100+ Free CPA FAR Practice Questions

Pass your AICPA CPA Exam — Financial Accounting & Reporting (FAR) exam on the first try — instant access, no signup required.

✓ No registration✓ No credit card✓ No hidden fees✓ Start practicing immediately

~42% Pass Rate

100+ Questions

100% Free

1 / 100

Question 1

Score: 0/0

Under the FASB Conceptual Framework, which of the following is a fundamental qualitative characteristic of useful financial information?

Comparability

Faithful representation

Verifiability

Timeliness

to track

2026 Statistics

Key Facts: CPA FAR Exam

~42%

Pass Rate

AICPA 2024-2025 cumulative (lowest of CPA cores)

4 hours

Exam Length

AICPA FAR Blueprint

50 MCQ + 7 TBS

Question Format

AICPA (50/50 score weighting)

75/99

Passing Score

AICPA scaled scoring

~$359

Section Fee

NASBA national rate (2024+)

30 months

Credit Window

NASBA (extended from 18 months in 2024)

FAR has the lowest pass rate (~42%) of the CPA core sections. The 4-hour exam mixes 50 multiple-choice questions and 7 task-based simulations weighted 50/50. Candidates pay ~$359 per section (NASBA national rate). Section credit was extended to 30 months in 2024. Most candidates need 100-150 hours to prepare, with heavy focus on ASC 606, ASC 842, and consolidations.

Sample CPA FAR Practice Questions

Try these sample questions to test your CPA FAR exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under the FASB Conceptual Framework, which of the following is a fundamental qualitative characteristic of useful financial information?

A.Comparability

B.Faithful representation

C.Verifiability

D.Timeliness

Explanation: Per FASB Concepts Statement No. 8, the two FUNDAMENTAL qualitative characteristics are relevance and faithful representation. Comparability, verifiability, timeliness, and understandability are ENHANCING qualitative characteristics that make useful information more useful but cannot make information useful by themselves.

2Which financial statement reports an entity's revenues, expenses, gains, and losses for a period of time?

A.Balance sheet

B.Statement of cash flows

C.Income statement

D.Statement of stockholders' equity

Explanation: The income statement (statement of operations) reports performance over a period of time through revenues, expenses, gains, and losses, ultimately producing net income. The balance sheet is a point-in-time statement, the cash flow statement reports cash inflows/outflows, and the equity statement reconciles equity changes.

3Per ASC 606, the five-step revenue recognition model begins with which step?

A.Identify the performance obligations

B.Determine the transaction price

C.Identify the contract with a customer

D.Allocate the transaction price

Explanation: ASC 606's five steps are: (1) Identify the contract with a customer; (2) Identify performance obligations; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations; (5) Recognize revenue when (or as) the entity satisfies a performance obligation.

4On January 1, Year 1, Lion Co. entered an operating lease with a 5-year term and annual payments of $10,000 due at year-end. The implicit rate is 6%, and the present value of the lease payments is $42,124. What is the right-of-use (ROU) asset recorded at lease commencement?

A.$42,124

B.$50,000

C.$10,000

D.$45,000

Explanation: Under ASC 842, at commencement the lessee records a lease liability equal to the present value of remaining lease payments ($42,124) and an ROU asset equal to the lease liability adjusted for prepayments, lease incentives, and initial direct costs. With no such adjustments, ROU = $42,124.

5Under ASC 842, a lessee classifies a lease as a finance lease if any of the following criteria are met EXCEPT:

A.The lease transfers ownership of the asset to the lessee

B.The lease grants a purchase option the lessee is reasonably certain to exercise

C.The lease term is for the major part of the asset's remaining economic life

D.The lessee has the option to extend the lease for one additional year

Explanation: ASC 842 finance lease criteria (any one): (1) ownership transfers; (2) purchase option reasonably certain; (3) lease term is major part of economic life (~75%); (4) PV of payments is substantially all (~90%) of fair value; (5) asset is so specialized it has no alternative use. A simple one-year extension option is not a classification criterion.

6Which inventory method is NOT permitted under U.S. GAAP?

A.LIFO (Last-In, First-Out)

B.FIFO (First-In, First-Out)

C.Weighted average

D.Base stock method

Explanation: U.S. GAAP permits FIFO, LIFO, weighted average, and specific identification. The base stock method is NOT permitted under GAAP. Note: LIFO is permitted under GAAP but prohibited under IFRS.

7Tiger Co. uses the LIFO inventory method. At year-end, inventory cost is $100,000 and net realizable value is $95,000. Replacement cost is $92,000 and NRV less normal profit is $88,000. At what value should the inventory be reported?

A.$100,000

B.$95,000

C.$92,000

D.$88,000

Explanation: Under U.S. GAAP, LIFO and retail inventory method use lower of cost or MARKET. Market is replacement cost, but bounded by ceiling (NRV = $95,000) and floor (NRV - normal profit = $88,000). Replacement cost $92,000 falls within the range, so market = $92,000. Compare to cost $100,000; lower is $92,000.

8Bear Co. (a non-LIFO/non-retail entity) has inventory with cost of $50,000 and net realizable value of $45,000. At what value is inventory reported?

A.$50,000

B.$45,000

C.$47,500

D.Cannot be determined

Explanation: For inventory measured under methods OTHER than LIFO or retail (e.g., FIFO, weighted average), ASC 330 requires lower of cost or NET REALIZABLE VALUE (NRV). NRV is estimated selling price less reasonable costs of completion and disposal. NRV ($45,000) < cost ($50,000), so inventory is written down to $45,000.

9Eagle Co. purchased equipment for $100,000 with a 5-year life and $10,000 salvage value. Using the double-declining-balance method, what is depreciation expense in Year 2?

A.$40,000

B.$24,000

C.$36,000

D.$18,000

Explanation: DDB rate = 2/5 = 40%. Year 1: $100,000 × 40% = $40,000 (no salvage in DDB calc). Book value end of Year 1 = $60,000. Year 2: $60,000 × 40% = $24,000. Salvage value is only used as a floor — depreciation stops once book value reaches salvage.

10Under ASC 360, an impairment loss on a long-lived asset held and used is recognized when:

A.Fair value is less than carrying amount

B.Carrying amount exceeds undiscounted future cash flows

C.The asset has not been used in operations for 12 months

D.Replacement cost is less than carrying amount

Explanation: ASC 360 uses a two-step impairment test: (1) Recoverability test — impairment exists only if carrying amount exceeds undiscounted expected future cash flows. (2) Measurement — if step 1 fails, impairment loss = carrying amount minus fair value. Note: under U.S. GAAP, impairments of long-lived assets held and used CANNOT be reversed.

About the CPA FAR Exam

FAR (Financial Accounting & Reporting) is the most content-heavy core section of the CPA Exam under the CPA Evolution model. The 4-hour exam tests US GAAP financial reporting at three levels: Area I — Financial Reporting (30-40%) including the FASB Conceptual Framework, financial statements, segment and interim reporting, governmental accounting (GASB), and not-for-profit (ASC 958); Area II — Select Balance Sheet Accounts (30-40%) covering receivables (CECL), inventory, PP&E, intangibles, investments, bonds, and equity; Area III — Select Transactions (25-35%) with revenue recognition (ASC 606), leases (ASC 842), business combinations (ASC 805), consolidations, deferred taxes (ASC 740), pensions (ASC 715), and stock-based compensation (ASC 718).

Questions

57 scored questions

Time Limit

4 hours

Passing Score

75 (scaled 0-99)

Exam Fee

~$359 per section (AICPA / NASBA / Prometric)

CPA FAR Exam Content Outline

30-40%

Area I: Financial Reporting

FASB Conceptual Framework (Concepts Statement No. 8), financial statement presentation (income statement, balance sheet, cash flows ASC 230, equity, comprehensive income), discontinued operations (ASC 205-20), accounting changes and error corrections (ASC 250), subsequent events (ASC 855), segment reporting (ASC 280; ASU 2023-07 enhancements), interim reporting (ASC 270), SEC reporting (Form 10-K, 10-Q, Regulation S-X), state and local government accounting (GASB 34, GASB 54 fund balance, encumbrances, modified accrual), and not-for-profit accounting (ASC 958)

30-40%

Area II: Select Balance Sheet Accounts

Cash and cash equivalents, trade and other receivables (CECL ASC 326), inventory (FIFO/LIFO/weighted-average; LCM for LIFO/retail vs. LCNRV for others), property/plant/equipment (depreciation methods, impairment ASC 360, ARO ASC 410, held-for-sale), investments and financial instruments (AFS debt, equity securities at FV through NI per ASU 2016-01, equity method ASC 323, fair value option ASC 825), intangibles and goodwill (ASC 350, ASU 2017-04), payables and accrued liabilities, bonds and long-term debt (effective interest, debt issuance costs, convertibles per ASU 2020-06), equity (par stock, treasury, dividends, EPS), commitments and contingencies (ASC 450)

