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These CBT questions were taken directly from the AICPA website. Select the best answer by clicking on the corresponding letter and then read the answer explanation that appears. Make sure to click on all the answer choices for additional insight. This valuable information will help you learn from questions you answer incorrectly, or answer correctly with uncertainty.

AUD

During an engagement to review the financial statements of a nonpublic entity, an accountant becomes aware that several leases that should be capitalized are not capitalized. The accountant considers these leases to be material to the financial statements. The accountant decides to modify the standard review report because management will not capitalize the leases. Under these circumstances, the accountant should

A. Issue an adverse opinion because of the departure from GAAP.
B. Express no assurance of any kind on the entity’s financial statements.
C. Emphasize that the financial statements are for limited use only.
D. Disclose the departure from GAAP in a separate paragraph of the accountant’s report.

BEC

Which of the following statements concerning the similarities between a general partnership and a corporation is correct?

A. Corporate stockholders and general partners have limited personal liability.
B. Corporations and general partnerships have perpetual existence.
C. Corporations and general partnerships can declare bankruptcy.
D. Corporations and general partnerships are recognized as taxpayers for federal income tax purposes.

FAR

During the year, Jones Foundation received the following support:

A cash contribution of $875,000 to be used at the board of directors’ discretion;
A promise to contribute $500,000 in the following year from a supporter who has made similar contributions in prior periods;
Contributed legal services with a value of $100,000, which Jones would have otherwise purchased.

At what amounts would Jones classify and record these transactions?

Unrestricted Revenue Temporarily Restricted Revenue
A. $875,000 $500,000
B. $975,000 $500,000

C. $975,000 $0
D. $1,375,000 $0
REG

If a corporation’s charitable contributions exceed the limitation for deductibility in a particular year, the excess

A. is not deductible in any future or prior year.
B. may be carried back to the third preceding year.
C. may be carried back or forward for one year at the corporation’s election.
D. may be carried forward to a maximum of five succeeding years.