CPA Accountant Practice Test: Get Ready for Your CPA Exam!

CPA Accountant Practice Test

The Uniform Certified Public Accountant Examination (CPA Exam) is an exam for those who wish to become U.S. Certified Public Accountants.

This exam is developed, maintained and scored by the American Institute of Certified Public Accountants.

The CPA Exam covers the topics of auditing and attestation, business environment and concepts, financial accounting and reporting as well as regulation.

CPA Accountant Exam

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Question 1
The GAAP stands for:
A
General accounting assistance program
B
Generally accepted accounting principles
C
Generally acceptable account procedures
D
The theory that accounting and the general public look at financial statements differently
Question 1 Explanation: 
The GAAP stands for Generally accepted accounting principles.
Question 2
What does GAAP provide between accounting periods?
A
Relativity
B
Compression
C
Contention
D
Collaboration
E
Comparability
Question 2 Explanation: 
The GAAP provides comparability between accounting periods.
Question 3
What is the result when capital is increased in the double-entry method of accounting?
A
A credit
B
A debit
C
It is dependent on the situation
D
None of the above
Question 3 Explanation: 
When capital is increased in the double-entry method of accounting, the result is A credit.
Question 4
What is the purpose of the trial balance?
A
To check the solvency of the company.
B
To identify credits and debits.
C
To analyze the accounting period.
D
To verify that credits equal debits.
Question 4 Explanation: 
The purpose is to verify that credits equal debits.
Question 5
The retained earnings are revenue of what kind of corporation?
A
A corporation that is not paid out in dividends.
B
A corporation that is paid to shareholders.
C
A corporation that is considered gross profit.
D
A corporation that is shown in a trial balance.
Question 5 Explanation: 
A corporation that is not paid out in dividends.
Question 6
A decrease to revenue, such as a refund, is done by a ______________.
A
note
B
debit
C
cost adjustment
D
deposit
Question 6 Explanation: 
A decrease to revenue, such as a refund, is done by a deposit entry.
Question 7
When would a client report the cost of a policy as an expense, in a case when the client purchased an insurance policy supposing that the accrual accounting method is still being used?
A
When the client signs the policy
B
When payment is made
C
When the client receives the benefits of the policy
D
When the client receives payments from the insurance company
Question 7 Explanation: 
The client would report the cost of the policy as an expense when the benefits of the policy are received.
Question 8
Please mark the appropriate terms for the gaps in the following statement: Common stock has a ________ balance and is a/an ______ to the corporation.
A
debit; liability
B
credit; liability
C
credit; asset
D
debit; asset
Question 8 Explanation: 
Common stock has a credit balance and is a liability to the corporation.
Question 9
Nonna's Lasagna saw sales of $50,000 in December-primarily due to New Year’s Eve celebrations. Nonna's determined that 30% of his sales are paid in cash, while the rest are billed for their brewskies. Of the money owed, 40% is paid December, while the remaining is paid the following month. What is the increase of Accounts Receivable on New Year’s Eve?
A
$21,000
B
$15,000
C
$14,000
D
$50,000
Question 9 Explanation: 
$21,000
Question 10
Please mark the three words which describe the ethical responsibilities of accountants:
A
CPA’s, GAAP, AICPA
B
Competence, objectivity, and confidentiality
C
Reliability, integrity, and honesty
D
Integrity, intelligence, and reliability
Question 11
Please mark the three words which describe the ethical responsibilities of accountants:
A
CPA’s, GAAP, AICPA
B
Competence, objectivity, and confidentiality
C
Reliability, integrity, and honesty
D
Integrity, intelligence, and reliability
Question 11 Explanation: 
Competence, objectivity, and confidentiality
Question 12
Please mark the correct statement(s) regarding the following case: Nonna's Lasagna has grown beyond the imaginable. They are now a corporation and have hired an accountant. Their income statement is now showing a net income. How is this income shown on the Statement of Retained Earnings? I. It increases retained earnings. II. It is shown as dividends paid to shareholders. III. It does not impact the Statement of Retained Earnings.
A
Only statement I is correct.
B
Only statement II is correct.
C
Only statement III is correct.
D
Both statement I and II could be correct.
Question 12 Explanation: 
Both statement I and II could be correct.
