CPA Exam Sample Questions
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Free Sample CPA Exam Questions
UWorld CPA Exam questions are the best in CPA Exam Review. Want to see for yourself?Which of the following is an input control designed to ensure the reliability and accuracy of data?
| Limit Test | Validity Check Test | |||
| A. | Yes | Yes | ||
| B. | Yes | No | ||
| C. | No | Yes | ||
| D. | No | No |
An auditor decides to use the blank form of accounts receivable confirmation. The auditor should be aware that the blank form may be less efficient because
| A. It does not provide positive third-party confirmation of account balances. | ||
| B. It is more likely to require a reconciliation of responses with client information. | ||
| C. It is not as reliable as other forms of account confirmations. | ||
| D. It is more difficult to prepare. |
An auditor’s objective in the performance of audit procedures is to obtain evidence that either supports or refutes management assertions. Which of the following is an action designed to achieve this objective?
| A. Comparing financial and nonfinancial data. | ||
| B. Developing and maintaining a system of quality control. | ||
| C. Preparing adequate and appropriate documentation. | ||
| D. Increasing the desired level of detection risk. |
An auditor uses the assessed level of control risk to
| A. Evaluate the effectiveness of an entity’s internal control policies and procedures. | ||
| B. Identify transactions and account balances in which inherent risk is at the maximum. | ||
| C. Indicate whether materiality thresholds for planning and evaluation purposes are sufficiently high. | ||
| D. Determine the acceptable level of detection risk. |
Take a look at a typical sample question from another provider below. The question shows you what you’ll see on the exam, but that’s not enough to help you pass. Their limited explanations address the right answer choice but do not go the extra mile to explain the wrong choices – so you don’t make the same mistakes on exam day.
The controller of a small utility company has interviewed audit firms proposing to perform the annual audit of their employee benefit plan. According to the guidelines of the Department of Labor (DOL), the selected auditor must be
| A. The firm that proposes the lowest fee for the work required. | ||
| B. Independent for purposes of examining financial information required to be filed annually with the DOL. | ||
| C. Included on the list of firms approved by the DOL. | ||
| D. Independent of the utility company and NOT relying on its services. |
Which of the following is the annual report that is filed with the United States Securities and Exchange Commission?
| A. Form 8-K. | ||
| B. Form 10-K. | ||
| C. Form S-1. | ||
| D. Form 10-Q. |
What is the purpose of reporting comprehensive income?
| A. To summarize all changes in equity from nonowner sources. | ||
| B. To reconcile the difference between net income and cash flows provided from operating activities. | ||
| C. To provide a consolidation of the income of the firm’s segments. | ||
| D. To provide information for each segment of the business. |
Wall Corp. offers an employee stock purchase plan through which employees can elect to have money withheld from their paychecks to purchase Wall stock. Wall’s plan specifies the following:
| For every $1 contributed from employees’ wages for the purchase of Wall’s common stock, Wall contributes $2. |
| The stock is purchased from Wall’s treasury stock at market price on the date of purchase. |
The following information pertains to the plan’s Year 1 transactions:
| Employee contributions for the year | $ 350,000 |
| Market value of 150,000 shares issued | 1,050,000 |
| Carrying amount of 150,000 shares of treasury stock issued (cost) | 900,000 |
Before payroll taxes, what amount should Wall recognize as expense in Year 1 for the stock purchase plan?
| A. $150,000 | ||
| B. $700,000 | ||
| C. $900,000 | ||
| D. $1,050,000 |
The following financial ratios and calculations were based on information from Kohl Co.’s financial statements for the current year:
| Accounts receivable turnover |
| Ten times during the year |
| Total assets turnover |
| Two times during the year |
| Average receivables during the year |
| $200,000 |
Kohl made all sales on credit. What was Kohl’s average total assets for the year?
| A. $2,000,000 | ||
| B. $1,000,000 | ||
| C. $400,000 | ||
| D. $200,000 |
Take a look at a typical sample question from another provider below. The question shows you what you’ll see on the exam, but that’s not enough to help you pass. Their limited explanations address the right answer choice but do not go the extra mile to explain the wrong choices – so you don’t make the same mistakes on exam day.
