[
  {
    "id": "FAR_MCQ_001",
    "type": "MCQ",
    "question": "Which of the following is an essential characteristic of a liability?",
    "options": [
      "It represents a probable future benefit.",
      "It allows the entity to obtain benefits and control others' access to them.",
      "It results from a past transaction or event.",
      "It provides the potential to contribute directly or indirectly to future cash inflows."
    ],
    "correctAnswer": "C",
    "explanation": "A liability has three essential characteristics: (1) it embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand, (2) the duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice, and (3) the transaction or other event obligating the entity has already happened."
  },
  {
    "id": "FAR_MCQ_002",
    "type": "MCQ",
    "question": "On January 1, Year 1, West Co. adopted the dollar-value LIFO inventory method. Inventory was valued at $100,000 on that date. The ending inventory for Year 1 at year-end costs was $150,000, and the cost index was 1.25. What is the dollar-value LIFO inventory at December 31, Year 1?",
    "options": [
      "120,000",
      "125,000",
      "140,000",
      "150,000"
    ],
    "correctAnswer": "B",
    "explanation": "To calculate Dollar-Value LIFO: 1) Convert ending inventory to base year cost: $150,000 / 1.25 = $120,000. 2) Determine the layer added in base year dollars: $120,000 - $100,000 (Base) = $20,000 increment. 3) Value the increment at current year cost: $20,000 * 1.25 = $25,000. 4) Add Base + Increment: $100,000 + $25,000 = $125,000."
  },
  {
    "id": "FAR_MCQ_003",
    "type": "MCQ",
    "question": "Which of the following describes the reporting of a change in accounting principle?",
    "options": [
      "Current period adjustment only.",
      "Prospective application to future periods.",
      "Retrospective application to prior periods presented.",
      "Adjustment to the beginning balance of retained earnings in the current period."
    ],
    "correctAnswer": "C",
    "explanation": "A change in accounting principle is generally reported through retrospective application. The financial statements of all prior periods presented are adjusted to reflect the new principle as if it had always been used."
  },
  {
    "id": "FAR_MCQ_004",
    "type": "MCQ",
    "question": "Under ASC 842, how should a lessee record a finance lease?",
    "options": [
      "As an operating expense on the income statement.",
      "As a Right-of-Use Asset and a Lease Liability on the balance sheet.",
      "Only as a footnote disclosure.",
      "As a deferred charge."
    ],
    "correctAnswer": "B",
    "explanation": "For a finance lease, the lessee recognizes a Right-of-Use (ROU) Asset and a Lease Liability on the balance sheet. Interest expense and amortization expense are recorded separately on the income statement."
  },
  {
    "id": "FAR_MCQ_005",
    "type": "MCQ",
    "question": "For a governmental unit, which fund is classified as a proprietary fund?",
    "options": [
      "General Fund",
      "Special Revenue Fund",
      "Internal Service Fund",
      "Capital Projects Fund"
    ],
    "correctAnswer": "C",
    "explanation": "Proprietary funds include Enterprise Funds and Internal Service Funds. The General, Special Revenue, and Capital Projects funds are Governmental funds."
  },
  {
    "id": "FAR_MCQ_006",
    "type": "MCQ",
    "question": "What is the primary authoritative source of GAAP for non-governmental entities in the United States?",
    "options": [
      "FASB Accounting Standards Codification",
      "Statements of Financial Accounting Concepts",
      "SEC Regulation S-X",
      "International Financial Reporting Standards"
    ],
    "correctAnswer": "A",
    "explanation": "The FASB Accounting Standards Codification (ASC) is the single source of authoritative nongovernmental U.S. GAAP."
  },
  {
    "id": "FAR_MCQ_007",
    "type": "MCQ",
    "question": "When computing weighted-average shares outstanding for Earnings Per Share (EPS), how is a stock split treated?",
    "options": [
      "It is weighted by the number of months it was outstanding.",
      "It is treated as if it occurred at the beginning of the earliest period presented.",
      "It is ignored for prior periods.",
      "It is treated as occurring at the end of the year."
    ],
    "correctAnswer": "B",
    "explanation": "Stock splits and stock dividends are treated retroactively as if they occurred at the beginning of the earliest period presented (or the date of issuance if the shares were issued during the period)."