Question 13
During 2009, Nonna's Lasagna saw a jump in accounts receivables. It went from $10,000 at year-end in 2007 to $20,000 at year-end in 2008. With the introduction of his newest mini-rolls lasagna, lasagnnetta-s, Nonna's saw his sales go extremely high. In 2008, his sales were $120,000. How much cash did Nonna's Lasagna take in for 2008?
A
$130,000
B
$110,000
C
$105,000
D
$120,000
Question 13 Explanation: 
$110,000
Question 14
AMC sells hardware. Their sales have finally reached $1,000,000 annually after years of hard work. Now their accountant has discovered a mistake-AMC misclassified a $2 expense several months ago. Their accountant decides to ignore it. What accounting concept does the accountant use to justify this?
A
The going concern concept
B
The materiality concept
C
The money measurement concept
D
The matching concept
Question 14 Explanation: 
The materiality concept
Question 15
Owner’s equity or capital is calculated by:
A
the gross income
B
the assets
C
the total income from operating activities
D
the net income
Question 15 Explanation: 
Owner’s equity or capital is calculated by the net income.
Question 16
What is another name for an income statement?
A
Statement of cash flows
B
Operating statement
C
Statement of owner’s equity
D
Profit & loss statement
Question 16 Explanation: 
Profit & loss statement
Question 17
Maria, the lawyer is going to represent Nonna's Lasa in an upcoming litigation. Nonna's is being sued for representing their mini-lasagna as being salt-free, when in fact, they were of 1,5 g. salt. Maria has asked Nonna's for a retainer of $1,000 before she’ll even meet with Nonna's. The payment from Nonna's to Maria is:
A
Revenue and a receipt
B
Accounts receivable
C
A receipt
D
Revenue
Question 17 Explanation: 
The payment from Nonna's toMaria is a receipt.
Question 18
Max Make-up is being sued by a former employee for $200,000. The employee is claiming race discrimination. She is Hispano-American and was terminated when Max Make-up decided that he wanted all employees to be American. Max Make-up's attorney has told them that the employee has a strong case and will probably win. How does this impact Max Make-up's accounting records?
A
A note is made on the Balance Sheet regarding the lawsuit.
B
There is no impact on the financial statement.
C
An entry will appear on the statement of cash flows.
D
A contingent liability of $100,000 appears on the income statement as an expense.
Question 18 Explanation: 
A contingent liability of $100,000 appears on the income statement as an expense.
Question 19
Please mark one of the following which is subtracted from net sales to determine gross profit:
A
Cost of goods sold
B
Expenses
C
Taxes
D
Both the cost of goods sold and the expenses
Question 19 Explanation: 
Cost of goods sold
Question 20
Max Make-up will shut down their Max Division. Where on the income statement would this closing be addressed?
A
Under extraordinary items at the bottom of the income statement.
B
Under discontinued operations at the bottom of the income statement.
C
As a note on the operating income section of the income statement.
D
As a deduction in the Net Profit section of the income statement.
Question 20 Explanation: 
Under discontinued operations at the bottom of the income statement.
Question 21
Maria, who uses the accrual basis of accounting, hired an extra driver to help him make deliveries in December. The extra driver only works from April 1st through the 30th. Maria pays the driver on April 5th, but the expense is shown on the April income statement. Why?
A
Due to cost-benefit analysis
B
Due to matching principle
C
Due to cost principle
D
Due to gross principle
Question 21 Explanation: 
Due to matching principle
Question 22
The marketing expense and an overhead expense are constituents of:
A
Operating expenses
B
Total expenses
C
Direct expenses
D
General expenses
Question 22 Explanation: 
The marketing expense and an overhead expense are constituents of total expenses.
Question 23
Please mark the following statement as true or false: Expenses cannot be estimated on income statements.  
A
True
B
False
Question 23 Explanation: 
Expenses can be estimated on income statements.
Question 24
Please mark the correct accounts receivable turnover ratio for the year in the following case: Maria’s accounts show the following for the year: Net Sales on Account: $200,000 COGS: $150,000 Accounts Receivable at the beginning of the year: $22,500 Accounts Receivable at year end: $17,500 Inventory at the beginning of the year: $45,000 Inventory at the end of the year: $55,000
A
10
B
4
C
1.5
D
5
Question 24 Explanation: 
The accounts receivable turnover ratio for the year is 10.
Question 25
Sean's Printing discards a copier that it purchased for $100,000. If the machine’s accumulated depreciation is $99,000, what would the journal entry be to record the disposal?
