CPA Exam Questions & Answers 2026 (1–10)

Question 1

The financial accounts of Lager Corporation are prepared using IFRS. Of the following, which information must be shown on the income statement?

TheoryPractice · Accepted Answer

Finance costs, tax expense, and income.. The income statement can be made by listing expenses either by type or by function, thus this is the right answer. Income, finance expenses, the equity method portion of profits and losses, tax expense, discontinued operations, profit or loss, noncontrolling interests in profits and losses, and net profit (loss) attributable to parent equity holders are the bare minimum disclosures that must be made on the income statement.

Question 2

Which of the following is NOT an example of Deferred Inflows of Resources?

TheoryPractice · Accepted Answer

Deferred loss from sale and leaseback. Examples of Deferred Inflows of Resources include grant amounts received in advance of meeting timing requirements, deferred amounts from refunding debt (credits), and proceeds from sale of future revenue. Other samples include deferred gain from a sale-leaseback transaction, positive fair value of government hedge of a future transaction, and advance of revenue from imposed non-exchange transactions.

Question 3

Au auditor would express an unmodified opinion with an emphasis-of-matter paragraph added to the auditor's report for a ________.

TheoryPractice · Accepted Answer

justified change in accounting principle. An auditor would express an unmodified opinion with an emphasis-of-matter paragraph added to the auditor's report for a justified change in accounting principle.  The emphasis-of-matter paragraph should be placed after the opinion paragraph.  A material weakness must be reported to management and those charged with governance, but it would not be disclosed in an emphasis-of-matter paragraph added to an otherwise unmodified opinion.

Question 4

According to the cost recovery method of accounting, gross profit on an installment sale is recognized in income ________.

TheoryPractice · Accepted Answer

After cash collections equal to the cost of sales have been received. Installment methods of recognizing revenue are appropriate only when "collection of the sale price is not reasonably assured."  Under the cost recovery method, gross profit is deferred and recognized only when the cumulative receipts exceed the cost of the asset sold.

Question 5

Which of the following is true regarding the difference between book value and shareholder’s equity?

TheoryPractice · Accepted Answer

Book value excludes intangibles such as goodwill.. Book value differs from shareholder’s equity in that book value excludes intangibles, such as goodwill.

Key Takeaway: Shareholder’s equity is Total Assets − Total Liabilities. Book value is the net tangible assets of a corporation and does not include items such as goodwill, patents, etc., that are considered intangible. The terms are not synonymous.

Question 6

Which of the following special reports provides negative assurance?

TheoryPractice · Accepted Answer

Auditor's report on compliance with aspects of contractual agreements. Negative assurance is provided in reports on compliance with aspects of contractual agreements and reports on regulatory requirements related to audited financial statements.  Saying, "We are not aware of any instances of noncompliance" is considered giving negative assurance.  Cash basis, tax basis, and other non-GAAP reports provide positive rather than negative assurance.  The emphasis-of-matter paragraph in the report indicates that the financial statements (elements, accounts, items) were prepared in accordance with the applicable special purpose framework (positive assurance).

Question 7

Receivables turnover measures which of the following?

TheoryPractice · Accepted Answer

the number of times per year the balance of receivables is collected. Receivables turnover measures the number of times per year the balance of receivables is collected.  This is a very important measure of the efficiency with which management is managing accounts receivable.

Question 8

Use the below facts to calculate basic EPS for ABC Corp:

Net Income $300,000

Stockholders Equity $500,000

Preferred Dividends $30,000

Weighted average common shares outstanding 200,000

TheoryPractice · Accepted Answer

1.35. Basic EPS = Income Available to common shareholders / Weighted average number of common shares outstanding

Income available to common shareholders = Net Income - Preferred Dividends

Basic EPS = (300,000-30,000)/200,000 = 1.35

Question 9

Calculate the amount of depreciation in year 3 of the assets useful life assuming the following facts.

Cost of asset $11,000
Salvage Value $1,000
Useful life is four years
Sum of years digit method is used to calculate

TheoryPractice · Accepted Answer

2,000. The sum of years digits is calculated based on the useful life (1+2+3+4) = 10

The depreciable base is Cost of asset - salvage value (11,000-1,000) = 10,000

Depreciation Schedule:

1st year (4/10) x 10,000 = 4,000

2nd year (3/10) x 10,000 = 3,000

3rd year (2/10) x 10,000 = 2,000

4th year (1/10) x 10,000 = 1,000.

Question 10

On January 1, year 1, the first day of business, Kate Company spent $115,000 on a machine. The machine's price at the end of the year was $125,000. The machine depreciates using the straight-line method, has a five-year life, and no salvage value.

What is the amount of the current cost depreciation expenditure that would appear in supplemental current cost financial statements for the year ended December 31, year 1?

TheoryPractice · Accepted Answer

$24,000. The average current cost of the asset during the term of usage should be used to calculate depreciation. This machine will typically cost $120,000 [($115,000 + $125,000) ÷ 2] at year one's current prices. Therefore, year 1 depreciation expense is $24,000 ($120,000 ÷ 5-year useful life).

CPA Exam Questions & Answers 2026 (1–10)

More CPA practice questions

Free practice here. Timed mocks when you are ready.