  },
  {
    "id": "FAR_MCQ_008",
    "type": "MCQ",
    "question": "In a statement of cash flows prepared using the indirect method, an increase in accounts receivable should be:",
    "options": [
      "Added to net income.",
      "Deducted from net income.",
      "Reported as an investing activity.",
      "Reported as a financing activity."
    ],
    "correctAnswer": "B",
    "explanation": "An increase in accounts receivable means cash was not collected for some revenue recognized in net income. Therefore, the increase must be deducted from net income to arrive at cash flows from operating activities."
  },
  {
    "id": "FAR_MCQ_009",
    "type": "MCQ",
    "question": "How should a Not-for-Profit entity report a donation of securities that has no donor-imposed restrictions?",
    "options": [
      "As deferred revenue.",
      "As revenue/support in Net Assets Without Donor Restrictions.",
      "As revenue/support in Net Assets With Donor Restrictions.",
      "Directly to the statement of cash flows only."
    ],
    "correctAnswer": "B",
    "explanation": "Contributions without donor-imposed restrictions are reported as revenue or support in Net Assets Without Donor Restrictions in the period received, measured at fair value."
  },
  {
    "id": "FAR_MCQ_010",
    "type": "MCQ",
    "question": "Company Z issues $1,000,000 of 10-year, 8% bonds at 96. Which of the following is true regarding the amortization of the discount?",
    "options": [
      "Interest expense will be lower than the cash interest payment.",
      "The carrying value of the bond will decrease over time.",
      "Interest expense will be higher than the cash interest payment.",
      "The discount amount will increase over time."
    ],
    "correctAnswer": "C",
    "explanation": "When bonds are issued at a discount, the effective interest rate is higher than the stated rate. Amortization of the discount increases interest expense (Interest Expense = Cash Interest + Discount Amortization) and increases the carrying value of the bond toward par."
  },
  {
    "id": "FAR_MCQ_011",
    "type": "MCQ",
    "question": "Under the acquisition method for business combinations, how are direct acquisition costs (e.g., legal fees, valuation fees) treated?",
    "options": [
      "Capitalized as part of Goodwill.",
      "Expensed as incurred.",
      "Deducted from Additional Paid-in Capital.",
      "Amortized over 5 years."
    ],
    "correctAnswer": "B",
    "explanation": "Direct acquisition costs (legal, consulting, etc.) are expensed as incurred. Costs to issue stock are a reduction of APIC."
  },
  {
    "id": "FAR_MCQ_012",
    "type": "MCQ",
    "question": "Which of the following is considered a Level 1 input in the Fair Value Hierarchy?",
    "options": [
      "Quoted prices for identical assets in active markets.",
      "Quoted prices for similar assets in active markets.",
      "Inputs based on the entity's own assumptions.",
      "Observable inputs other than quoted prices."
    ],
    "correctAnswer": "A",
    "explanation": "Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date."
  },
  {
    "id": "FAR_MCQ_013",
    "type": "MCQ",
    "question": "A contingency that is probable and reasonably estimable should be:",
    "options": [
      "Disclosed only.",
      "Accrued and disclosed.",
      "Neither accrued nor disclosed.",
      "Accrued only if it involves a lawsuit."
    ],
    "correctAnswer": "B",
    "explanation": "Loss contingencies that are both probable and reasonably estimable must be accrued (recorded as a liability/loss) and disclosed in the notes."
  },
  {
    "id": "FAR_MCQ_014",
    "type": "MCQ",
    "question": "In government-wide financial statements, capital assets are reported:",
    "options": [
      "As expenditures in the period purchased.",
      "At historical cost net of accumulated depreciation.",
      "At fair market value.",
      "They are not reported."
    ],
    "correctAnswer": "B",
    "explanation": "In the government-wide Statement of Net Position, capital assets are reported at historical cost, net of accumulated depreciation. This differs from the fund financial statements where they are expenditures."
  },
  {
    "id": "FAR_MCQ_015",
    "type": "MCQ",
    "question": "Under ASC 606, revenue is recognized when:",
    "options": [
      "Cash is received.",
      "A contract is signed.",
      "Performance obligations are satisfied.",
      "The price is fixed."
    ],
    "correctAnswer": "C",
    "explanation": "The core principle of ASC 606 is that an entity recognizes revenue when (or as) it satisfies a performance obligation by transferring a promised good or service to a customer."
