CPA Exam practice test

During planning, an auditor sets a lower materiality threshold for transactions with related parties than for routine transactions. This decision most directly reflects the auditor's assessment of:

An auditor observes the client's year-end physical inventory count. This procedure provides assurance primarily about which assertion?

A company buys equipment for 50,000 dollars with a 5,000 dollar salvage value and a 5-year useful life. Using straight-line depreciation, what is the annual depreciation expense?

Under accrual accounting, a company performs services in December but does not bill or collect until January. In December the company should recognize:

A company's current assets are 300,000 dollars and current liabilities are 150,000 dollars. What is the current ratio?

For a single individual taxpayer in the current year, which of the following is generally an above-the-line deduction used to arrive at adjusted gross income?

A taxpayer sells stock held for 18 months at a gain. For federal income tax purposes, this gain is classified as:

Which business entity generally provides limited liability to all owners while allowing income to pass through to the owners without an entity-level federal income tax?

A company's weighted average cost of capital is most directly used to:

A company has fixed costs of 120,000 dollars, a selling price of 40 dollars per unit, and variable cost of 25 dollars per unit. How many units must it sell to break even?

An auditor sends written requests directly to a client's customers asking them to verify account balances. This procedure is called:

A company receives 12,000 dollars on October 1 for a one-year service contract beginning that date. At December 31, the year-end adjusting entry should recognize revenue of:

Under the allowance method for uncollectible accounts, the entry to record estimated bad debt expense at year-end includes a:

A CPA preparing a client's tax return discovers an error in a prior-year return the CPA did not prepare. Under professional standards, the CPA should:

An effective internal control environment relies on segregation of duties. Which combination of duties should be assigned to different employees?

The component of audit risk that the auditor can directly influence by changing the nature, timing, and extent of substantive procedures is:

Which financial statement reports a company's revenues and expenses over a period of time?

A parent provides more than half the support of a 19-year-old child who is a full-time student and earns 4,000 dollars from a part-time job. For the parent to claim the child as a qualifying child dependent, a key test satisfied here is the:

A company is evaluating two mutually exclusive projects of equal cost. Project A has a higher net present value than Project B at the required rate of return. Based solely on this information, the company should: