CPA FAR Practice: 5 Accounting MCQs Explained (Archived Set)

Work through five CPA accounting multiple-choice questions with explanations and calculations: nonprofit stock investments, bond interest accrual, IFRS component depreciation, proprietary fund cash flows and LIFO inventory valuation. This is an archived FAR practice recording for CPA candidates and accounting students. The presenter introduces the items as previously released AICPA questions. Use them to practice the underlying concepts and check the current exam blueprint for today's section coverage; this older mixed-topic set is not a current FAR syllabus or a prediction of live exam questions. Practice and supporting lessons: https://farhatlectures.com Accounting MCQs and worked examples:    • CPA FAR Practice Questions: Financial Acco...   Current AICPA CPA Exam Blueprints: https://www.aicpa-cima.com/resources/... CHAPTERS 00:00 Archived CPA question-set introduction 00:27 Study resources 00:42 Question 1: nonprofit stock investments 01:10 Calculate year-end fair value 01:44 Question 2: bond interest expense period 02:15 Map the issue and payment dates 02:48 Count seven months of expense 03:31 Question 3: IFRS component depreciation 04:36 Calculate depreciation by component 05:46 Question 4: proprietary fund cash flows 06:18 Question 5: LIFO inventory valuation 07:21 Cost vs. designated market 08:01 Calculate the NRV ceiling and floor 09:02 Choose market within the limits 09:38 Compare market with inventory cost 10:17 Answer and further practice ANSWER CHECK: TRY EACH QUESTION BEFORE READING 1. Stock investments: 200 × $49 + 100 × $51 = $14,900. The question uses year-end fair values, not original cost or beginning-of-year values. 2. Bond interest: June 1 through December 31 is seven months. Interest expense follows the period the debt is outstanding; the October and April coupon dates do not determine the year's expense period. 3. Component depreciation: $80 million ÷ 20 + $10 million ÷ 5 + $10 million ÷ 4 = $8.5 million. Apply the question's straight-line, full-year and no-residual-value assumptions. The two components with the same life and method are combined in the first calculation. 4. Governmental reporting: proprietary fund financial statements include a statement of cash flows. Distinguish proprietary funds from governmental funds and government-wide statements. 5. LIFO inventory: ceiling = $408,000 selling price − $20,000 disposal cost = $388,000. Floor = $388,000 − $60,000 normal profit = $328,000. The $390,000 replacement cost exceeds the ceiling, so designated market is $388,000. Compare that with $400,000 cost: report $388,000. CONCEPT CLARIFICATIONS • The first answer applies to the stock investments described. The recording's broad statement should not be read as “every investment is always fair value.” Investment type, the reporting framework, consolidation, significant influence and applicable measurement alternatives can change the treatment. • Bond interest expense is distinct from the cash coupon paid. Accrued-interest settlement when bonds are issued between coupon dates does not create expense for months before issuance. • The depreciation question explicitly uses IFRS. IAS 16 requires separate depreciation of significant components; significant parts with the same useful life and depreciation method may be grouped. Depreciation generally begins when an asset is available for use, not automatically on every purchase date. • Under U.S. GAAP, the replacement-cost ceiling/floor test remains relevant to LIFO and retail-method inventory. FIFO and average-cost inventory generally use lower of cost and net realizable value. NRV includes applicable completion, disposal and transportation costs; this question supplies only disposal costs. “Normal profit” is a dollar amount here, not an extra percentage to infer. REFERENCES IAS 16: Property, Plant and Equipment: https://www.ifrs.org/issued-standards... GASB Statement 34, proprietary fund reporting: https://storage.gasb.org/GASBS%2034.pdf FASB ASU 2015-11, inventory measurement scope: https://storage.fasb.org/ASU_2015-11.pdf #CPAExam #AccountingPractice #InventoryValuation