Free CPA FAR (Financial Accounting & Reporting) Select Balance Sheet Accounts Practice Questions
Select balance sheet accounts on the CPA FAR exam cover cash, receivables, inventory (FIFO, LIFO, weighted average), fixed assets, intangible assets, lease accounting (ASC 842), and accounting for investments and financial instruments.
Sample Questions
Question 1
Easy
Under ASC 350, how should goodwill be treated subsequent to acquisition?
Solution
A is correct.
Under ASC 350, goodwill is an indefinite-lived intangible asset that is not amortized. Instead, it is tested for impairment at least annually at the reporting unit level (and between annual tests if a triggering event occurs). Under the current one-step approach, an impairment loss is recognized when the carrying amount of the reporting unit exceeds its fair value, with the loss limited to the carrying amount of goodwill.
Under ASC 350, goodwill is an indefinite-lived intangible asset that is not amortized. Instead, it is tested for impairment at least annually at the reporting unit level (and between annual tests if a triggering event occurs). Under the current one-step approach, an impairment loss is recognized when the carrying amount of the reporting unit exceeds its fair value, with the loss limited to the carrying amount of goodwill.
Question 2
Medium
Which statement about the fair value option under ASC 825 is correct?
Solution
A is correct.
The ASC 825 fair value option is an irrevocable, instrument-by-instrument election made at initial recognition (or another eligible event). Once elected, the instrument is measured at fair value with changes recognized in net income.
The ASC 825 fair value option is an irrevocable, instrument-by-instrument election made at initial recognition (or another eligible event). Once elected, the instrument is measured at fair value with changes recognized in net income.
Question 3
Hard
In Year 1 a company extracts 120,000 tons of ore at a depletion rate of $6 per ton and sells 100,000 of those tons. How much of the Year 1 depletion reaches cost of goods sold?
Solution
A is correct.
Depletion attaches to extracted units and follows them into inventory, reaching cost of goods sold only as those units are sold.
| Item | Amount | Why |
|---|---|---|
| Depletion on units extracted | $720,000 | 120,000 tons x $6 |
| Stays in inventory (unsold) | ($120,000) | 20,000 tons x $6 |
| **Depletion in COGS** | **$600,000** | 100,000 tons sold x $6 |
The $120,000 on the 20,000 unsold tons remains in inventory until those tons are sold.
Depletion attaches to extracted units and follows them into inventory, reaching cost of goods sold only as those units are sold.
| Item | Amount | Why |
|---|---|---|
| Depletion on units extracted | $720,000 | 120,000 tons x $6 |
| Stays in inventory (unsold) | ($120,000) | 20,000 tons x $6 |
| **Depletion in COGS** | **$600,000** | 100,000 tons sold x $6 |
The $120,000 on the 20,000 unsold tons remains in inventory until those tons are sold.