Which one of the following would constitute a highly inflationary economy when determining the functional currency of a foreign entity?
| A. 20% inflation for each of the past 5 years | ||
| B. 30% inflation for each of the past 3 years | ||
| C. 35% inflation for each of the past 3 years | ||
| D. 20%, 35%, and 40% inflation, respectively, for each of the past 3 years |
On June 1, 20X5, Rusk Corp. was petitioned involuntarily into bankruptcy. At the time of the filing, Rusk had the following creditors:
- Safe Bank, for the balance due on the secured note and mortgage on Rusk’s warehouse.
- Employee salary claims.
- 20X4 federal income taxes due.
- Accountant’s fees outstanding.
- Utility bills outstanding.
Prior to the bankruptcy filing, but while insolvent, Rusk engaged in the following transactions:
- On February 1, 20X5, Rusk repaid all corporate directors’ loans made to the corporation.
- On May 1, 20X5, Rusk purchased raw materials for use in its manufacturing business and paid cash to the supplier.
Required:
Below is relate to Rusk’s creditors and the February 1 and May 1 transactions. For each item, determine whether only statement I is correct, whether only statement II is correct, whether both statements I and II are correct, or whether neither statement I nor II is correct.
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Which of the following actions would most likely be an infringement of the exclusive rights of the owner of a copyrighted work?
| A. Preparing a foreign language translation of the copyrighted work. | ||
| B. Writing a book review of the copyrighted work that includes excerpts from the work. | ||
| C. Making multiple copies of extracts from the copyrighted work for classroom use. | ||
| D. Using the copyrighted work for research. |
What is an example of property that can be considered either personal property or real property?
| A. Air rights. | ||
| B. Mineral rights. | ||
| C. Harvested crops. | ||
| D. Growing crops. |
Trees were cut down and made into lumber. The lumber was used to build a house. Which of the following statements best describes the property aspect of these events?
| A. The trees were and remained tangible personal property. | ||
| B. The trees were and remained real property. | ||
| C. The trees were real property, then became and remained personal property. | ||
| D. The trees were real property, became personal property, and then reverted to being real property. |
Take a look at a typical sample question from another provider below. The question shows you what you’ll see on the exam, but that’s not enough to help you pass. Their limited explanations address the right answer choice but do not go the extra mile to explain the wrong choices – so you don’t make the same mistakes on exam day.
A corporation’s penalty for underpaying federal estimated taxes is
| A. Not deductible. | ||
| B. Fully deductible in the year paid. | ||
| C. Fully deductible if reasonable cause can be established for the underpayment. | ||
| D. Partially deductible. |
A cloud service provider offering Infrastructure as a Service is most likely to be contractually responsible for maintaining which of the following?
| A. Networks. | ||
| B. Middleware. | ||
| C. Operating systems. | ||
| D. Applications. |
In a SOC 2® examination, management should consider the implementation guidance found in which of the following criteria when making judgments about the disclosures to include in its description of the service organization’s system?
| A. DC Section 100 Description Criteria. | ||
| B. DC Section 200 Description Criteria. | ||
| C. DC Section 300 Description Criteria. | ||
| D. DC Section 400 Description Criteria. |
During a suspected data breach, an incident response team has gathered raw data indicating anomalous server activity. Then they compared the current situation with a similar incident from the previous year. Which of the following stages of the OODA loop is the team primarily utilizing?
| A. Observe and act. | ||
| B. Orient and decide. | ||
| C. Observe and orient. | ||
| D. Decide and act. |
Which of the following IT controls would a company appropriately use to mitigate the risk of unauthorized access to its payroll data?
