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AICPA CPA-Financial Exam Questions
- Topic 1: Financial Statement Concepts
- Topic 2: General Principles of Financial Statement Presentation and Accounting Policies
- Topic 3: Special Accounting Considerations for Certain Financial Assets and Liabilities.
Free AICPA CPA-Financial Exam Actual Questions
Note: Premium Questions for CPA-Financial were last updated On Sep. 09, 2026 (see below)
An extraordinary item should be reported separately on the income statement as a component of income:
Choice 'b' is correct, Yes - No. An extraordinary item should be reported separately on the income statement as a component of income:
Yes - net of income taxes.
No - after (not before) 'discontinued operations of a segment of a business.'
On January 2, 20X5, to better reflect the variable use of its only machine, Holly, Inc. elected to change its method of depreciation from the straight-line method to the units of production method. The original cost of the machine on January 2, 20X3, was $50,000, and its estimated life was 10 years. Holly estimates that the machine's total life is 50,000 machine hours. Machine hours usage was 8,500 during 20X4 and 3,500 during 20X3.
Holly's income tax rate is 30%. Holly should report the accounting change in its 20X5 financial statements as a(n):
Choice 'd' is correct. A change in the method of depreciation is now considered to be both a change in method and a change in estimate. These changes should be accounted for as changes in estimate and handled prospectively. The new depreciation method should be used as of the beginning of the year of change and should start with the current book value of the underlying asset. No retroactive or retrospective calculations should be made, and no adjustment should be made to retained earnings.
The cumulative effect treatment on the income statement was the treatment of most changes in accounting principle prior to SFAS No. 154. The adjustment to beginning retained earnings is the treatment now given to changes in accounting principle by SFAS No. 154. However a change in depreciation method is no longer accounted for as a change in accounting principle.
Choices 'a', 'b', and 'c' are incorrect, per the above Explanation: .
According to the FASB's conceptual framework, the process of reporting an item in the financial statements of an entity is:
Choice 'a' is correct. Recognition.
According to the FASB's conceptual framework, the process of reporting an item in the financial statements of an entity is recognition.
Which of the following types of entities are required to report on business segments?
Choice 'b' is correct. Only publicly-traded enterprises are required to report on business segments.
Choices 'a', 'c', and 'd' are incorrect, per the Explanation: above.
Envoy Co. manufactures and sells household products. Envoy experienced losses associated with its small appliance group. Operations and cash flows for this group can be clearly distinguished from the rest of Envoy's operations. Envoy plans to sell the small appliance group with its operations. What is the earliest point at which Envoy should report the small appliance group as a discontinued operation?
Choice 'a' is correct. The earliest period that a component of an entity can be reported in discontinued operations is when the component meets the following 'held for sale' criteria:
1. Management commits to a plan to sell the component.
2. The component is available for immediate sale in its present condition.
3. An active program to locate a buyer has been initiated.
4. The sale of the component is probable and the sale is expected to be completed within one year.
5. The sale of the component is being actively marketed.
6. It is unlikely that significant change to the plan to sell will be made or that the plan will be withdrawn.
Choices 'b', 'c', and 'd' are incorrect, per the Explanation: above.
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