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This page provides CPA Exam candidates with important study materials and resources that can help them prepare to take the Uniform CPA Examination. Note the version reference below and click on Replacement Textbooks under. CPA Resources at to learn if a newer. Passing the CPA requires time and dedication. We've curated a list of the best free study materials to help you decide how to start your study plan.

Interim Financial Report: A financial report that contains either a complete or condensed set of financial statements Accounting Principles and Practices In general, the results for each interim period should be based on the accounting principles and practices used by an entity in the preparation of its latest annual financial statements unless a change in an accounting practice or policy has been adopted in the current year.

However, under U. GAAP, certain accounting principles and practices followed for annual reporting purposes may require modification at interim reporting dates so that the reported results for the interim period may better relate to the results of operations for the annual period. Revenues must be recognized during an interim period on the same basis as is followed for the full year. Costs and Expenses: Costs and expenses for interim reporting purposes may be classi- fied as either of the following: Those costs and expenses that are directly associ- ated with or allocated to the products sold or to the services rendered, for annual reporting purposes, including, for example, material costs; wages, salaries and related fringe benefits; manufacturing overhead; and warranties, which should be similarly treated for interim reporting purposes.

Costs and expenses other than product costs should be charged to income in interim periods as incurred, or be allocated among interim periods, based on an estimate of the time expired, the benefit received, or the activity associated with the periods. Smith Corp. Costs and expenses other than product costs should be charged to income in interim periods as incurred or be allocated among interim periods, based on the benefit received.

The depreciation expense and bonuses to employees provide benefits throughout the year and should be allocated evenly to all interim periods. The repairs will benefit operations for the remainder of the calendar year. The unanticipated repairs to plant and equipment will benefit the second, third, and fourth quarters. Losses should be recognized in full during the interim period in which the existence of such losses becomes evident. Gains and losses that arise in any interim period sim- ilar to those that would not be deferred at year-end should not be deferred to later interim periods within the same fiscal year.

What portion of the gain should Smith report in its income statement for the third quarter? A company that issues quarterly financial statements incurs an unusu- Example al loss in one of the first three quarters. In which of the following ways would the company report this loss? Only in the annual report b. Entirely in the quarter wherein the loss occurs c. Pro-rated over the remaining quarters of the current year d. Disclosed only by a note in the quarter wherein the loss occurs Correct answer: Income Taxes A.

Estimated annual effective tax rate The tax or benefit 12 related to ordinary income or loss 13 should be computed at an estimated annual effective tax rate. At the end of each interim period, the entity should make its best estimate of the effec- tive tax rate that is expected to be applicable for the full fiscal year. If a reliable estimate cannot be made, then the actual effective tax rate for the year-to-date may be the best estimate of the annual effective tax rate.

The estimated annual effective tax rate should be applied to the year-to-date ordinary income or loss , at the end of each interim period, to compute the year-to-date tax or benefit applicable to ordinary income or loss.

The interim period tax or benefit related to ordinary income or loss should be the difference between the amount so computed and the amounts reported for the previous interim periods of the fiscal year. Smith Co. The quarterly tax Example computations are as follows:. Multiply the year-to-date ordinary income by the estimated annual effective tax rate and subtract the result from the provision previously provided in the previous quarter.

The estimated effective tax rate should reflect the anticipated investment tax credits, foreign tax rates, percentage depletion, capital gains rates, and other available tax-planning alternatives. Changes in estimates A change in the estimated effective annual tax rate is accounted for as a change in accounting estimate and should be accounted for in the period in which the change in estimate is made.

No restatement of previously reported interim information should be made for changes in estimates. Example Smith Co. The estimated annual effective tax rate changed from one quarter to another. The quarterly tax computations are as follows: Inventory in Interim Financial Statements Practices vary in terms of determining costs of inventory.

While entities should generally use the same inventory pricing methods and make provisions for write-downs at interim dates on the same basis as those used for annual inventory dates, it is appropriate to use following exceptions for interim reporting dates:. Different inventory methods at interim periods Some entities use estimated gross profit rates to determine the cost of goods sold during interim periods or they use other methods that differ from those used at annual inven- tory dates.

These entities must disclose the method used at the interim date and any sig- nificant adjustments that result from reconciliations with the annual physical inventory. GAAP only Entities that use the LIFO method may encounter a liquidation of base period inventories at an interim date that is expected to be replaced by the end of the annual period. Form 6-K Form 6-K is filed by foreign private issuers to report the occurrence of any material events or corporate changes not previously reported to investors.

Form 6-K may be filed, any time during the year, to report the occurrence of any material events. Reports on Form 6-K typically cover events, including a change in control, a significant acquisition or disposition of assets, a bankruptcy or receivership, or a change in accountants. Regarding interim reporting, the SEC requires only a semi-annual report of non-ad- justed earnings, filed on Form 6-K, if and when firms are required to report interim earnings in their home country.

Reports on Form 6-K that are filed by foreign private issuers generally take the place of reports on Form Q which include unaudited financial reports and current reports on Form 8-K which include disclosure on material events that U.

