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Who should take the Financial Accounting and Reporting (FAR) Exam
Candidates must see the FAR exam dumps pdf to see if they are interested in the contents. People who wish to become Financial Accounting and Reporting experts and explore the dynamic culture of this field to jump-start their certification and lifelong learning goals should take this exam. Many businesses prefer that their accountants are Financial Accounting and Reporting (FAR) certified. Applicants winning their FAR title will find themselves more hirable and will be better paid. To become eligible for the exam, a candidate must have completed a 120 program approved by NYSED. Also, they must have completed their bachelor's degree with accounting as their major.
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What is the duration, language, and format of the Financial Accounting and Reporting (FAR) Exam
- Language of Exam: English
- Format: Multiple choice, Task-based simulations, research prompts
- Duration of Exam: 4 hours
- Passing score: 75
NEW QUESTION 63
There are multiple active markets for a financial asset with different observable market prices:
There is no principal market for the financial asset. What is the fair value of the asset?
- A. $74
- B. $72
- C. $71
- D. $76
Answer: A
Explanation:
Choice "c" is correct. When there is no principal market, the price in the most advantageous market is the
fair value measurement. Although transaction costs are not included in the fair value measurement, they
are used to determine the most advantageous market, as follows:
Market A: Net Price = Quoted Price - Transaction Costs = $76 - 5 = $71 Market B: Net Price = Quoted
Price - Transaction Costs = $74 - 2 = $72
Because the net price in Market B is higher than the net price in Market A, Market B is the most
advantageous market and the quoted price in Market B ($74) is the fair value of the asset. Choice "a" is incorrect.
This is the net price in Market A.
Fair value does not include transaction costs. Choice "b" is incorrect. This is the net price in Market B.
This net price indicates that Market B is the most
advantageous market, but the net price is not the fair value because fair value does not include
transaction costs. Choice "d" is incorrect. If Market A were the principal market for the asset, then this
would be the fair value of the asset. However, because there is no principal market, the price in the most
advantageous market (Market B) is the price of the asset.
NEW QUESTION 64
An extraordinary gain should be reported as a direct increase to which of the following?
- A. Comprehensive income.
- B. Income from discontinued operations, net of tax.
- C. Income from continuing operations, net of tax.
- D. Net income.
Answer: D
Explanation:
Choice "a" is correct. Extraordinary items are reported as a component of net income, after income from
continuing operations and discontinued operations.
Choice "b" is incorrect. An extraordinary gain (or loss) only indirectly affects comprehensive income as a
component of net income.
Choice "c" is incorrect. Extraordinary items are reported net of tax after income from continuing operations
and discontinued operations.
Choice "d" is incorrect. Extraordinary items are reported net of tax after income from continuing
operations and discontinued operations.
NEW QUESTION 65
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?
- A. $1,700,000
- B. $1,190,000
- C. $1,400,000
- D. $980,000
Answer: B
Explanation:
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
2 0X2 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.
NEW QUESTION 66
During a period when an enterprise is under the direction of a particular management, its financial
statements will directly provide information about:
- A. Both enterprise performance and management performance.
- B. Neither enterprise performance nor management performance.
- C. Management performance but not directly provide information about enterprise performance.
- D. Enterprise performance but not directly provide information about management performance.
Answer: D
Explanation:
Choice "c" is correct. Financial reporting, and especially financial statements, usually cannot and do not
separate management performance from enterprise performance. Financial reporting provides
information about an enterprise during a period when it was under the direction of a particular
management but does not directly provide information about that management's performance. SFAC 1
para. 53
NEW QUESTION 67
According to the FASB conceptual framework, an entity's revenue may result from:
- A. An increase in a liability from incidental transactions.
- B. An increase in an asset from incidental transactions.
- C. A decrease in an asset from primary operations.
- D. A decrease in a liability from primary operations.