A
Debit Accumulated Depreciation of Copier, $99,000; credit Copier, $100,000; credit Loss on Disposal of Copier, $1,000.
B
Credit Accumulated Depreciation of Copier, $99,000; credit Copier, $100,000; debit Loss on Disposal of Copier, $1,000.
C
Debit Accumulated Depreciation of Copier, $99,000; credit Copier, $100,000; debit Loss on Disposal of Copier, $1,000.
D
Credit Accumulated Depreciation of Copier, $99,000; debit Copier, $100,000; debit Loss on Disposal of Copier, $1,000.
Question 25 Explanation: 
Debit Accumulated Depreciation of Copier, $99,000; credit Copier, $100,000; debit Loss on Disposal of Copier, $1,000.
Question 26
If Sean’s Printing signs a contract on December 28 with Nonna's Lasagna to provide him with 1,000 going-out-of-business flyers, but the work will not be performed until January of the following year, where will this transaction be recorded on the December 31 balance sheet?
A
In the owner’s equity section
B
It will not appear on the balance sheet
C
In the liabilities section
D
In the assets section
Question 26 Explanation: 
It will not appear on the balance sheet
Question 27
Please mark the choice that would appear first under the assets category in a balance sheet:
A
Accounts receivable
B
Vehicles
C
Cash
D
Land
Question 27 Explanation: 
Cash would appear first.
Question 28
Please mark the contra account:
A
Marc Miller, Capital
B
Cash
C
Accumulated depreciation
D
Wage expense
Question 28 Explanation: 
Accumulated depreciation is considered a contra account.
Question 29
Please mark the statement you consider true regarding the difference between book value and shareholder’s equity:
A
Book value is an asset; shareholder’s equity is a liability.
B
Shareholder’s equity is an asset; book value is a liability.
C
Shareholder’s equity measures net assets.
D
Book value excludes intangibles such as goodwill.
Question 29 Explanation: 
Book value excludes intangibles such as goodwill.
Question 30
Please mark the most appropriate way of transaction recording if Nonna's Lasagna, which is not publicly traded, issues common stock in exchange for a new delivery truck:
A
At the stated value of the common stock.
B
At the fair market value of the delivery truck or the fair market value of the common stock, whichever can be determined more objectively.
C
At the fair market value of the delivery truck.
D
At the fair market value of the common stock.
Question 30 Explanation: 
At the fair market value of the delivery truck or the fair market value of the common stock, whichever can be determined more objectively.
Question 31
Nonna's Lasagna  shows the following balances in the books: Common Stock: $200,000 Paid in Capital in Excess of Par: $20,000 Retained Earnings: $95,000 Treasury Stock: $10,000 What is the total stockholder’s equity?  
A
$335,000
B
$220,000
C
$305,000
D
$295,000
Question 31 Explanation: 
The total stockholder’s equity is $305,000.
Question 32
The balance sheet will display a deferred credit as a/an:
A
owner's equality
B
asset
C
liability
D
none of the above
Question 32 Explanation: 
As a liability.
Question 33
These widgets were available in inventory for sale during the year. Here is the rise of the costs throughout the year: Beginning Inventory: 5 units at $51 Purchase 1: 12 units at $53 Purchase 2: 15 units at $54 Purchase 3: 10 units at $63 The ending inventory was 10 units. If the company uses the periodic system for inventory, what is the value of the inventory at year end using the average cost method?
A
$500
B
$510
C
$540
D
$555
Question 33 Explanation: 
The value of the inventory at the end of the year, using the average cost method, is $555.
Question 34
Amalfi's Best decided to purchase Nonna's Lasagna. Nonna's Lasagna has a book value of $550,000. Amalfi's Best paid $655,000 in stock and cash under the purchase method. How much goodwill would Amalfi's Best be required to put on its balance sheet?
A
$550,000
B
$655,000
C
$105,000
D
$155,000
Question 34 Explanation: 
The goodwill that Amalfi's Best would recognize on its balance sheet is $105,000.
Question 35
What is Amalfi's Best's debt to equity ratio if the Amalfi's Best owes  $100,000 in long term debt, $50,000 in short term loans, and has $1,000,000 in shareholder equity?
A
0.15
B
0.10
C
0.05
D
0.50
Question 35 Explanation: 
The debt to equity ratio is 0.15.
