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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 May. 25, 2026 (see below)
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 It is unlikely that significant change to the plan to sell will be made or that the plan will be withdrawn.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.
Mellow Co. depreciated a $12,000 asset over five years, using the straight-line method with no salvage value. At the beginning of the fifth year, it was determined that the asset will last another four years. What amount should Mellow report as depreciation expense for year 5?
Choice 'a' is correct. Over the first 4 years, the asset would be depreciated down to $2,400. Once it was determined that the asset would last for another 4 years, $600 would be depreciated each year of that 4 year period. This change is a change in accounting estimate (the estimate being the life of the asset).
Changes is accounting estimate are accounted for in the current year and future years if the change affects both.
Choice 'b' is incorrect. This answer is the annual difference between the depreciation expense IF depreciation expense had been retroactively restated ($24,000 / 8 = $1,500) and the correct depreciation expense. Retroactive restatement is not appropriate for changes in accounting estimate.
Choice 'c' is incorrect. This answer is the depreciation expense IF depreciation had been retroactively restated ($24,000 / 8 = $1,500). Retroactive restatement is not appropriate for changes in accounting estimate.
Choice 'd' is incorrect. This answer is the undepreciated amount at the beginning of the fifth year or the amount of the annual depreciation expense for each of the first 4 years. Either way, it certainly is not going to be the depreciation expense for that year because the remaining cost will depreciated over the remaining period.
On December 31, 20X2, the Board of Directors of Maxy Manufacturing, Inc. committed to a plan to discontinue the operations of its Alpha division. Maxy estimated that Alpha's 20X3 operating loss would be $500,000 and that the fair value of Alpha's facilities was $300,000 less than their carrying amounts.
Alpha's 20X2 operating loss was $1,400,000, and the division was actually sold for $400,000 less than its carrying amount in 20X3. Maxy's effective tax rate is 30%.
In its 20X2 income statement, what amount should Maxy report as loss from discontinued operations?
Choice 'b' is correct. Since the fair value of Alpha's facilities was $300,000 less than its carrying value, there has been an impairment loss, and that loss should be recognized in 20X2. That $300,000 impairment loss plus the $1,400,000 20X2 operating loss would be recognized in 20X2 net of tax. The total loss would be $1,700,000 70% (100% - 30%) or $1,190,000.
Choice 'a' is incorrect. It includes the 20X2 operating loss of $1,400,000 but not the $300,000 impairment loss but does report the 20X2 operating loss net of tax.
Choice 'c' is incorrect. It includes the 20X2 operating loss of $1,400,000, but not the $300,000 impairment loss, and reports the 20X2 operating loss gross of tax and not net of tax.
Choice 'd' is incorrect. It reports the 20X2 loss from discontinued operations gross of tax and not net of tax.
Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies?
Choice 'c' is correct. Yes - No.
Yes - 'Depreciation methods' should be disclosed in the 'summary of significant accounting policies.'
No - Composition of fixed assets (or any other account) should not be disclosed in the 'summary of significant accounting policies.'
According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on:
Choice 'd' is correct. The FASB conceptual framework states that the objectives of financial reporting stem from the informational needs of the external users of the information. SFAC 1 para. 28
Choice 'a' is incorrect. Generally accepted accounting principles (GAAP) are derived from and based on the objectives of financial reporting, not the other way around.
Choice 'b' is incorrect. Information concerning management's stewardship is only one aspect of the information financial statements are intended to provide. SFAC 1 para. 50
Choice 'c' is incorrect. Conservatism is an underlying concept for financial accounting but is not the basis for the objectives. SFAC 2 para. 91-97
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