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

1. The effect of a material transaction that is infrequent in occurrence but not unusual in nature should be presented separately as a component of income from continuing operations when the transaction results in a:

A) Option D
B) Option B
C) Option C
D) Option A

2. For interim financial reporting, the computation of a company's second quarter provision for income taxes uses an effective tax rate expected to be applicable for the full fiscal year. The effective tax rate should reflect anticipated:

A) Option D
B) Option B
C) Option C
D) Option A

3. In September 1996, Koff Co.'s operating plant was destroyed by an earthquake. Earthquakes are rare in the area in which the plant was located. The portion of the resultant loss not covered by insurance was $700,000. Koff's income tax rate for 1996 was 40%. In its 1996 income statement, what amount should Koff report as extraordinary loss?

A) $280,000
B) $700,000
C) $0
D) $420,000

4. Which of the following assumptions means that money is the common denominator of economic activity and provides an appropriate basis for accounting measurement and analysis?

A) Periodicity.
B) Monetary unit.
C) Going concern.
D) Economic entity.

5. Due to a decline in market price in the second quarter, Petal Co. incurred an inventory loss. The market price is expected to return to previous levels by the end of the year. At the end of the year the decline had not reversed. When should the loss be reported in Petal's interim income statements?

A) Ratably over the third and fourth quarters.
B) In the fourth quarter only.
C) Ratably over the second, third, and forth [sic] quarters.
D) In the second quarter only.

Solutions: