AICPA Exam CPA-Financial Topic 3 Question 71 Discussion

Actual exam question for AICPA's CPA-Financial exam

Question #: 71
Topic #: 3

Adam Corp. had the following infrequent transactions during 1989:

* A $190,000 gain on reacquisition and retirement of bonds. This material event is also considered unusual for Adam Corp.

* A $260,000 gain on the disposal of a component of a business. Adam continues similar operations at another location.

* A $90,000 loss on the abandonment of equipment.

In its 1989 income statement, what amount should Adam report as total infrequent net gains that are not considered extraordinary?

A$100,000

B$170,000

C$360,000

D$450,000

Show Suggested Answer

Suggested Answer: D

Choice 'd' is correct. The concept of reliability in financial reporting includes; neutrality, representational faithfulness and verifiability.

Choices 'a', 'b', and 'c' are incorrect, per the above.

by Audra at Jul 09, 2023, 06:09 AM

Limited Time Offer

25%

Off

Get Premium CPA-Financial Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Jacob

2 months ago

Alright, time to put on my accountant hat. The question is pretty straightforward, but I can't help but feel like the answer is staring me in the face. Like, how could anyone get this wrong? Oh, wait, did I just say that out loud? Oops, my bad. Anyway, the answer is B) $170,000, and if you can't figure that out, you might want to consider a career change.

upvoted 0 times

Ernestine

1 months ago

I'm not sure about this one, but I'll go with D) $450,000. It seems like the total infrequent net gains should be higher based on the transactions mentioned.

upvoted 0 times

...

Annmarie

1 months ago

No, I disagree. I believe the correct answer is B) $170,000. The gain on reacquisition and retirement of bonds is the key here.

upvoted 0 times

...

Cassie

2 months ago

I think the answer is C) $360,000. That gain on the disposal of a component of a business seems significant.

upvoted 0 times

...

Johnetta

3 months ago

Hmm, let me think about this. If the bond reacquisition gain is considered unusual, then we can't include that. But the business disposal gain and the equipment abandonment loss are both infrequent, so we add those together. That makes the answer B) $170,000. Wait, is that the right answer? I hope I'm not, like, totally off base here.

upvoted 0 times

Kenny

1 months ago

But remember, we're looking for the total infrequent net gains that are not considered extraordinary. So, the correct answer should be B) $170,000.

upvoted 0 times

...

Erin

1 months ago

Yeah, I agree. So, if we add the $260,000 gain on the disposal of a business component and the $90,000 loss on equipment abandonment, we get $350,000.

upvoted 0 times

...

Bok

2 months ago

Got it. So the total infrequent net gains that are not considered extraordinary for Adam Corp. in 1989 would be $170,000. That's the answer B).

upvoted 0 times

...

Delbert

2 months ago

Yeah, that's correct. So, we add the $260,000 gain on the disposal of a component of a business and the $90,000 loss on the abandonment of equipment to get $170,000.

upvoted 0 times

...

Yen

2 months ago

I think you're on the right track. We should exclude the bond reacquisition gain and just focus on the business disposal gain and equipment abandonment loss.

upvoted 0 times

...

Rebecka

2 months ago

I think you're on the right track. We should exclude the bond reacquisition gain and just focus on the business disposal gain and equipment abandonment loss.

upvoted 0 times

...

Adell

3 months ago

This is a tricky one, but I think I got it. The bond reacquisition gain is unusual, so we can't include that. But the business disposal gain and the equipment abandonment loss are both infrequent, so we add those together. That gives us B) $170,000. Easy peasy!

upvoted 0 times

Lettie

24 days ago

Great job! It's always important to carefully analyze each transaction.

upvoted 0 times

...

Tamie

25 days ago

Yes, that's correct. And that gives us a total of $170,000.

upvoted 0 times

...

Robt

26 days ago

So, we add the business disposal gain and the equipment abandonment loss, right?

upvoted 0 times

...

Antonette

28 days ago

I think you're right, we should exclude the bond reacquisition gain.

upvoted 0 times

...

Malissa

1 months ago

Great job! It's always important to carefully consider each transaction.

upvoted 0 times

...

Alfreda

1 months ago

Yes, that's correct. And that gives us a total of $170,000.

upvoted 0 times

...

Kimberlie

1 months ago

So, we add the business disposal gain and the equipment abandonment loss, right?

upvoted 0 times

...

Sharen

2 months ago

I think you're right, we should exclude the bond reacquisition gain.

upvoted 0 times

...

Jean

3 months ago

I'm leaning towards D) $450,000 because all the gains and losses should be considered.

upvoted 0 times

...

Torie

3 months ago

I disagree, I believe the answer is C) $360,000.

upvoted 0 times

...

Andree

3 months ago

I think the answer is B) $170,000.

upvoted 0 times

...

Ellen

3 months ago

I'm not sure, but I think the correct answer is D) $450,000.

upvoted 0 times

...

Leeann

3 months ago

I disagree, I believe the answer is C) $360,000.

upvoted 0 times

...

Denny

3 months ago

Wait, wait, wait. I'm pretty sure the question says the bond reacquisition gain is considered unusual, not just infrequent. That means we can't include it, right? I think the answer is A) $100,000.

upvoted 0 times

Markus

2 months ago

I agree, the answer should be A) $100,000.

upvoted 0 times

...

Teri

2 months ago

That would make the total infrequent net gains $100,000, which matches option A.

upvoted 0 times

...

Filiberto

2 months ago

So, we should only consider the gain on disposal of a component of a business and the loss on the abandonment of equipment.

upvoted 0 times

...

Jerilyn

2 months ago

I think you're right, we can't include the bond reacquisition gain since it's considered unusual.

upvoted 0 times

...

Eugene

3 months ago

I think the answer is B) $170,000.

upvoted 0 times

...

Gabriele

3 months ago

Hmm, let's see... The gains from the bond reacquisition and business disposal are infrequent but not extraordinary, and the loss from the equipment abandonment is also infrequent. So, we need to add the gains and subtract the loss to get the total infrequent net gains. Looks like the answer is B) $170,000.

upvoted 0 times

...