CPA BAR Practice Questions and Sample Test

How to use this practice set

Attempt each question before reading its answer. For MCQs, write down why the best option fits and why the strongest distractor fails. For the short case, identify the requested outputs and organize the facts before calculating. Record the blueprint area, time and error type in a log. Review uncertain answers even when you guessed correctly.

This set is original and illustrative. It is not an AICPA sample test, does not reproduce protected exam content and does not estimate a scaled score. Use the official AICPA sample test to become familiar with the interface, and use the current blueprint to confirm topic coverage.

Business Analysis questions

Question 1: contribution margin

A product sells for $80 per unit. Variable cost is $50 per unit and monthly fixed costs are $90,000. How many units must be sold to break even?

• A. 1,125
• B. 1,800
• C. 3,000
• D. 4,500

Answer: C. 3,000 units.

Contribution margin per unit is $80 minus $50, or $30. Break-even volume equals fixed costs divided by contribution margin: $90,000 divided by $30 equals 3,000 units. Option A divides fixed costs by price, ignoring variable cost. Option B divides by total cost without first calculating a per-unit margin. Option D doubles the correct volume.

Question 2: current ratio interpretation

A company reports current assets of $480,000 and current liabilities of $300,000. It pays $60,000 of accounts payable using cash. What happens to the current ratio immediately after payment?

• A. It decreases from 1.60 to 1.40.
• B. It remains 1.60.
• C. It increases from 1.60 to 1.75.
• D. It becomes 2.00.

Answer: C. It increases from 1.60 to 1.75.

Before payment, the ratio is $480,000 divided by $300,000, or 1.60. After payment, both current assets and current liabilities fall by $60,000. The new ratio is $420,000 divided by $240,000, or 1.75. Because the original ratio was greater than one, reducing equal amounts from numerator and denominator increases the ratio. This is a ratio interpretation question, not an improvement in cash.

Question 3: discounted cash flow

A project requires an initial investment of $100,000 and produces $60,000 at each year-end for two years. The present value factors at the required rate are 0.90 for year one and 0.81 for year two. What is the project NPV?

• A. $2,600 positive
• B. $8,600 positive
• C. $100,000 positive
• D. $2,600 negative

Answer: A. $2,600 positive.

Present value of the inflows is ($60,000 × 0.90) + ($60,000 × 0.81), or $54,000 + $48,600 = $102,600. Subtract the $100,000 initial outflow to obtain positive NPV of $2,600. Option B adds the discounted inflows but fails to subtract the initial investment. Option D has the correct magnitude but reverses the sign.

Technical Accounting and Reporting questions

Question 4: inventory error

A company using FIFO in a rising-cost environment mistakenly omits some ending inventory units from its count. Which combination is the likely effect on current-period cost of goods sold and pretax income, assuming no other errors?

• A. Cost of goods sold understated; income understated.
• B. Cost of goods sold overstated; income understated.
• C. Cost of goods sold overstated; income overstated.
• D. Cost of goods sold unchanged; income unchanged.

Answer: B. Cost of goods sold is overstated and income is understated.

Ending inventory is subtracted when calculating cost of goods sold. Omitting units understates ending inventory, which overstates cost of goods sold and understates gross profit and pretax income. FIFO and the rising-cost condition do not change the direction of this count error. The distractors either reverse the effect or ignore the inventory relationship.

Question 5: impairment evidence

A long-lived asset held for use has a carrying amount of $500,000. Under the applicable simplified facts for this question, its undiscounted expected cash flows are $470,000 and fair value is $430,000. Which amount is the impairment loss?

• A. $0
• B. $30,000
• C. $70,000
• D. $500,000

Answer: C. $70,000.

Under the held-for-use impairment model assumed in this question, first compare carrying amount with undiscounted cash flows. Since $500,000 exceeds $470,000, the asset is not recoverable. The loss is then carrying amount less fair value: $500,000 minus $430,000 equals $70,000. The $30,000 difference from undiscounted cash flows is not the measurement of the loss. The prompt states the model assumptions to isolate the sequence.