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SEC Regulations A. It contains information regarding the financial statements, including the notes and schedules for both interim and annual statements that must be submitted to the SEC.

It contains instructions for filing the non-financial statement forms required by the SEC. These requirements ensure that investors can ascertain the likelihood that past performance is indicative of future performance.

It is an open specification that uses XML-based data tags to describe financial state- ments. These tags identify the contents of each data item. For example, a tag might indicate that a data item represents accounts receivable. XML means extensible markup language and is standard for the electronic exchange of data between businesses and on the Internet.


Under XML, identifying tags are applied to items of data so they can be efficiently processed by computer software. These rules apply to domestic and foreign companies using U. XBRL exhibits enable investors to compare information between companies using analytic software. Securities and Exchange Commission 1. The SEC was created under which of the following acts? The Securities Act of b. The Securities Exchange Act of c.

Both the Securities Act of and the Securities Exchange Act of were designed to restore investor confidence subsequent to the stock market crash. The Act contains accounting and disclosure requirements for the initial offering of a stock or bond. The Securities Exchange Act of also identifies and prohibits certain types of conduct in the markets and provides the Commission with disciplinary powers over regulated entities and the persons associated with these entities.

The Securities Exchange Act of empowers the SEC to require companies that issue publicly traded securities to report certain information on a periodic basis.

FASB Interpretations c. Derivatives Implementation Group Issues Correct answer: Accounting literature that is not included in the Codification will be considered non-authoritative.

To be relevant to the investors, creditors, lenders, and other users, accounting information must be capable of making a difference in a decision. Ande Co. This practice follows which of the following accounting concepts? Matching b. Going concern c. Consistency d. Substance over form Correct answer: For an accounting period, net income or loss is determined by the process of associating realized revenues with the expenses and expired costs that were necessary to generate them.

This often requires estimates and allocations. The matching principle states that income or loss is determined by a process of associating realized revenues with the expenses necessary to generate them. According to the IASB Framework, an item that meets the definition of an element should be recognized in the financial statements if: It is probable that any future economic benefit associated with the item will flow to or from the entity; or II.

The item has a cost or value that can be measured with reliability. Please choose one of the following: I and II d. None of the above Correct answer: If the item meets the definition of an element and can be reliably measured, then it will be incorporated into the income statement or the statement of financial position. Under U. GAAP, an item that meets the definition of an element should be recognized in the financial statements if the item: If an item possesses the characteristics that define an element, then this is a necessary but not sufficient condition for formally recognizing the item in the financial statements.

Which capital-maintenance concept is applied to currently reported net income and which is applied to comprehensive income? Currently reported net Comprehensive income income a. Financial capital Physical capital b. Physical capital Physical capital c. Financial capital Financial capital d. Physical capital Financial capital.

The major difference between them involves the effects of price changes on assets held and liabilities owed during a period. These two concepts are: Financial Capital Concept: Physical Capital Concept: The physical capital maintenance concept supports current cost accounting. Under the physical capital concept, adjustments would be a separate element rather than gains and losses.

Financial capital maintenance is the basis for U. Which of the following is not a characteristic of an asset? A probable future benefit in a contribution to future net cash inflows b. An entity can obtain and control access to this benefit c. A transaction or an event that has already occurred that leads to control by the entity d. Little or no discretion is needed to avoid future sacrifice Correct answer: Little or no discretion required to avoid future sacrifice is a characteristic of liabilities.

An asset continues to be an asset until it is collected, transferred, used, or destroyed. Entities that incur liabilities face probable future sacrifices of economic benefits. Which of the following is not a characteristic of liabilities? Little or no discretion to avoid future sacrifice b. A legal, equitable, or constructive duty to transfer assets in the future c. A transaction or event that has already occurred for the obligated enterprise d. A probable future benefit in a contribution to future net cash inflows Correct answer: When an asset is classified as held for sale, it is measured at the lower of either its carrying amount or its fair value less the costs incurred to sell the asset.

So, a loss should be recognized for any initial or subsequent write-down to fair value less the cost incurred to sell the asset. Wand Inc. So, Wand Inc. The results of the operations of a component that is classified as held for sale should be reported in discontinued operations, in the period s in which they occur. Which of the following is are considered to be a change in accounting principle?

The initial adoption of an accounting principle in order to recognize events or transactions that have occurred for the first time or that previously were immaterial in their effect II. An adoption or modification of an accounting principle that is necessitated by transactions or events that are clearly different in substance from those previously occurring III.

At the beginning of 20x7, entity A decides to adopt the first-in, first-out FIFO method of inventory valuation. But, since its inception on January 1, 20x5, entity A had been using the last-in, first-out LIFO method for financial and tax reporting. Entity A concluded that the FIFO method is the preferable inventory valuation method for its inventory.

Select the best answer: III b. A presumption exists that an accounting principle, once adopted, should not be changed in the accounting of events and transactions of a similar type. Consistent use of the same accounting principle, from one accounting period to another, enhances the utility of financial statements, for users, by facilitating the analysis and understanding of the comparative accounting data of an entity.

Neither of the following is considered to be a change in accounting principle: Based on the following information, what journal entry should Beta Co. For the years 20x1 to 20x3, it appropriately reported income under the completed-contract method. In 20x4, Beta Co. Cumulative effect: The credit to the Retained Earnings account is the cumulative effect of the change in the accounting method as of the beginning of the year in which the accounting change is made, which is 20x4.

The credit to the Income Taxes Payable account assumes that the same change is made for tax purposes. The debit to the construction-in-progress account is the cumulative effect before income taxes as of the beginning of the year in which the accounting change is made, which is 20x4. The change in the accounting method for long-term construction contracts took place in 20x4. After reading the following, please answer all of questions 1 to 5. On January 1, 20x1, Mitchell Co.

The machine was depreciated by the double-declining- balance method. On January 1, 20x3, Mitchell changed to the straight-line method. Mitchell Co. What should be the depreciation expense on this machine for the year-ended December 31, 20x3?

What is the accumulated depreciation for this machine at December 31, 20x3? In its 20x3 income statement, what amount should Mitchell Co.

On January 1, 20x3, what amount should Mitchell report as the deferred income tax liability as a result of this change? Prepare the journal entry to record the change from the double-declining balance method to the straight-line method in 20x3.

Changes in accounting estimates should be accounted for and reported pro- spectively. The entity should not account for a change in the accounting estimate by restating or retrospectively adjusting the amounts reported in the financial state- ments of prior periods or by reporting the pro forma amounts for the prior periods.

In addition, the cumulative effect of the change in the depreciation method would not be recognized in either the income statement or in the retained earnings statement. In addition, the cumu- lative effect of the change in the depreciation method would not be recognized in either the income statement or in the retained earnings statement.

Therefore, there are no deferred income-tax-liability effects. Under IFRS, which of the following is not a disclosure requirement related to the correction of a material prior-period error: The impact of the correction on basic and diluted earnings per share for each period presented c. The nature of the error d. The amount of the correction at the beginning of the earliest period presented. Under IFRS, disclosures relating to error correction include: Althouse Co.

The equipment should have been depreciated over five years with no salvage value. This is done by restating all prior years that are affected by the error. Corrections of errors must not be included in net income, therefore, no adjustment to depreciation expense should be made for the prior-period errors.

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A company reported the following information for year 20x You can download this from https: Flag for inappropriate content. Related titles. Revenue Recognition 1. Jump to Page. Search inside document. Fiscal Year 21 1. XBRL Overview 83 1. The pages below are random excerpts. Related question 1 1. Type of Accounting Change and Effect on Financial Statements accounting treatment Type of accounting change Accounting treatment Change in accounting principle Retrospective application, except when it is impracticable to determine.

Prospective if impracticable to determine Change in accounting estimate Prospective Application Change in reporting entity Retrospective Application 1. Cumulative effect 1. Comparative financial statements If comparative financial statements are being presented, then the cumulative effect of a change is reported as an adjustment to the beginning-of-year retained-earnings balance of the earliest year presented.

Non-Comparative financial statements If non-comparative financial statements are being presented, then the cumulative effect of the change is reported as an adjustment to the beginning-of-year retained- earnings balance. A change to or from the cost method to the equity method Related questions 27 28 1. A change in the estimation of inventory obsolescence Related questions 29 1. I only hope that everyone can enjoy the meal. In the mood of depression, even began to express the intention to leave the Yujing City after the spring to return to the wasteland and continue to open up.

Many people who have the heart to move can t help but push their own thoughts down, and they don t know what this CPA Exam Book Hong Xuan machine has to do with the emperor. The two returned to the deck, and the son in law curiously flipped the gold plated card over and over again. Wait until the Emperor is innocent, and you will wait for me to be inhuman, and the endless assassination of the vacuum. In a word, their family life has no effect. Chapter anti piracy version, please book friends to see again at five or six in the morning.


Although it is famous for its bow and arrow, it is just like many other weapons. This group of stars, the light ball, formed into a cohesive shape, and quickly shot toward Shen Tianyang and Shen Tiezhu.

It is unimaginable to what extent wealth is. The two martial arts skills are strong, Xiaoyan is not an opponent, but some vain words will be believed by the two to believe that The voice of the monk has not yet fallen, and the three groups of water mines rubbed his skin and flew out, falling on it. Go out from the room and gently bring the door.The following is their trial balance as at 30th June It represents the amount paid for the transportation of goods into the business premises before they are sold.

A change from the individual-item approach to the aggregate approach in applying to inventories the lower of FIFO cost or market d. Sh Mutie 50, Mutua 30, Mutinda 20, If the partners decide to show goodwill in the accounts, show the statement of financial position as at 31st December The entry will be as follows: The closing balance of the stock is obtained by actual counting of the stock at hand at the end o the accounting period.

The head of section further informs you that all receipts are banked intact and all payment s are made by cheque.