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

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Adell

4 days 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!

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Jean

5 days ago

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

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Torie

6 days ago

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

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Andree

7 days ago

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

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Ellen

8 days ago

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

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Leeann

9 days ago

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

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Denny

18 days 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.

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Eugene

20 days ago

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

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Gabriele

20 days 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.

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