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Test Prep CPA Test Exam Practice Questions (P. 1)

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Question #1
Several sources of GAAP consulted by an auditor are in conflict as to the application of an accounting principle. Which of the following should the auditor consider the most authoritative?
  1. A
    FASB Technical Bulletins.
  2. B
    AICPA Accounting Interpretations.
  3. C
    FASB Statements of Financial Accounting Concepts.
  4. D
    AICPA Technical Practice Aids.

Correct Answer: A ?️

Question #2
For an entity's financial statements to be presented fairly in conformity with generally accepted accounting principles, the principles selected should:
  1. A
    Be applied on a basis consistent with those followed in the prior year.
  2. B
    Be approved by the Auditing Standards Board or the appropriate industry subcommittee.
  3. C
    Reflect transactions in a manner that presents the financial statements within a range of acceptable limits.
  4. D
    Match the principles used by most other entities within the entity's particular industry.

Correct Answer: C ?️

Question #3
Fanny and John each own and manage their own companies. Fanny's business is manufacturing freight boxes of all types, and John's business is selling freight boxes to different industries. They decide to combine their expertise and knowledge to produce and sell freight boxes specifically designed for the new airline company that just formed in their city. Which of the following best describes the business formed by the parties?
  1. A
    A general partnership.
  2. B
    A limited liability partnership.
  3. C
    A sole proprietorship.
  4. D
    A joint venture.

Correct Answer: D ?️

Question #4
A sole proprietorship would be an ideal form of business to select if:
  1. A
    The individual desired no liability beyond his capital investment.
  2. B
    The individual wanted to be able sell the business at will.
  3. C
    The individual wanted the business to be a separate entity from the sole proprietor.
  4. D
    The individual wanted the business to continue indefinitely.

Correct Answer: B ?️

Question #5
Formation of which of the following types of business does not require the filing of documents with the state?
  1. A
    Option A
  2. B
    Option B
  3. C
    Option C
  4. D
    Option D

Correct Answer: C ?️

Question #6
According to the FASB conceptual framework, the objectives of financial reporting for business enterprises are based on:
  1. A
    Generally accepted accounting principles.
  2. B
    Reporting on management's stewardship.
  3. C
    The need for conservatism.
  4. D
    The needs of the users of the information.

Correct Answer: D ?️

Question #7
According to the FASB conceptual framework, the usefulness of providing information in financial statements is subject to the constraint of:
  1. A
    Consistency.
  2. B
    Cost-benefit.
  3. C
    Reliability.
  4. D
    Representational faithfulness.

Correct Answer: B ?️

Question #8
Parker, whose spouse died during the preceding year, has not remarried. Parker maintains a home for a dependent child. What is Parker's most advantageous filing status?
  1. A
    Single.
  2. B
    Head of household.
  3. C
    Married filing separately.
  4. D
    Qualifying widow(er) with dependent child.

Correct Answer: D ?️

Question #9
In which of the following situations may taxpayers file as married filing jointly?
  1. A
    Taxpayers who were married but lived apart during the year.
  2. B
    Taxpayers who were married but lived under a legal separation agreement at the end of the year.
  3. C
    Taxpayers who were divorced during the year.
  4. D
    Taxpayers who were legally separated but lived together for the entire year.

Correct Answer: A ?️

Question #10
Barkley owns a vacation cabin that was rented to unrelated parties for 10 days during the year for $2,500. The cabin was used personally by Barkley for three months and left vacant for the rest of the year. Expenses for the cabin were as follows:

Real estate taxes $1,000 -
Maintenance and utilities $2,000
How much rental income (loss) is included in Barkley's adjusted gross income?
  1. A
    $0
  2. B
    $500
  3. C
    $(500)
  4. D
    $(1,500)

Correct Answer: A ?️

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