Question 36
How much cash is generated from the sale if $5,000,000 in 7% bonds are issued at 104 ½?
A
$1,040,000
B
$5,225,000
C
$5,000,000
D
$1,000,000
Question 36 Explanation: 
The generated cash is $5,225,000.
Question 37
If Amalfi's Best purchases a mozzarella producer for $150,000 and the owner retained 12.21%, what is the minority interest that is put on the balance sheet?
A
$21,581
B
$18,315
C
$150,000
D
$131,685
Question 37 Explanation: 
The minority interest is $18,315.
Question 38
Lizzy has the following accounts: Accounts Receivable: $10,000 Land: $20,000 Cash: $22,000 Intangible Assets: $12,500 Inventory: $33,000 Equipment: $99,000 Prepaid Expenses: $10,000 Please mark what is the amount of Lizzy’s quick assets:
A
$206,500
B
$65,000
C
$60,000
D
$32,000
Question 38 Explanation: 
The quick assets are total of $32,000.
Question 39
Please mark the financial statements which will be affected if Amalfi's Best notices an increase in sales and no increase in expenses: I balance sheet II income statement III statement of retained earnings
A
I
B
I and II
C
III
D
I, II, and III
Question 39 Explanation: 
I, II, and III
Question 40
Don’s Nachos purchases land and finances that purchase by issuing a long-term bond at par. Dilbert does not have to pay interest......for at least 12 months according to the terms. This purchase will lead to:
A
Increase in net income
B
Increase in assets
C
Decrease in liabilities
D
Decrease in assets
Question 40 Explanation: 
The purchase will lead to an increase in assets.
Question 41
Please mark the term(s) which refer to the principal amount of the bond that the issuing corporation will pay the bondholders on the bond’s maturity date:
A
Maturity value
B
Par value
C
Face value
D
All of the above
Question 41 Explanation: 
All of the above
Question 42
Please mark what would be the total that an issuing corporation would pay to a bondholder in the following 10 years if the corporation issues a 10-year $100,000 8% bond:
A
$80,000
B
$180,000
C
$140,000
D
$200,000
Question 42 Explanation: 
$180,000
Question 43
Quicksy Pups had a total of 100,000 shares of common stock issued. In March, they reacquired 20,000 shares and did not retire them. Please mark how many shares of outstanding stock they have:
A
100,000
B
20,000
C
80,000
D
120,000
Question 43 Explanation: 
80,000 shares of outstanding stock.
Question 44
Please mark the book value of each share of stock, if Quicksy Pups has $1,000,000 in assets after purchasing Softy Cats, along with $500,000 in liabilities:
A
$1,000
B
$500,000
C
$2,000
D
$500
Question 44 Explanation: 
$1,000
Question 45
Please mark the book value of the share of stock if a share of cumulative preferred stock has a call price of $95 and has had four years of dividends of $5 each:
A
$95
B
$115
C
$100
D
$105
Question 45 Explanation: 
$115
Question 46
The statement of cash flow reports are used for: I Investing activities II Financing activities III Operating activities IV Supplemental activities
A
I
B
II
C
III
D
IV
E
I, II, III, and IV
Question 46 Explanation: 
I, II, III, and IV
Question 47
Please mark the transactions which have a negative impact on cash:
A
Proceeds from selling equipment used in the business
B
A loss on selling equipment used in the business
C
Dividends declared and paid
D
An increase in income taxes payable
Question 47 Explanation: 
Dividends declared and paid have a negative impact on cash.
Question 48
Please mark the section on the statement of cash flows in which one will report equipment used by a corporation in its operations and sold at a loss:
A
Financing
B
Operating
C
Investing
D
None of the above
Question 48 Explanation: 
In the operating section.
Question 49
Please mark the section on the statement of cash flows in which the purchase of treasury stock will be shown:
A
Operating
B
Financing
C
Investing
D
It is not reported on the statement of cash flows.
Question 49 Explanation: 
The purchase of treasury stock would be reported under the financing section.
Question 50
Please mark the difference between a balance sheet and a trial balance:
A
A trial balance is used to close accounts, a balance sheet to open accounts.
B
A trial balance is used at the end of the month and a balance sheet at the end of the year.
C
A trial balance is used to determine profit, a balance sheet to determine net assets.
D
A trial balance is an internal document, a balance sheet is an external document.
Question 50 Explanation: 
A trial balance is an internal document, a balance sheet is an external document.
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