  },
  {
    "id": "FAR_MCQ_016",
    "type": "MCQ",
    "question": "Which component of OCI is reclassified to net income when realized?",
    "options": [
      "Prior service cost for pension plans.",
      "Unrealized gains on Available-for-Sale debt securities.",
      "Foreign currency translation adjustments (upon sale of sub).",
      "All of the above."
    ],
    "correctAnswer": "D",
    "explanation": "Items in Accumulated Other Comprehensive Income (AOCI) such as unrealized gains/losses on AFS debt securities, pension adjustments, and foreign currency translation adjustments are reclassified to Net Income when the underlying transaction is realized (e.g., security sold, pension plan terminated, foreign sub sold)."
  },
  {
    "id": "FAR_MCQ_017",
    "type": "MCQ",
    "question": "What is the Modified Accelerated Cost Recovery System (MACRS) primarily used for?",
    "options": [
      "Financial reporting under GAAP.",
      "Management accounting.",
      "Tax reporting in the United States.",
      "IFRS reporting."
    ],
    "correctAnswer": "C",
    "explanation": "MACRS is the tax depreciation system used in the United States. It is not generally accepted for financial reporting (GAAP), which usually requires a method that allocates cost over useful life (like Straight-Line)."
  },
  {
    "id": "FAR_MCQ_018",
    "type": "MCQ",
    "question": "Which of the following is NOT a required financial statement for a Not-for-Profit organization?",
    "options": [
      "Statement of Financial Position",
      "Statement of Activities",
      "Statement of Cash Flows",
      "Statement of Retained Earnings"
    ],
    "correctAnswer": "D",
    "explanation": "NFPs do not have 'Retained Earnings' or shareholders. They present a Statement of Financial Position, Statement of Activities, and Statement of Cash Flows. They also present a Statement of Functional Expenses (required for all NFPs)."
  },
  {
    "id": "FAR_MCQ_019",
    "type": "MCQ",
    "question": "How are research and development costs generally treated under US GAAP?",
    "options": [
      "Capitalized and amortized.",
      "Expensed as incurred.",
      "Capitalized if they result in a patent.",
      "Expensed only if unsuccessful."
    ],
    "correctAnswer": "B",
    "explanation": "With very few exceptions (like software development after technological feasibility), R&D costs are expensed as incurred under US GAAP."
  },
  {
    "id": "FAR_MCQ_020",
    "type": "MCQ",
    "question": "A 100% owned subsidiary sold inventory costing $50 to its parent for $80. The parent still holds the inventory at year-end. What implies the elimination entry required for consolidation?",
    "options": [
      "Debit Sales $80, Credit COGS $80.",
      "Debit Sales $80, Credit COGS $50, Credit Inventory $30.",
      "Debit Retained Earnings $30, Credit Inventory $30.",
      "No entry is needed."
    ],
    "correctAnswer": "B",
    "explanation": "The intercompany sale must be eliminated. Revenue (Sales) is overstated by $80. COGS is overstated by $50 (the original cost). The Inventory on the Parent's books is overstated by the $30 profit. The entry is Dr Sales $80, Cr COGS $50, Cr Inventory $30."
  },
  {
    "id": "FAR_MCQ_021",
    "type": "MCQ",
    "question": "Which of the following events occurring after the reporting date but before financial statements are issued requires adjustment to the financial statements?",
    "options": [
      "Settlement of litigation that confirms a liability existed at the balance sheet date.",
      "Loss of plant due to fire occurring after the balance sheet date.",
      "Issuance of bonds after the balance sheet date.",
      "Purchase of a business after the balance sheet date."
    ],
    "correctAnswer": "A",
    "explanation": "Recognized subsequent events provide additional evidence about conditions that existed at the date of the balance sheet (Type 1). Settlement of litigation confirming a liability existing at year-end requires adjustment. The others are Non-recognized (Type 2) and require disclosure only."
  },
  {
    "id": "FAR_MCQ_022",
    "type": "MCQ",
    "question": "Diluted EPS differs from Basic EPS by including the effect of:",
    "options": [
      "Common stock dividends.",
      "Potentially dilutive securities.",
      "Extraordinary items.",
      "Discontinued operations."
    ],
    "correctAnswer": "B",
    "explanation": "Diluted EPS incorporates the potential impact of dilutive securities such as stock options, warrants, and convertible bonds/preferred stock."