Answer: D
Explanation:
Rule: Revenues are inflows or other enhancements of assets and/or settlements (decreases) in liabilities
resulting from the entity's ongoing major operations, not from "incidental" operations. Choice "d" is correct.
An entity's revenue may result from a decrease in a liability from primary operations.
NEW QUESTION 68
Which of the following is not a valuation technique that can be used to measure the fair value of an asset
or liability?
- A. The cost approach.
- B. The impairment approach.
- C. The market approach.
- D. The income approach.
Answer: B
Explanation:
Choice "b" is correct. The impairment approach is not used to measure the fair value of an asset or liability.
Instead, when an entity is determining whether an asset has been impaired, the entity will use the market
approach, the income approach or the cost approach to determine the fair value of the asset. Choice "a" is
incorrect. The market approach is an accepted method of fair value measurement in which price and
other market information from identical or comparable assets or liabilities is used to measure fair value.
Choice "c" is incorrect. The income approach is an accepted method of fair value measurement in which
future cash flows or earnings are discounted to determine fair value. Choice "d" is incorrect. The cost
approach is an accepted method of fair value measurement in which current replacement cost is used to
determine the fair value of an asset.
NEW QUESTION 69
In the hierarchy of generally accepted accounting principles, APB Opinions have the same authority as
AICPA:
- A. Issues Papers.
- B. Statements of Position.
- C. Industry Audit and Accounting Guides.
- D. Accounting Research Bulletins.
Answer: D
Explanation:
Choice "d" is correct. AICPA Accounting Research Bulletins, FASB Standards, FASB Interpretations,
FASB Staff Positions, FASB Statement 133 Implementation Issues, and APB Opinions and
Interpretations are the most authoritative sources of generally accepted accounting principles. Choice "a"
is incorrect. AICPA Statements of Position, AICPA Accounting and Auditing Guides, and FASB Technical
Bulletins are secondary sources of generally accepted accounting principles. Choice "b" is incorrect.
AICPA Statements of Position, AICPA Accounting and Auditing Guides, and FASB Technical Bulletins
are secondary sources of generally accepted accounting principles. Choice "c" is incorrect. AICPA Issues
Papers and Practice Bulletins, FASB Concepts Statements, and other authoritative pronouncements are
tertiary sources for generally accepted accounting principles.
NEW QUESTION 70
Financial reporting by a development stage enterprise differs from financial reporting for an established
operating enterprise in regard to footnote disclosures:
- A. Only.
- B. And revenue and expense recognition principles.
- C. And expense recognition principles only.
- D. And revenue recognition principles only.
Answer: A
Explanation:
Choice "a" is correct. Financial reporting by a development stage enterprise differs from financial
reporting for an established operating enterprise in regard to (more extensive) footnote disclosures only.
Choices "b", "c", and "d" are incorrect. Revenue and expense recognition principles are the same. Rule:
Development stage enterprises should present financial statements in accordance with GAAP and make
additional disclosures such as: cumulative net losses, cumulative deficit (as part of equity), cumulative
sales and expenses (as part of the income statement), cumulative statement of cash flows and
supplementary "shareholders equity."
NEW QUESTION 71
A change from the cost approach to the market approach of measuring fair value is considered to be what
type of accounting change?
- A. Error correction.
- B. Change in valuation technique.
- C. Change in accounting estimate.
- D. Change in accounting principle.
Answer: C
Explanation:
Choice "a" is correct. A change in the valuation technique used to measure fair value is a change in
accounting estimate. Choice "b" is incorrect. Per SFAS No. 157, a change in valuation technique is a
change in accounting estimate, not a change in accounting principal. Choice "c" is incorrect. Although a
change from the cost approach to the market approach is a change in valuation technique, a change in
valuation technique is not defined as a type of accounting change, but instead falls into the category of
changes in accounting estimate. Choice "d" is incorrect. Both the market approach and the cost approach
are acceptable methods of measuring fair value per SFAS No. 157; therefore, switching between these
methods is not the correction of an error. Additionally, an error correction is not a type of accounting
change.
