Ch8. US CPA Final Mock Exam (20 Questions) & Post-Exam Career Roadmap

CPA Quick Reference

Section	Key Facts
FAR GAAP vs. IFRS	LIFO: GAAP OK, IFRS forbidden
FAR ASC 606	5-step: Identify contract → PO → Price → Allocate → Recognize
AUD Audit Risk	AR = IR × CR × DR
AUD Opinions	Unmodified, Qualified, Adverse, Disclaimer
REG C-Corp rate	21% flat rate (2018+)
REG Standard Deduction	Single $14,600 / MFJ$ 29,200 (2024)

20-Question Mock Exam

Q1 (FAR). Which inventory method is NOT permitted under US GAAP? A) FIFO B) Weighted average C) LIFO D) Specific identification E) None — all are permitted

Q2 (FAR). Under ASC 842, how does a lessee account for an operating lease? A) No balance sheet recognition B) Recognize ROU asset and lease liability
C) Recognize only interest expense D) Recognize only depreciation

Q3 (FAR). The General Fund in governmental accounting is used for: A) Long-term capital projects B) Debt service payments
C) General operating activities D) Special restricted purposes

Q4 (FAR). Step 3 of the ASC 606 five-step revenue model is: A) Identify the contract B) Identify performance obligations
C) Determine the transaction price D) Allocate the transaction price

Q5 (AUD). Audit risk formula: A) AR = IR + CR + DR B) AR = IR × CR × DR
C) AR = (IR+CR)/DR D) AR = IR × DR

Q6 (AUD). An auditor who also prepares the client’s financial statements faces what independence threat? A) Self-interest B) Self-review C) Advocacy D) Familiarity

Q7 (AUD). Requesting bank balance confirmation from a third party is: A) Inquiry B) Observation C) Confirmation D) Inspection

Q8 (AUD). Financial statements with material and pervasive misstatements receive: A) Unmodified B) Qualified C) Adverse D) Disclaimer

Q9 (REG). The 2024 standard deduction for a Single filer is: A) $12,400 B)$ 13,850 C) $14,600 D)$ 15,000

Q10 (REG). The C-Corporation federal income tax rate under TCJA is: A) 15% B) 21% C) 25% D) 35%

Q11 (REG). Partnership income is taxed: A) At the entity level at 21% B) As pass-through income to partners
C) Only when distributed D) At the partner’s election

Q12 (REG). Which is NOT a required element for a valid contract? A) Offer B) Acceptance C) Consideration D) Written form

Q13 (FAR). Under US GAAP, research and development costs are: A) Capitalized as intangible assets B) Development phase only is capitalized
C) Expensed immediately in the period incurred D) Amortized over product life

Q14 (FAR). Under US GAAP, goodwill is: A) Amortized over 40 years B) Subject to annual impairment testing
C) Expensed immediately D) Written off when the acquired entity is sold

Q15 (AUD). PCAOB auditing standards apply to audits of: A) All US companies B) Publicly registered companies
C) Non-profit organizations D) Government entities

Q16 (REG). The default tax treatment of an LLC is: A) C-Corp taxation B) Pass-through to members C) Exempt from taxation D) 20% flat rate

Q17 (FAR). Under US GAAP, investment property is measured using: A) Fair value method only B) Cost method only
C) Either fair value or cost D) Net realizable value

Q18 (AUD). Analytical procedures are most appropriately used in: A) Tests of controls only B) Planning and final review stages
C) Physical asset inspections D) Confirmation procedures

Q19 (REG). S-Corporation eligibility does NOT allow: A) US domestic corporation B) Maximum 100 shareholders
C) Only US citizen/resident shareholders D) Multiple classes of stock

Q20 (FAR). Under the accrual basis of accounting: A) Revenue recognized when cash is received
B) Revenue recognized when earned; expenses when incurred
C) Both based on cash flows D) Management determines timing

Answer Key

Q	Answer	Explanation
1	E	All four methods (FIFO, LIFO, weighted avg, specific ID) are permitted under GAAP. LIFO is prohibited under IFRS.
2	B	ASC 842: operating leases → ROU asset + lease liability on balance sheet
3	C	General Fund = primary fund for general government operations
4	C	ASC 606 Step 3: Determine the transaction price
5	B	AR = IR × CR × DR (multiplication)
6	B	Preparing AND auditing = self-review threat
7	C	Bank balance request = confirmation procedure
8	C	Material AND pervasive = Adverse opinion
9	C	2024 Single standard deduction = $14,600
10	B	C-Corp: 21% flat federal rate (Tax Cuts and Jobs Act 2017)
11	B	Partnership: pass-through (Form 1065 → K-1 to partners)
12	D	Written form NOT required for all contracts (oral contracts are valid)
13	C	GAAP: R&D expensed immediately (IFRS allows development cost capitalization)
14	B	Goodwill: no amortization; annual impairment test (ASC 350)
15	B	PCAOB governs audits of publicly registered companies (SOX 2002)
16	B	LLC default = pass-through to members
17	B	US GAAP investment property: cost model only (unlike IFRS)
18	B	Analytical procedures: planning stage and final review
19	D	S-Corp = only one class of stock allowed
20	B	Accrual basis: revenue earned when performance complete; expense when incurred

Post-Exam: CPE and License Maintenance

Most states: 40–80 CPE hours every 2 years
Ethics hours typically required (2–4 hours minimum)
AICPA membership is voluntary but beneficial for professional development

Final Career Roadmap

Milestone	Timeline
Pass all 4 CPA sections	14–18 months
Complete 150 credit hours	Concurrent or prior
Accumulate 1–2 years experience	Post-exam or concurrent
Pass AICPA Ethics Exam	After exam passage
Apply for CPA license	After all requirements met
Maintain CPE	Every 2 years

US CPA Exam Guide series complete! Best of luck on your journey to becoming a CPA!