Wiley CPA Exam Review 2013, Financial Accounting and Reporting

1377 Pages·2012·20.82 MB·English

by  Whittington, O. Ray

CONTENTS

Preface

About the Authors

About the Contributor

Introduction

Chapter 1: Beginning Your CPA Review Program

General Comments on the Examination

Attributes of Examination Success

Purpose and Organization of This Review Textbook

Self-Study Program

Planning For The Examination

Chapter 2: Examination Grading

Chapter 3: The Solutions Approach

Chapter 4: Taking The Examination

Examination Strategies

Chapter 5: Exam Content Overview

Aicpa Content and Skills Specification

Researching Fasb Accounting Standards

Financial Accounting and Reporting

Module 9: Basic Theory and Financial Reporting

Module 10: Inventory

Module 11: Fixed Assets

Module 12: Monetary Current Assets and Current Liabilities
Module 13: Present Value

Module 14: Deferred Taxes

Module 15: Stockholders’ Equity

Module 16: Investments

Module 17: Statement of Cash Flows

Module 18: Business Combinations and Consolidations

Module 19: Derivative Instruments and Hedging Activities

Module 20: Miscellaneous

Module 21: Governmental (State and Local) Accounting

Module 22: Not-for-Profit Accounting

ARB, APB, and FASB Pronouncements

Appendices

Appendix A: Financial Accounting and Reporting Sample Examination

Appendix B: Sample Financial Accounting and Reporting Testlet Released by the
AICPA

Appendix C: 2012 Released AICPA Questions for Financial Accounting and
Reporting

Index

The following items, copyright © by the American Institute of Certified Public
Accountants, Inc., are reprinted (or adapted) with permission.

1. Material from Uniform CPA Examination Questions and Answers, 1978
through 2000.

2. Information for Uniform CPA Examination Candidates, Board of Examiners,
2000.

3. Material from the Certified Internal Auditor Examination, Copyright © 1994
through 1997 by the Institute of Internal Auditors, Inc., are reprinted and/or adapted by
permission.

4. Material from the Certified Management Accountant Examinations, Copyright
© 1993 through 1997 by the Institute of Certified Management Accountants are reprinted
and/or adapted by permission.

5. Example financial statements from Industry Audit Guides: Audits of Colleges
and Universities, Audits of Voluntary Health and Welfare Organizations, and Audits of
Providers of Health Care Services.

6. Example of Statement of Activity from SOP 78-10.

Reproduction and adaptation of pronouncements, copyright © Financial
Accounting Standards Board, Norwalk, Connecticut 06856-5116, with permission.

Reproduction of “Combined Statement of Revenues, Expenditures, and Changes
in Fund Balances–All Governmental Fund Types and Expendable Trust Funds,”
copyright © Governmental Accounting Standards Board, Norwalk, Connecticut
06856-5116, with permission.

Statement of changes in fund balances for an educational institution from College
and University Business Administration with permission of the National Association of
College and University Business Officers.

Copyright © 2013 by John Wiley & Sons, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey

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PREFACE

DON’T FORGET TO VISIT OUR WEBSITE AT WWW.WILEY.COM/CPA
FOR SUPPLEMENTS AND UPDATES.
Passing the CPA exam upon your first attempt is possible! The Wiley CPA
Examination Review preparation materials provide you with the necessary materials (visit
our website at www.wiley.com/cpa for more information). It’s up to you to add the hard
work and commitment. Together we can beat the pass rate on each section of about 45%.
All Wiley CPA products are continuously updated to provide you with the most
comprehensive and complete knowledge base. Choose your products from the Wiley
preparation materials and you can proceed confidently. You can select support materials
that are exam-based and user-friendly. You can select products that will help you pass!
Remaining current is one of the keys to examination success. Here is a list of
what’s new in this edition of the Wiley CPA Examination Review Financial
Accounting and Reporting text.

The new AICPA Content Specification Outlines on Financial Accounting and
Reporting for the computerized CPA Examination beginning in 2012
AICPA questions released in 2012
The new task-based simulations
Complete coverage of standards, especially The newest FASB accounting
standards International accounting standards SEC reporting requirements
The objective of this work is to provide you with the knowledge to pass the
Financial Accounting and Reporting portion of the Uniform Certified Public Accounting
(CPA) Exam. The text is divided up into fourteen areas of study called modules. Each
module contains written text with discussion, examples, and demonstrations of the key
exam concepts. Following each text area, actual American Institute of Certified Public
Accountants (AICPA) unofficial questions and answers are presented to test your
knowledge. We are indebted to the AICPA for permission to reproduce and adapt
examination materials from past examinations. Author constructed questions and
simulations are provided for new areas or areas that require updating. All author
constructed questions and simulations are modeled after AICPA question formats. The
multiple-choice questions are grouped into topical areas, giving candidates a chance to
assess their areas of strength and weakness. Selection and inclusion of topical content is
based upon current AICPA Content Specification Outlines. Only testable topics are
presented. If the CPA exam does not test it, this text does not present it.
The CPA exam is one of the toughest exams you will ever take. It will not be easy.
But if you follow our guidelines and focus on your goal, you will be thrilled with what
you can accomplish.
Ray Whittington

November 2012
ABOUT THE AUTHORS

Ray Whittington, PhD, CPA, CMA, CIA, is the dean of the Driehaus College of
Business at DePaul University. Prior to joining the faculty at DePaul, Professor
Whittington was the Director of Accountancy at San Diego State University. From 1989
through 1991, he was the Director of Auditing Research for the American Institute of
Certified Public Accountants (AICPA), and he previously was on the audit staff of
KPMG. He previously served as a member of the Auditing Standards Board of the
AICPA and as a member of the Accounting and Review Services Committee and the
Board of Regents of the Institute of Internal Auditors. Professor Whittington has
published numerous textbooks, articles, monographs, and continuing education courses.
Patrick R. Delaney, deceased, was the dedicated author and editor of the Wiley
CPA Exam Review books for twenty years. He was the Arthur Andersen LLP Alumni
Professor of Accountancy and Department Chair at Northern Illinois University. He
received his PhD in Accountancy from the University of Illinois. He had public
accounting experience with Arthur Andersen LLP and was coauthor of GAAP:
Interpretation and Application, also published by John Wiley & Sons, Inc. He served as
Vice President and a member of the Illinois CPA Society’s Board of Directors, and was
Chairman of its Accounting Principles Committee; was a past president of the Rockford
Chapter, Institute of Management Accountants; and had served on numerous other
professional committees. He was a member of the American Accounting Association,
American Institute of Certified Public Accountants, and Institute of Management
Accountants. Professor Delaney was published in The Accounting Review and was a
recipient of the Illinois CPA Society’s Outstanding Educator Award, NIU’s Excellence in
Teaching Award, and Lewis University’s Distinguished Alumnus Award. He was
involved in NIU’s CPA Review Course as director and instructor.
ABOUT THE CONTRIBUTOR

Natalie T. Churyk, PhD, CPA, is the Caterpillar Professor of Accountancy at
Northern Illinois University. She teaches in the undergraduate and L.M.A.S. programs as
well as developing and delivering continuing professional education in Northern Illinois
University’s CPA Review program. Professor Churyk has published in professional and
academic journals. She serves on state and national committees relating to education and
student initiatives and is a member of several editorial review boards. Professor Churyk is
a coauthor on two textbooks: Accounting and Auditing Research: Tools and Strategies
and Mastering the Codification and eIFRS: A Case Approach.
INTRODUCTION

To maximize the efficiency of your review program, begin by studying (not
merely reading) chapters 1 through 5 of this volume. They have been carefully organized
and written to provide you with important information to assist you in successfully
completing the Financial Accounting and Reporting section of the CPA exam. Beyond
providing a comprehensive outline to help you organize the material tested on the
Financial Accounting and Reporting section of the exam, these chapters will assist you in
organizing a study program to prepare for the Financial Accounting and Reporting
portion. Self-discipline is essential.
Chapter 1: Beginning Your CPA Review Program

Chapter 2: Examination Grading

Chapter 3: The Solutions Approach

Chapter 4: Taking the Examination

Chapter 5: Exam Content Overview