Question 6: lease classification reasoning

A lessee agreement transfers ownership of identified equipment to the lessee at the end of the lease term. Which conclusion is most directly supported by this fact under the general lease classification framework?

• A. The arrangement is an operating lease because title transfers later.
• B. The arrangement meets a finance lease classification criterion.
• C. The lessee should omit the arrangement from its analysis.
• D. Classification depends only on the first payment date.

Answer: B. The arrangement meets a finance lease criterion.

Transfer of ownership by the end of the term is one of the indicators supporting finance lease classification for a lessee. The other criteria and the applicable guidance should still be considered in a complete analysis, but the stated fact directly supports the finance conclusion. A later transfer is still a transfer. Payment timing alone does not determine classification.

State and Local Governments questions

Question 7: governmental fund focus

Which measurement focus and basis of accounting generally apply to governmental fund financial statements?

• A. Economic resources and accrual
• B. Current financial resources and modified accrual
• C. Economic resources and cash
• D. Current financial resources and full accrual

Answer: B. Current financial resources and modified accrual.

Governmental funds generally report current financial resources and use modified accrual accounting. Government-wide statements use the economic resources measurement focus and accrual basis. Confusing those statement levels is a common error. First identify whether the question asks about a fund statement or government-wide reporting, then apply the matching perspective.

Question 8: fund balance classification

A government has resources whose use is constrained by an external grant agreement for a specified program. Which fund balance classification most directly describes the constraint, assuming no higher-priority classification applies?

• A. Nonspendable
• B. Restricted
• C. Committed
• D. Assigned

Answer: B. Restricted.

An external grantor restriction is an externally imposed constraint, which supports restricted fund balance. Committed amounts arise from formal action by the government’s highest decision-making authority. Assigned amounts reflect intended use under the applicable authority, while nonspendable amounts are not in spendable form or are legally required to remain intact. The external source of the constraint is decisive here.

Short case: analytical decision and reporting

A fictional municipality operates a water utility accounted for as an enterprise activity. It is considering a meter system costing $300,000. The system is expected to reduce cash operating costs by $95,000 at each year-end for four years. No salvage value or tax effect applies. The required return is 8 percent. The present value annuity factor for four years at 8 percent is 3.3121. The case asks for the NPV, the annual operating-cost reduction needed for zero NPV, and the high-level statement perspective.

Work the facts in order. The present value of savings is $95,000 multiplied by 3.3121, or $314,649.50. Subtract the $300,000 cost to get a positive NPV of $14,649.50. For zero NPV, divide cost by the annuity factor: $300,000 divided by 3.3121 is approximately $90,577 per year. The planned $95,000 reduction exceeds that break-even amount.

The enterprise activity uses the economic resources measurement focus and accrual basis in its proprietary fund statements, unlike governmental fund statements. The case supplies a simplified investment analysis and a reporting context; it does not ask for a full journal entry or determine whether a real project should proceed. A complete decision would consider evidence beyond the stated assumptions.

A useful review asks whether you discounted the year-end amounts, used the four-year factor, subtracted the initial cost and distinguished the operating entity from a governmental fund. If you made an error, classify it as formula selection, arithmetic, period, or framework before repeating a new case.

Review answers to improve

Do not stop after checking whether the letter was right. Explain the decision rule and the fact that triggers it. If you guessed correctly, record the uncertainty. If you missed a question, close the explanation and solve a fresh variation later. This turns practice into retrieval and application rather than answer memorization.

Use the blueprint to balance coverage. A strong score on analysis questions does not remove the need to practise advanced reporting and governmental accounting. Likewise, a set made entirely of MCQs does not rehearse the evidence selection and response completion demanded by TBSs. Include both formats throughout your study plan.

Official sample test and limitations

AICPA’s sample test is useful for navigating the exam interface and seeing how question formats behave. It is not a substitute for a broad, current study set and should not be treated as a forecast of your live exam. Review the BAR blueprint separately to understand tested content and the official scoring page to understand the 75 scaled passing standard.

These examples are original teaching material. BAR questions on an actual administration can differ in wording, difficulty, topic mix and task demands. No practice set can guarantee a score or reveal which questions will appear.