Admission Test Certified Public Accountant (Financial Accounting & Reporting) Sample Questions:

1. Which of the following accounting pronouncements is the most authoritative?

A) FASB Statement of Financial Accounting Concepts.
B) FASB Technical Bulletin.
C) AICPA Statement of Position.
D) AICPA Accounting Principles Board Opinion.

2. The summary of significant accounting policies should disclose the:

A) Criteria for determining which investments are treated as cash equivalents.
B) Maturity dates of noncurrent debts.
C) Terms for convertible debt to be exchanged for common stock.
D) Concentration of credit risk of all financial instruments by geographical region.

3. 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.
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 A

A) Change in accounting estimate.
B) Correction of an error in previously presented financial statements.
C) Neither an accounting change nor an accounting error.
D) Change in accounting principle.

4. Which of the following statements is incorrect regarding the inputs that can be used to measure fair value?
I. Level I inputs are the most reliable fair value measurements and Level III inputs are the least reliable.
II. Level I measurements are quoted prices in active markets for identical or similar assets or liabilities.
III. A fair value measurement based on management assumptions only (no market data) would not be acceptable per GAAP.
IV. The level in the fair value hierarchy of a fair value measurement is determined by the level of the highest level significant input.

A) I only.
B) II, III, IV.
C) I, II, IV.
D) I, II, III, IV.

5. How should the effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate be reported?

A) As a component of income from continuing operations.
B) By footnote disclosure only.
C) By restating the financial statements of all prior periods presented.
D) As a correction of an error.

Solutions: