Certified Public Accountant Research & Evidence-Based Practice 3

Question 1

A CPA needs to determine the proper revenue recognition for a multi-element software arrangement. Which ASC topic is MOST directly applicable?

Accepted Answer

ASC 606

Answer

ASC 606 (Revenue from Contracts with Customers) is the primary standard governing revenue recognition, including most software arrangements, replacing prior industry-specific guidance.

Question 2

When using the FASB ASC research tool, what does a CPE gray paragraph indicate?

Accepted Answer

The paragraph does not apply to private companies that have adopted PCC alternatives

Answer

Gray text in FASB ASC indicates content that has been amended or does not apply to entities that have adopted Private Company Council (PCC) alternatives.

Question 3

A CPA is resolving a conflict between two pieces of authoritative GAAP guidance within the FASB ASC. What should the CPA do?

Accepted Answer

Apply the more specific guidance over the more general guidance

Answer

When two authoritative GAAP standards conflict, the more specific guidance generally takes precedence over broader, more general guidance.

Question 4

Under IRC Section 61, which of the following is NOT included in gross income by default?

Accepted Answer

Gifts received from a family member

Answer

IRC Section 102 explicitly excludes gifts and inheritances from gross income, making them a statutory exclusion from the broad IRC Section 61 definition.

Question 5

A CPA is researching the tax treatment of a stock dividend. Which primary authority should be consulted FIRST?

Accepted Answer

IRC Section 305 and related Treasury Regulations

Answer

IRC Section 305 and its Treasury Regulations are the primary authoritative sources governing the taxability of stock dividends.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Research & Evidence-Based Practice 3