  },
  {
    "id": "FAR_MCQ_023",
    "type": "MCQ",
    "question": "In a troubled debt restructuring involving a modification of terms where the undiscounted future cash flows are less than the carrying amount of the debt, the debtor recognizes:",
    "options": [
      "No gain or loss.",
      "A gain on restructuring.",
      "A loss on restructuring.",
      "Interest expense over the remaining life."
    ],
    "correctAnswer": "B",
    "explanation": "If the undiscounted future cash flows (principal + interest) under the new terms are less than the carrying value, the debtor writes down the debt to the undiscounted cash flows and records a gain. No interest expense is recorded going forward."
  },
  {
    "id": "FAR_MCQ_024",
    "type": "MCQ",
    "question": "Governmental funds use which basis of accounting?",
    "options": [
      "Accrual Basis",
      "Cash Basis",
      "Modified Accrual Basis",
      "Tax Basis"
    ],
    "correctAnswer": "C",
    "explanation": "Governmental funds (General, Special Revenue, Debt Service, Capital Projects, Permanent) use the Modified Accrual basis of accounting and the Current Financial Resources measurement focus."
  },
  {
    "id": "FAR_MCQ_025",
    "type": "MCQ",
    "question": "When the functional currency of a foreign subsidiary is the US Dollar (the reporting currency), which method is used to convert financial statements?",
    "options": [
      "Translation Method (Current Rate Method)",
      "Remeasurement Method (Temporal Method)",
      "Historical Rate Method",
      "Average Rate Method"
    ],
    "correctAnswer": "B",
    "explanation": "When the functional currency is the reporting currency (USD), or the economy is highly inflationary, the Remeasurement (Temporal) method is used. Gains/losses go to Income. If the functional currency was the local currency, Translation would be used."
  },
  {
    "id": "FAR_MCQ_026",
    "type": "MCQ",
    "question": "Goodwill is tested for impairment:",
    "options": [
      "Every 5 years.",
      "Whenever the market price of stock drops.",
      "At least annually, or more frequently if events indicate impairment.",
      "Only upon liquidation."
    ],
    "correctAnswer": "C",
    "explanation": "Goodwill is not amortized but must be tested for impairment at least annually at the reporting unit level. It is also tested between annual tests if an event occurs that would more likely than not reduce fair value below carrying amount."
  },
  {
    "id": "FAR_MCQ_027",
    "type": "MCQ",
    "question": "Under the specific identification method for inventory, cost of goods sold is determined by:",
    "options": [
      "The average cost of all items.",
      "The cost of the most recent purchases.",
      "The actual cost of the specific units sold.",
      "The cost of the oldest purchases."
    ],
    "correctAnswer": "C",
    "explanation": "Specific identification tracks the actual cost of each specific item in inventory. It is typically used for high-value, unique items like jewelry or cars."
  },
  {
    "id": "FAR_MCQ_028",
    "type": "MCQ",
    "question": "Which of the following costs should be capitalized in the cost of a building constructed by the entity?",
    "options": [
      "Overhead costs specifically related to construction.",
      "Marketing costs for the new building.",
      "Costs to clear the land.",
      "Property taxes on the land during construction."
    ],
    "correctAnswer": "A",
    "explanation": "Direct materials, direct labor, and overhead specifically applicable to the construction are capitalized. Land clearing is a Land cost. Property taxes during construction are generally capitalized to the building, but overhead is the most distinct answer here relative to general expenses."
  },
  {
    "id": "FAR_MCQ_029",
    "type": "MCQ",
    "question": "The primary purpose of the Statement of Comprehensive Income is to report:",
    "options": [
      "Cash flows from non-owner sources.",
      "All changes in equity during a period except those resulting from investments by owners and distributions to owners.",
      "The financial position of the entity at a point in time.",
      "The accumulated earnings of the company since inception."
    ],
    "correctAnswer": "B",
    "explanation": "Comprehensive Income includes Net Income plus Other Comprehensive Income (OCI). It represents all changes in equity except those resulting from owner transactions (stock issuance, dividends)."
