Important AICPA-Financial CPA Exam Questions

Answer: B

Explanation:

Choice 'b' is correct. The quality of information that helps users increase the likelihood of correctly forecasting the outcome of past or present events is called predictive value. Forecasting is predicting.

Choice 'a' is incorrect. The quality of information that helps users increase the likelihood of correctly forecasting the outcome of past or present events is called predictive value, not feedback value. Feedback value enables decision makers to confirm prior expectations or to adjust or correct the decisions made previously.

Choice 'c' is incorrect. The quality of information that helps users increase the likelihood of correctly forecasting the outcome of past or present events is called predictive value, not representational faithfulness. Representational faithfulness is the agreement between financial reporting and the resources or events represented.

Choice 'd' is incorrect. The quality of information that helps users increase the likelihood of correctly forecasting the outcome of past or present events is called predictive value, not reliability. Reliability is the combination of neutrality, representational faithfulness, and verifiability.

Answer: B

Explanation:

Choice 'b' is correct, Yes - No. An extraordinary item should be reported separately on the income statement as a component of income:

Yes - net of income taxes.

No - after (not before) 'discontinued operations of a segment of a business.'

Answer: C

Explanation:

Choice 'c' is correct. Interim financial reporting should be viewed as reporting for an integral part of an annual period.

Choices 'a', 'b', and 'd' are incorrect, per the above rule.

Answer: A

Explanation:

Choice 'a' is correct. General and administrative expenses include:

Freight-in is part of cost of sales; freight-out is a selling expense; and sales salaries are selling expenses.

Choice 'b' is incorrect. Freight-in is part of cost of inventory; freight-out is a selling expense; and sales salaries are selling expenses.

Choice 'c' is incorrect. Freight-in is part of cost of inventory; freight-out is a selling expense; and sales salaries are selling expenses.

Choice 'd' is incorrect. Freight-in is part of cost of inventory; freight-out is a selling expense; and sales salaries are selling expenses.

Answer: A

Explanation:

Note: 1/2 of the office space of $240,000 was used by the sales department, which should be allocated to 'selling expenses' (not general and administrative).

Choice 'a' is correct. $290,000.