NEW QUESTION 72
On January 2, 1993, Quo, Inc. hired Reed to be its controller. During the year, Reed, working closely with
Quo's president and outside accountants, made changes in accounting policies, corrected several errors
dating from 1992 and before, and instituted new accounting policies.
Quo's 1993 financial statements will be presented in comparative form with its 1992 financial statements.
This question represents one of Quo's transactions. List B represents the general accounting treatment
required for these transactions. These treatments are:
. Cumulative effect approach - Include the cumulative effect of the adjustment resulting from the
accounting change or error correction in the 1993 financial statements, and do not restate the 1992
financial statements.
. Retroactive or retrospective restatement approach - Restate the 1992 financial statements and adjust
1 992 beginning retained earnings if the error or change affects a period prior to 1992.
. Prospective approach - Report 1993 and future financial statements on the new basis but do not restate
1 992 financial statements.
Item to Be Answered
Quo manufactures heavy equipment to customer specifications on a contract basis. On the basis that it is
preferable, accounting for these long-term contracts was switched from the completed-contract method to
the percentage-of-completion method.
List B (Select one)
- A. Retroactive or retrospective restatement approach.
- B. Cumulative effect approach.
- C. Prospective approach.
Answer: A
Explanation:
Choice "B" is correct. Changes in accounting principle are handled "retrospectively." Beginning retained
earnings of the earliest year presented is adjusted for the cumulative effect of the change and all prior
year financial statements are restated.
NEW QUESTION 73
Which of the following should be disclosed in a summary of significant accounting policies?
I. Management's intention to maintain or vary the dividend payout ratio.
II. Criteria for determining which investments are treated as cash equivalents.
III. Composition of the sales order backlog by segment.
- A. II and III.
- B. II only.
- C. I only.
- D. I and III.
Answer: B
Explanation:
Choice "c" is correct. Il only.
The criteria for determining which investments are treated as "cash equivalents" is a method of
accounting policies that needs to be disclosed in the summary of significant accounting policies.
Choice "a" is incorrect. Management's intention to maintain or vary the "dividend payout ratio" is not an
"accounting policy."
Choices "b" and "d" are incorrect. Composition of the sales order backlog by segment is not an
"accounting policy."
NEW QUESTION 74
On March 15, 1992, Krol Co. paid property taxes of $90,000 on its office building for the calendar year
1 992. On April 1, 1992, Krol paid $150,000 for unanticipated repairs to its office equipment. The repairs
will benefit operations for the remainder of 1992. What is the total amount of these expenses that Krol
should include in its quarterly income statement for the three months ended June 30, 1992?
- A. $72,500
- B. $172,500
- C. $97,500
- D. $37,500
Answer: A
Explanation:
Rule: Actual and estimated expenditures benefiting all interim periods equally should be expensed ratably
throughout the year.
Choice "c" is correct. $72,500 total expense for the three months ended June 30, 1992.
NEW QUESTION 75
Conceptually, interim financial statements can be described as emphasizing:
- A. Comparability over neutrality.
- B. Timeliness over reliability.
- C. Relevance over comparability.
- D. Reliability over relevance.
Answer: B
Explanation:
Choice "a" is correct. Interim financial statements emphasize timeliness (an element of relevance) by
providing financial information based on actual performance to date and estimates prior to year end.
Information must be available when it is needed to be useful. Reliability is impeded by the extensive use
of estimates; however, the lag until verifiability is obtained detracts from usefulness. SFAC 2 para. 56
Choice "b" is incorrect. Relevance (particularly timeliness) of information in interim financial statements is
emphasized more than reliability. Reliability is impeded by the extensive use of estimates in interim data.
Choice "c" is incorrect. Since comparability is a secondary quality of information, there should be no need
to trade off comparability for relevance (a primary quality). Choice "d" is incorrect. Neutrality is an element
of reliability (a primary quality of information. There should be NO need for a trade-off for comparability
over neutrality.
