CPA FAR Key Concepts
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The CPA Financial Accounting and Reporting (FAR) section covers US GAAP, IFRS, and governmental accounting, focusing on financial statement preparation, balance sheet accounts, and complex transactions.

Key concepts include revenue recognition (ASC 606), leases (ASC 842), business combinations, bonds, inventory, and governmental accounting, with a 50/50 mix of MCQs and simulations.

CPA FAR Key Concepts
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25 Questions

1. Luge believes it is probable that a lawsuit will be filed next year regarding its responsibility for the cleanup of toxic materials at a site it owns where a prior owner conducted operations. Luge reliably estimates that its probable share of remedial action will cost $600,000 to $900,000 (each point in this continuous range is as likely as any other). Do we need to disclose anything?

2. Stock dividends over 25% get the following journal entry:
Db R/E
Cr C/S (at par)
NO APIC RECOGNIZED

3. Birdlovers, a nongovernmental not-for-profit entity, incurred $5,000 in management and general expenses during the year. In Birdlovers' statement of activities for the year ended December 31, the $5,000 should be reported as

4. AUA is a DTA because we are allowed to deduct it later when actual accounts are written off. AUA is CUMULATIVE! The DTA will equal the tax rate * the balance in AUA as of the balance sheet date. AUA is a cumulative account that already takes into account write-offs and individual year expenses.

5. 0 - this is a change in accounting principle that is inseperable from a change in accounting estimate.

6. Financing cash flows

7. Comprehensive income includes

8. What is the entry for cash dividends received on an equity method investment?

9. Litigation settlements paid
Taxes paid
Then for indirect remember to get rid of gains/losses since they are NOT opearting activities

10. Journal entry for uncertain tax positions

11. 2 methods of reporting a purchase as A/P

12. The carrying amount of the asset converted and the costs incurred as a DIRECT result of the condemnation (appraisal fees, attorney fees, cleanup costs when property is condemned through destruction). Nothing to do with acquisition of replacement property though! That goes on the replacement property.

13. 2 variable consideration methods

14. When the double-extension approach to the dollar-value LIFO inventory method is used, the inventory layer added in the current year is multiplied by an index number. Which of the following correctly states how components are used in the calculation of this index number?

15. Transfer of receivables to a factor is a

16. Before the balance sheet date! Not subsequent but before issuance. Must be during the actual year.

17. The effect of a material transaction that is infrequent in occurrence and unusual in nature should be presented

18. Loss on foreign subsidiary's operations due to significant currency devaluation by foreign government

19. Bonds payable issued with scheduled maturities at various dates are called

20. T/F An interim inventory market/NRV decline reasonably expected to be restored within the fiscal year may be deferred at the interim date

21. What are the methods of generating cash from A/R?

22. The arrangement that results when a transferor of financial assets does not relinquish control.

23. The costs of R&D contract services are included in R&D costs. These costs are reported under:

24. In its financial statements, Pulham Corp. uses the equity method of accounting for its 30% ownership of Angles Corp. At December 31, Year 4, Pulham has a receivable from Angles. How should the receivable be reported in Pulham's Year 4 financial statements?

25. Unless explicitly restricted by donor or law, gains and losses should be reported in the statement of activities as increases or decreases in net assets without donor restrictions.
UPMIFA is a law that would change this rule.

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