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AICPA CPA-Business Exam Questions
- Topic 1: Auditing and Attestation
- Topic 2: Business Environment and Concepts
- Topic 3: Financial Accounting and Reporting.
Free AICPA CPA-Business Exam Actual Questions
Note: Premium Questions for CPA-Business were last updated On Jul. 07, 2026 (see below)
Gartshore Inc. is a mail-order book company. The Company recently changed its credit policy in an attempt to increase sales. Gartshore's variable cost ratio is 70 percent and its required rate of return is 12 percent. The company projects that annual sales will increase from the current level of $360,000 to $432,000, but the average collection period on receivables will go from 30 days to 40 days. Ignoring any tax implications, what is the cost of carrying the additional investment in accounts receivable, using a 360-day year?
Choice 'a' is correct. The cost of carrying accounts receivable now is the variable cost of creating the account receivable times the cost of that capital during the collection period. The cost of the investment in accounts receivable is now:
Choice 'c' is incorrect. This considers the entire account receivable as a cost.
Choices 'b' and 'd' are incorrect, per the above calculation.
Generally, a merger of two corporations requires:
Choice 'a' is correct. The merger of two corporations requires that a special meeting be held and that notice and copy of the merger plan be given to all stockholders of both companies. A merger generally requires the approval of both the directors and stockholders.
Choice 'b' is incorrect. While the stockholders' approval is required, in most states a majority vote is required; no state requires a unanimous vote.
Choice 'c' is incorrect. While the board's approval is required, a majority vote and not a unanimous vote is required.
Choice 'd' is incorrect. There is no requirement that all liabilities owed by the absorbed corporation be paid before the merger because the merged corporation becomes obligated to pay such liabilities upon the merger.
Initially the nominal interest rate is 8 percent and the inflation rate is 6 percent. One year later, the nominal interest rate rises to 12 percent while the inflation rate rises to 10 percent. It follows that the real rate of interest:
Choice 'a' is correct. The real interest rate equals the nominal interest rate minus the inflation rate. Thus, the real interest rate in the first year is: real interest rate = 8 6 = 2 and the real interest rate in the next year is: real interest rate = 12 10 = 2.
The inflation rate measures:
Choice 'd' is correct. The inflation rate measures the rate of increase in the overall price level in the economy.
Choice 'a' is incorrect. The inflation rate is associated with price level changes not changes in the nominal value of output.
Choice 'b' is incorrect. Inflation refers to a sustained increase in the overall price level. Not the price of a particular good.
Choice 'c' is incorrect. The inflation rate is associated with price level changes not interest rate changes.
At the beginning of year 1, $10,000 is invested at 8% interest, compounded annually. What amount of interest is earned for year 2?
Choice 'c' is correct. This question is a compound interest question because the interest is to be determined at the end of the second year. The calculation is as follows and uses different symbols than the SI = PIN formula in the text to show candidates the PRT formula as well (the CPA exam often uses different terminology):
Interest = PRT (for the first year)
Interest = $1,000 x .08 x 1 = $800 and adding the $800 to the beginning principal
Interest = PRT (for the second year)
Interest = $1,800 x .08 x 1 = $864
It is obvious from the answer that the interest earned in year 2 is interest earned on the original principal ($10,000 x .08 = $800) plus interest on the year 1 interest ($800 x .08 = $64).
Choice 'a' is incorrect. This answer is interest only on the original principal, and not on the year 1 interest.
Choice 'b' is incorrect. This answer has a decimal point error in calculating the year 2 interest on year 1 interest.
Choice 'd' is incorrect. This answer is apparently made up. It is sometimes difficult to come up with 3 decent wrong answers, especially with simple questions.
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