NEW QUESTION 76
Coffey Corp.'s trial balance of Income Statement Accounts for the year ended December 31, 1988 as
follows:
Coffey's income tax rate is 30%. The gain on debt extinguishment is considered a usual and recurring part
of Coffey's operations. The hurricane is considered an unusual and infrequent event. Coffey prepares a
multiple-step income statement for 1988.
Net income is:
- A. $168,000
- B. $161,000
- C. $140,000
- D. $200,000
Answer: C
Explanation:
Choice "a" is correct. $140,000.
Net income is the "bottom line" amount after all has been considered on the income statement.
Without showing all the line items as required for the income statement, the "bottom line" amount of
$ 140,000 is derived as follows:
NEW QUESTION 77
On August 31, 1992, Harvey Co. decided to change from the FIFO periodic inventory system to the
weighted average periodic inventory system. Harvey is on a calendar year basis. The cumulative effect of
the change is determined:
- A. As of January 1, 1992.
- B. As of August 31, 1992.
- C. During the eight months ending August 31, 1992, by a weighted average of the purchases.
- D. During 1992 by a weighted average of the purchases.
Answer: A
Explanation:
Rule: The cumulative effect of a change in accounting principle equals the difference between retained
earnings at the beginning of period of the change and what retained earnings would have been if the
change was applied to all affected prior periods. Choice "a" is correct. As of January 1, 1992, the
beginning of the year. This assumes that the company is not presenting comparative financial statements.
If comparative financial statements are presented, then the adjustment is made to the beginning retained
earnings of the earliest year presented. Choice "b" is incorrect. The cumulative effect of the change is not
determined as of the date the decision is made. Choices "c" and "d" are incorrect. The cumulative effect of
the change is not determined by a weighted average. (A far out distractor.)
NEW QUESTION 78
Belle Co. determined after four years that the estimated useful life of its labeling machine should be 10
years rather than 12 years. The machine originally cost $46,000 and had an estimated salvage value of
$ 1,000. Belle uses straight-line depreciation. What amount should Belle report as depreciation expense
for the current year?
- A. $3,200
- B. $3,750
- C. $4,500
- D. $5,000
Answer: D
Explanation:
Choice "d" is correct. A change in estimated useful life is a change in accounting estimate, and is
therefore accounted for prospectively. The revised useful life should be used as of the beginning of the
year of the change and should be applied to the current book value of the fixed asset. The first step in
determining the depreciation expense in the year of the change in estimate is to determine the book value
of the labeling machine at the time of the change:
Original cost $46,000
-Accumulated depreciation 15,000 = [(46,000 - 1,000) / 12] *4 Current book value $31,000 This book
value is then depreciated over the remaining life of the fixed asset based on the new estimated life. In this
problem, the new estimated life is 10 years, four of which have already passed, so the asset must be
depreciated over the remaining 6 years: ($31,000 - 1,000) / 6 = $5,000 Choice "a" is incorrect. This
answer is incorrectly calculated by adding the salvage value to the current book value, and by using the
entire 10 year revised estimated life. Salvage value should always be subtracted and the asset should
only be depreciated over the remaining life of the asset. Choice "b" is incorrect. This is the annual
depreciation before the change in estimated life ($46,000 -$1,000) / 12 = $3,750]. The depreciation after
the change in estimate should be calculated as described above. Choice "c" is incorrect. This would have
been the annual straight-line depreciation if the original useful life of the asset had been 10 years rather
than 12 years. The change in estimated life is applied prospectively, as described above, not
retrospectively.
NEW QUESTION 79
Which of the following facts concerning fixed assets should be included in the summary of significant
accounting policies?
- A. Option A
- B. Option C
- C. Option D
- D. Option B
Answer: B
Explanation:
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."
NEW QUESTION 80
......
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