Free Bachelor of Science in Accountancy: FAR Questions and Answers

Question 1

Andrew, a consultant, uses a cash basis to maintain his accounting records. Gary received $300,000 in client fees in year 2. Andrew had $50,000 in accounts receivable as of 12/31/Year 1. At 12/31/Year 2, Andrew had $70,000 in accounts receivable and $6,000 in unearned income. What would Andrew's second-year service revenue be if he used the accrual basis?

Accepted Answer

341,000

Answer

Cash Collected – $300,000
Beginning Balance Accounts Receivable – ($50,000)
Ending Balance Accounts Receivable – $70,000
Unearned Revenue – ($6,000)
——————————————————

Service Revenue – $314,000

Question 2

True or False: The rules for contributions partners make while forming a partnership are the same under GAAP and tax.

Accepted Answer

False

Answer

To calculate the amount contributed to the partnership under GAAP, the fair value of the assets is used.
The net book value of assets provided to a partnership is used by the tax rule.

Question 3

Beginning inventory for ABC Corp. was $32,000 undervalued at the beginning of Year 1 while ending inventory was $57,000 inflated. So, ABC Corp's cost of goods sold for the third year was:

Accepted Answer

understated by 89,000

Answer

The 32,000 understatement of initial inventory results in a 32,000 understatement of cost of goods sold and an understatement of the cost of products offered for sale.
The cost of goods sold is understated by 57,000 due to the 57,000 overstatement of ending inventory. This total cost of goods sold is 89,000 underestimated.

Question 4

Relative value, commonly referred to as salvage value, is:

Accepted Answer

An estimate of the amount that will be realized at the end of the useful life of a depreciable asset

Answer

An assessment of an asset's value at the end of its useful life is called salvage value, or residual value. It is applied in the depreciation calculation.

Question 5

Bobcat Corp. sold a piece of land to Crystal Corp. on September 1st, Year 3 for $300,000. The land originally cost $275,000 to Bobcat Corp. Courtside Corp's subsidiaries include Crystal Corp and Bobcat Corp. What would the land's worth be on the consolidated balance sheet?

Accepted Answer

$275,000

Answer

As this would be an intercompany transaction, the gain that Bobcat Corp would record would be removed and the land would be written down to its original value when the consolidated financial statements are published (the amount of the gain).

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Practice Test

Free Bachelor of Science in Accountancy: FAR Questions and Answers