| A. Validity checks. | ||
| B. A neural network. | ||
| C. Biometric devices. | ||
| D. Employee purchase cards. |
From an employee’s standpoint, the tax benefit of a qualified stock option is that:
| A. There is no AMT impact when stock is acquired through option exercise. | ||
| B. The gain recognized when stock acquired through option exercise is sold may be taxed at preferential rates. | ||
| C. The compensation income recognized is deferred until option exercise. | ||
| D. The compensation income recognized at grant date is taxed at preferential rates. |
The parents of a three-year-old taxpayer gifted him stock when he was born. This year, the taxpayer has $20,000 of qualified dividends, $0 earned income, and $4,000 of itemized deductions related to the dividends. Assuming the current dependent child standard deduction is $1,250, how much of the taxpayer’s dividends will be taxed at his parents’ rate?
| A. $1,250 | ||
| B. $14,750 | ||
| C. $18,750 | ||
| D. $20,000 |
Osha, a cash-basis calendar-year partnership, began business on April 1, Year 5. Osha incurred and paid the following during Year 5:
| Legal services associated with formation of the partnership: | $15,260 |
| Accounting fees associated with promoting and selling partnership interests: | 10,000 |
Osha elected to amortize costs. What is the maximum amount of organizational costs deductible on Osha’s Year 5 partnership return?
| A. $5,000 | ||
| B. $5,513 | ||
| C. $5,684 | ||
| D. $6,013 |
On January 1, Year 2, a taxpayer lent $90,000 to a friend as a gift to help the friend buy a home. The loan terms require the friend to make three $30,000 repayments annually beginning on December 31, Year 2. The loan does not require the friend to pay interest. For the individual in Year 2, what are the income tax consequences regarding the loan?
| A. The individual has no income tax consequences because no interest is due under the loan terms. | ||
| B. The individual must recognize interest income because the loan was issued at a premium. | ||
| C. The individual has no income tax consequences because the loan is de minimis. | ||
| D. The individual must recognize interest income because interest income must be imputed. |
In the current year, Poplar City paid $5,000 interest and $20,000 principal on its outstanding general obligation bonds. The payment was made from a debt service fund using cash transferred earlier the same year from the general fund. How should the city report the expenditures?
| General fund | Validity Debt service fund | Permanent fund | |||
| A. | $25,000 | $25,000 | $0 | ||
| B. | $0 | $25,000 | $20,000 | ||
| C. | $25,000 | $5,000 | $0 | ||
| D. | $0 | $25,000 | $0 |
North Bank is analyzing Belle Corp.’s financial statements for a possible extension of credit. Belle’s quick ratio is significantly better than the industry average. Which of the following factors should North Bank consider as a possible limitation of using this ratio when evaluating Belle’s creditworthiness?
| A. Fluctuating market prices of marketable debt securities may adversely affect the ratio. | ||
| B. Increasing market prices for Belle’s inventory may adversely affect the ratio. | ||
| C. Belle prepaid its rent expense in full for the following year. | ||
| D. Belle may need to liquidate its inventory to meet its long-term obligations. |
On December 31, Year 1, Northpark Co. collected a receivable due from a major customer. Which of the following ratios would be increased by this transaction?
| A. Inventory turnover ratio. | ||
| B. Receivable turnover ratio. | ||
| C. Current ratio. | ||
| D. Quick ratio. |
On May 1, Clothes Co. sells clothing to Link Corp. for $40,000. Clothes ships the clothing on May 1 and Link is obligated to pay Clothes within six months. Link is given 12 months to return any of the clothing for a refund if they experience low demand. Link is also given 18 months to exchange any clothing due to low demand. At the time of sale, Clothes cannot reasonably estimate returns, but estimates $5,000 in exchanged goods. Clothes should recognize revenue for the aforementioned transaction
| A. On the day of the sale. | ||
| B. 6 months after the date of sale. | ||
| C. 12 months after the date of sale. | ||
| D. 18 months after the date of sale. |
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