  },
  {
    "id": "FAR_MCQ_030",
    "type": "MCQ",
    "question": "Which ratio is used to measure an entity's ability to pay short-term obligations?",
    "options": [
      "Debt to Equity Ratio",
      "Current Ratio",
      "Return on Assets",
      "Earnings Per Share"
    ],
    "correctAnswer": "B",
    "explanation": "The Current Ratio (Current Assets / Current Liabilities) is a liquidity ratio that measures an entity's ability to pay short-term obligations."
  },
  {
    "id": "FAR_MCQ_031",
    "type": "MCQ",
    "question": "On January 1, Year 1, an entity acquired a trademark for $200,000. The trademark has a remaining legal life of 15 years, but the entity estimates the useful life to be 10 years. The entity uses the straight-line method of amortization. On December 31, Year 3, the entity determines that the trademark's future cash flows (undiscounted) are estimated to be $120,000, and its fair value is $110,000. What is the impairment loss to be recognized in Year 3?",
    "options": [
      "0",
      "10,000",
      "30,000",
      "40,000"
    ],
    "correctAnswer": "C",
    "explanation": "Carrying Value at end of Year 3 = $200,000 - ($20,000 * 3) = $140,000. Step 1 Recoverability Test: Compare Carrying Value ($140,000) to Undiscounted Cash Flows ($120,000). Since CV > UCF, the asset is impaired. Step 2 Measurement: Impairment = Carrying Value ($140,000) - Fair Value ($110,000) = $30,000."
  },
  {
    "id": "FAR_MCQ_032",
    "type": "MCQ",
    "question": "Which of the following is reported as a source of other financing uses in the governmental fund financial statements?",
    "options": [
      "Transfers to other funds.",
      "Principal and interest payments on long-term debt.",
      "Expenditure for capital outlay.",
      "Proceeds from the sale of capital assets."
    ],
    "correctAnswer": "A",
    "explanation": "In governmental funds, transfers out to other funds are classified as 'Other Financing Uses'. Principal/interest payments and capital outlays are Expenditures. Proceeds from sales are Other Financing Sources."
  },
  {
    "id": "FAR_MCQ_033",
    "type": "MCQ",
    "question": "Under ASC 606, when a contract includes a significant financing component, how should revenue be recognized?",
    "options": [
      "At the cash selling price of the goods or services.",
      "At the present value of the payments to be received.",
      "Based on the future value of the contract.",
      "Without adjustment for the time value of money."
    ],
    "correctAnswer": "A",
    "explanation": "If a significant financing component exists, revenue is recognized at the 'cash selling price' (the amount the customer would have paid in cash at the time of transfer), which equates to the present value of the promised consideration."
  },
  {
    "id": "FAR_MCQ_034",
    "type": "MCQ",
    "question": "Company A owns 30% of Company B and uses the equity method. During the year, Company B reported net income of $100,000 and paid dividends of $20,000. Company A's investment account should increase by:",
    "options": [
      "6,000",
      "24,000",
      "30,000",
      "0"
    ],
    "correctAnswer": "B",
    "explanation": "Under the equity method, the investment increases by the investor's share of Net Income (30% * 100,000 = 30,000) and decreases by the share of Dividends (30% * 20,000 = 6,000). Net increase = 30,000 - 6,000 = $24,000."
  },
  {
    "id": "FAR_MCQ_035",
    "type": "MCQ",
    "question": "Which of the following creates a temporary difference that results in a deferred tax liability?",
    "options": [
      "Use of straight-line depreciation for financial reporting and MACRS for tax purposes.",
      "Fines and penalties paid to the government.",
      "Premiums paid on life insurance where the corporation is the beneficiary.",
      "Warranty expenses accrued for financial reporting but deducted for tax when paid."
    ],
    "correctAnswer": "A",
    "explanation": "Using accelerated depreciation (MACRS) for tax and straight-line for books typically results in lower taxable income in early years (Tax Depr > Book Depr), creating a future taxable amount (Deferred Tax Liability). Fines and Life Insurance premiums are permanent differences. Warranties create a Deferred Tax Asset."
  },
  {
    "id": "FAR_MCQ_036",
    "type": "MCQ",
    "question": "A Not-for-Profit organization receives a pledge of $50,000 to be paid in five years. The pledge is unconditional. How should this be recognized?",
    "options": [
      "As revenue when cash is received.",
      "As a conditional contribution.",
      "As contribution revenue at its present value in the year pledged.",
      "As deferred revenue until the time restriction expires."
