CPA-TEST Free Sample Questions

A CPA firm is auditing Innovatech, a pre-IPO software-as-a-service (SaaS) startup. The audit team notes the following: 1. Innovatech recognizes revenue from 3-year, non-cancellable contracts at the point of sale, arguing the cash is received upfront and the service is 'always-on'. 2. The company recently pivoted its business model, causing significant recurring losses. Management's going concern assessment relies heavily on securing a future Series C funding round, for which they only have a verbal expression of interest from a venture capital firm. 3. The lead developer, who wrote most of the proprietary source code, left the company acrimoniously and has threatened litigation over intellectual property rights. Which of the following audit opinions is most appropriate given these circumstances, assuming all issues are material?

During the audit of a publicly traded manufacturer, the auditor determines the need to use an actuary (an auditor's specialist) to assist in evaluating the reasonableness of the client's pension benefit obligation (PBO). The specialist is not employed by the audit firm. Which action is required by the auditor in relation to using this specialist's work?

An auditor is performing procedures related to subsequent events for an audit of a non-issuer with a December 31 year-end. The audit report is dated March 1. Which TWO of the following procedures would be most appropriate for the auditor to perform specifically to identify subsequent events? (Select TWO)

On January 1, Year 1, Apex Corp. sells a manufacturing facility to a buyer for $5,000,000 cash. The facility has a carrying amount of $3,500,000. On the same day, Apex leases the facility back for 10 years, with annual payments of $400,000 due at the beginning of each year. The present value of the lease payments is $2,800,000, and the fair value of the facility is determined to be $5,200,000. The lease does not transfer ownership or contain a purchase option. How should Apex account for this transaction on January 1, Year 1?

Parent Co. owns 70% of Subsidiary Co. and consolidates its financial statements. During the year, Parent sold inventory to Subsidiary for $100,000, which had cost Parent $70,000. At year-end, 40% of this inventory remains in Subsidiary's warehouse. The noncontrolling interest (NCI) in Subsidiary's net income for the year, before considering the intercompany transaction, was $30,000. What is the amount of net income attributable to the noncontrolling interest that should be reported in Parent's consolidated income statement?

True or False: Under U.S. GAAP for internal-use software, costs incurred during the preliminary project stage should be capitalized, while costs incurred during the application development stage should be expensed as incurred.

Alex is a partner in the ABC Partnership with a basis of $50,000. The partnership makes a non-liquidating distribution to Alex of a parcel of land with a fair market value of $40,000 and an adjusted basis to the partnership of $30,000. The land is subject to a mortgage of $10,000, which Alex assumes. What is Alex's basis in the partnership immediately after the distribution?

A construction company hires a skilled mason as an independent contractor and issues a Form 1099-NEC. The company directs the mason's work hours, provides all tools and materials, and requires the mason to work exclusively on its projects. The IRS later reclassifies the mason as an employee. Which legal concept most directly exposes the company's officers to personal liability for the unpaid employment taxes?

A financial analyst is evaluating the performance of RetailCo, a publicly traded company. The analyst has been provided with the following information for the most recent fiscal year: * Net Sales: $50,000,000 * Cost of Goods Sold: $30,000,000 * Operating Income: $5,000,000 * Net Income: $3,000,000 * Total Assets: $25,000,000 * Total Equity: $10,000,000 The industry average Return on Equity (ROE) is 25%. The analyst wants to understand the drivers of RetailCo's ROE compared to the industry. Which component of the 3-step DuPont analysis is the primary driver of RetailCo's underperformance relative to the industry average?

The City of Springwood, a municipal government, constructs a new city hall. The cost of construction was financed by a bond issuance specifically for this purpose. In which fund(s) should the construction expenditures and the completed city hall asset be reported?