25-35%

Area III: Select Transactions

Revenue recognition (ASC 606 five-step model, performance obligations, over-time vs. point-in-time, principal-vs-agent, contract modifications, right of return), leases for lessees and lessors (ASC 842 finance vs. operating, ROU and lease liability, short-term lease election, sale-leaseback), business combinations (ASC 805 acquisition method, contingent consideration, acquisition-related costs), consolidations (ASC 810, VIE primary beneficiary, NCI at fair value, loss of control), income taxes (ASC 740 temporary vs. permanent differences, valuation allowance, UTBs, NOL post-TCJA, ASU 2023-09 disclosures), defined benefit pensions and OPEB (ASC 715 PBO, funded status, ASU 2017-07 cost presentation), stock-based compensation (ASC 718; nonemployee awards per ASU 2018-07), derivatives and hedging (ASC 815), foreign currency (ASC 830), nonmonetary exchanges, restructuring (ASC 420), troubled debt restructurings

How to Pass the CPA FAR Exam

What You Need to Know

Passing score: 75 (scaled 0-99)
Exam length: 57 questions
Time limit: 4 hours
Exam fee: ~$359 per section

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

CPA FAR Study Tips from Top Performers

1Master ASC 606's five-step revenue model — identify contract, identify performance obligations, determine transaction price, allocate to obligations, recognize when satisfied

2Drill ASC 842 lease classification: 5 lessee criteria (ownership transfer, purchase option, major part of life ~75%, substantially all FV ~90%, specialized asset)

3Learn deferred tax mechanics cold: temporary differences create DTAs/DTLs; permanent differences only affect ETR; valuation allowance applies if MLTN unrealizable

4Practice EPS calculations: basic = (NI − preferred div) / WA shares; treasury stock method for options; if-converted for convertibles; remember anti-dilution test

5Memorize CECL (ASC 326) — lifetime expected losses for amortized cost; AFS debt uses an allowance limited to FV vs. amortized cost gap that CAN be reversed

6Know GASB 34 government-wide vs. fund accounting: governmental funds use modified accrual + current financial resources; government-wide uses accrual + economic resources

7Study GASB 54's five fund balance categories: Nonspendable, Restricted, Committed, Assigned, Unassigned — only General Fund can have positive Unassigned

8For not-for-profits: net assets are 'with donor restrictions' or 'without donor restrictions' (post-ASU 2016-14); expenses must be reported by function AND nature

Frequently Asked Questions

What is the pass rate on the CPA FAR exam?

FAR has the LOWEST pass rate of the three CPA core sections — approximately 42% (AICPA 2024-2025 cumulative). It is widely considered the most content-heavy section. Compare to AUD ~48% and REG ~63%. Many candidates take FAR first to maximize the 30-month rolling credit window in case of a retake.

How is the FAR exam structured?

FAR is 4 hours long with 50 multiple-choice questions delivered in two MCQ testlets and 7 task-based simulations (TBS) delivered in three TBS testlets. The MCQ and TBS portions are weighted 50/50 toward your final scaled score (0-99, with 75 required to pass). Multistage testing adjusts MCQ difficulty within the section.

How much does the FAR section cost?

Effective 2024, NASBA's national exam fee is approximately $359 per section. Add jurisdiction-specific application/registration fees ($100-$200 typical) and any re-examination fees if you need a retake. Many candidates also invest $1,500-$3,000 in a CPA review course (Becker, Roger, Wiley, Gleim, Surgent).

What are the major 2024-2026 FAR updates I should know?

Key recent updates: ASU 2023-07 (Segment Reporting — significant segment expense disclosures, CODM identification); ASU 2023-09 (Income Taxes — disaggregated rate reconciliation and income taxes paid by jurisdiction); the 30-month rolling credit window (extended from 18 months by NASBA effective Jan 2024); continued embedding of CPA Evolution model topics; CECL (ASC 326) fully phased in for all entities.

Which FAR areas should I prioritize?

Prioritize Area III: Select Transactions — ASC 606 revenue recognition, ASC 842 leases, and consolidations are heavily tested with both MCQ and TBS. Master deferred taxes (ASC 740) and EPS calculations early as they appear repeatedly. Don't neglect governmental accounting (GASB 34/54) and NFP (ASC 958) — these can swing your score and many candidates underprepare.

How long should I study for FAR?

Plan 100-150 hours of focused study. Most candidates spend 8-12 weeks on FAR alone. Build a study schedule with daily practice MCQs (aim for 80%+ accuracy before sitting), drill TBS regularly (they count for half your score), and complete at least one full-length 4-hour mock exam under timed conditions before your Prometric appointment.

Should I take FAR first or last?

Most CPA review providers recommend taking FAR FIRST. It has the most content, lowest pass rate, and provides a foundation for AUD (which uses FAR concepts). Passing FAR first also maximizes your 30-month testing window in case other sections take longer. Some candidates prefer to start with REG or AUD if they have stronger background in those areas.