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CPA FARFree CPA — Financial Accounting & Reporting practice test
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10 real CPA FAR practice questions with instant answers and explanations — no account, no credit card, no email. Score yourself, then unlock the full bank of 500 questions whenever you’re ready. The CPA FAR passing score is 75 / 99.
Which financial statement presents a company's assets, liabilities, and stockholders' equity as of a specific date?
Answer key
All 10 CPA FAR questions & answers
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Q1. Which financial statement presents a company's assets, liabilities, and stockholders' equity as of a specific date?
Correct answer: A. Balance sheet
The balance sheet (statement of financial position) reports assets, liabilities, and equity at a single point in time, unlike the income statement and cash flow statement, which cover a period.
Q2. Under ASC 606, an entity recognizes revenue when (or as):
Correct answer: B. Control of the promised good or service transfers to the customer
ASC 606's core principle is that revenue is recognized when control of goods or services transfers to the customer, not merely upon cash receipt or contract signing.
Q3. Ashford Co. reports current assets of $450,000 and current liabilities of $300,000 at year-end. What is Ashford's current ratio?
Correct answer: C. $1.50
Current ratio = current assets / current liabilities = $450,000 / $300,000 = 1.50.
Q4. Delta Corp sells a product for $100,000 and offers a $10,000 volume rebate if the customer meets an annual purchase threshold. Delta estimates an 80% probability the threshold will be met (rebate earned, net price $90,000) and a 20% probability it will not (full price $100,000). Using the expected value method under ASC 606, what transaction price should Delta recognize?
Correct answer: D. $92,000
Under the expected value method, transaction price is the sum of probability-weighted outcomes: (0.80 x $90,000) + (0.20 x $100,000) = $72,000 + $20,000 = $92,000.
Q5. In the statement of cash flows, proceeds received from issuing long-term bonds payable are classified as:
Correct answer: C. Financing activities
Cash inflows from issuing debt or equity securities are financing activities under ASC 230.
Q6. Which of the following is reported in other comprehensive income rather than net income?
Correct answer: A. Unrealized holding gain on available-for-sale debt securities
Unrealized gains and losses on available-for-sale debt securities bypass net income and are reported in other comprehensive income until realized or reclassified.
Q7. Bristo Inc. reports net income of $500,000 for the year and paid $50,000 in preferred stock dividends. Weighted-average common shares outstanding were 150,000. What is basic earnings per share?
Correct answer: D. $3.00
Basic EPS = (net income - preferred dividends) / weighted-average shares = ($500,000 - $50,000) / 150,000 = $3.00.
Q8. Which basis of accounting is used by the general fund of a state or local government for fund financial statements?
Correct answer: B. Modified accrual basis
Governmental funds, including the general fund, use the modified accrual basis, recognizing revenues when measurable and available and expenditures when the related liability is incurred.
Q9. Under current GAAP (ASU 2016-14), a not-for-profit entity classifies its net assets into which two categories on the statement of financial position?
Correct answer: A. Without donor restrictions and with donor restrictions
ASU 2016-14 simplified the prior three-tier net asset classification into two categories: net assets without donor restrictions and net assets with donor restrictions.
Q10. Kestrel Co. sells a bundle containing Product A and Product B for a combined price of $90,000. The standalone selling prices are $60,000 for Product A and $40,000 for Product B. Using the relative standalone selling price method, how much of the transaction price should be allocated to Product A?
Correct answer: C. $54,000
Allocate based on relative standalone prices: Product A = $90,000 x ($60,000 / $100,000) = $54,000.
Exam facts and objectives sourced from the official AICPA certification page. Last reviewed June 2026.
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