CPA FAR Simulation Examples
CPA Exam candidates studying for the FAR section of the CPA exam should be prepared for a simulation that focuses on adjustments to inventory. The simulation would have you start with the unadjusted inventory balance from the trial balance and determine what adjusting journal entries need to be recorded. Accounting departments would perform this type of evaluation at the end of the period to determine what the final adjusted inventory balance would be.
The visual below illustrates how a company would take the unadjusted trial balance, record adjusting entries, and that prepares the final adjusted trial balance.
Adjusting journal entries could relate to inventory purchases in-transit, customer orders in-transit, consigned inventory, and results of the physical inventory count.
Candidates would likely have to prepare a rollforward and understand whether the adjusting entries increase or decrease inventory. Below is an example of the rollforward that was prepared for the inventory adjustment simulation in the Universal CPA Review platform.
The YouTube video below is from the Universal CPA Review course. The video explains the instructions, briefly reviews the exhibits, and then walks the candidate through the explanation in a step-by-step manner. Universal CPA Review is the only CPA review course with explanation videos that use visual learning for every MCQ and simulation.
Back To All Questions
You might also be interested in...
-
CECL Excel Workbook
If you would like to use the Excel workbook that was used to create the Universal CPA lecture on CECL for debt securities, please click the link below to download the Excel workbook: CECL Calculation workbook (Universal CPA Review)
-
Journal Entry for Direct Materials Variance
Journal Entry for Direct Materials Variance In the current year, Mission Burrito budgeted 6,000 pounds of production and actually used 4,000 pounds. Material cost was budgeted for $5 per pound and the actual cost was $8 per pound. What would the debit or credit to the direct material efficiency variance account be for the current...
-
Understanding Variance Analysis
Variance Analysis Variance analysis is a method for companies to compare its actual performance vs its budgeted amount for that cost measurement (related to the flexible budget). The differences between the standard (budgeted) amount of cost and the actual amount that the organization incurs is referred to as a variance. By analyzing variances, the company...
CECL Excel Workbook
If you would like to use the Excel workbook that was used to create the Universal CPA lecture on CECL for debt securities, please click the link below to download the Excel workbook: CECL Calculation workbook (Universal CPA Review)
Journal Entry for Direct Materials Variance
Journal Entry for Direct Materials Variance In the current year, Mission Burrito budgeted 6,000 pounds of production and actually used 4,000 pounds. Material cost was budgeted for $5 per pound and the actual cost was $8 per pound. What would the debit or credit to the direct material efficiency variance account be for the current...
Understanding Variance Analysis
Variance Analysis Variance analysis is a method for companies to compare its actual performance vs its budgeted amount for that cost measurement (related to the flexible budget). The differences between the standard (budgeted) amount of cost and the actual amount that the organization incurs is referred to as a variance. By analyzing variances, the company...
