increase the likelihood of correctly
forecasting the outcome of past or present events is called predictive value, not feedback value.
Feedback value enables decision makers to confirm prior expectations or to adjust or correct the
decisions made previously. Choice "c" is incorrect. The quality of information that helps users increase
the likelihood of correctly forecasting the outcome of past or present events is called predictive value, not
representational faithfulness. Representational faithfulness is the agreement between financial reporting
and the resources or events represented. Choice "d" is incorrect. The quality of information that helps
users increase the likelihood of correctly forecasting the outcome of past or present events is called
predictive value, not reliability. Reliability is the combination of neutrality, representational faithfulness,
and verifiability.

NEW QUESTION # 33
Which of the following is correct concerning financial statement disclosure of accounting policies?

A. Disclosures should duplicate details disclosed elsewhere in the financial statements.
B. The format and location of accounting policy disclosures are fixed by generally accepted accounting
principles.
C. Disclosures should be limited to principles and methods peculiar to the industry in which the company
operates.
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 # 34
According to the FASB conceptual framework, which of the following situations violates the concept of
reliability?

A. Data on segments having the same expected risks and growth rates are reported to analysts
estimating future profits.
B. Management reports to stockholders regularly refer to new projects undertaken, but the financial
statements never report project results.
C. Financial statements include property with a carrying amount increased to management's estimate of
market value.
D. Financial statements are issued nine months late.

Answer: C

Explanation:
Choice "d" is correct. Management's estimate of market value lacks verifiability, which is a component of
reliability. SFAC 2 para. 89 Choice "a" is incorrect. Communicating data on segments to analysts does not
violate the concept of reliability. Choice "b" is incorrect. Issuing financial statements nine months late
violates timeliness, which is a component of relevance, not reliability. SFAC 2 para. 56 Choice "c" is
incorrect. Neglecting to report results of new projects violates full disclosure, not reliability.

NEW QUESTION # 35
......

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FAR NEW SOFT SIMULATIONS - FAR EXAM SUCCESS

FAR New Soft Simulations - FAR Exam Success