    ],
    "correctAnswer": "C",
    "explanation": "Unconditional promises to give (pledges) are recognized as revenue in the period the pledge is made, measured at the present value of estimated future cash flows (if expected to be collected in more than one year)."
  },
  {
    "id": "FAR_MCQ_037",
    "type": "MCQ",
    "question": "During a period of rising prices, which inventory method generally results in the highest Net Income?",
    "options": [
      "LIFO",
      "FIFO",
      "Weighted Average",
      "Moving Average"
    ],
    "correctAnswer": "B",
    "explanation": "In a period of rising prices, FIFO assigns the oldest (cheaper) costs to COGS, resulting in lower expenses and higher Net Income. LIFO assigns the newest (expensive) costs to COGS, lowering Net Income."
  },
  {
    "id": "FAR_MCQ_038",
    "type": "MCQ",
    "question": "When converting foreign currency financial statements to the reporting currency using the translation method, where are translation gains and losses reported?",
    "options": [
      "In Net Income from Continuing Operations.",
      "In Other Comprehensive Income (OCI).",
      "As an extraordinary item.",
      "Retained Earnings adjustment."
    ],
    "correctAnswer": "B",
    "explanation": "Under the Translation Method (current rate method), translation adjustments are reported in Other Comprehensive Income (OCI) and accumulated in equity (AOCI)."
  },
  {
    "id": "FAR_MCQ_039",
    "type": "MCQ",
    "question": "How should a change in reporting entity be reported?",
    "options": [
      "Prospectively.",
      "Retrospectively for all periods presented.",
      "As a correction of an error.",
      "In the notes only."
    ],
    "correctAnswer": "B",
    "explanation": "A change in reporting entity (e.g., presenting consolidated statements for the first time) requires retrospective application to all prior periods presented to show the new entity structure comparatively."
  },
  {
    "id": "FAR_MCQ_040",
    "type": "MCQ",
    "question": "Which of the following costs is capitalized as part of the cost of land?",
    "options": [
      "Architect fees for a new building on the land.",
      "Cost of razing an old building on the land (net of salvage).",
      "Excavation costs for the foundation of a new building.",
      "Property taxes incurred after the building is constructed."
    ],
    "correctAnswer": "B",
    "explanation": "The cost of razing (demolishing) an existing structure to prepare the land for its intended use is a cost of the Land. Architect and excavation fees are costs of the Building."
  },
  {
    "id": "FAR_MCQ_041",
    "type": "MCQ",
    "question": "In a business combination, what is the treatment for pre-existing goodwill on the books of the acquiree?",
    "options": [
      "It is carried forward to the consolidated balance sheet.",
      "It is ignored/eliminated and not recognized.",
      "It is revalued to fair value.",
      "It is amortized over 10 years."
    ],
    "correctAnswer": "B",
    "explanation": "In an acquisition, the acquirer recognizes the identifiable assets and liabilities at fair value. The acquiree's old goodwill is not an identifiable asset; it is eliminated. New goodwill is calculated as the excess of consideration over the FV of identifiable net assets."
  },
  {
    "id": "FAR_MCQ_042",
    "type": "MCQ",
    "question": "A company issues 5,000 shares of $10 par value common stock for land with a fair value of $80,000. The stock is currently trading at $15 per share. At what amount should the land be recorded?",
    "options": [
      "50,000",
      "75,000",
      "80,000",
      "0"
    ],
    "correctAnswer": "B",
    "explanation": "When stock is issued for non-monetary assets, the transaction is generally recorded at the fair value of the consideration given (the stock) if it is more clearly evident than the fair value of the asset received. Since the stock is actively trading at $15/share, this is the most objective measure. Land is recorded at $15 * 5,000 = $75,000."
  },
  {
    "id": "FAR_MCQ_043",
    "type": "MCQ",
    "question": "In the statement of cash flows (indirect method), how is the amortization of a bond premium treated?",
    "options": [
      "Added to net income.",
      "Deducted from net income.",
      "Inflow from financing.",
      "Outflow from investing."
    ],
    "correctAnswer": "B",
    "explanation": "Amortization of a bond premium reduces Interest Expense, thereby increasing Net Income. Since it is a non-cash reduction of expense, it must be deducted from Net Income in the operating section to arrive at cash flow."
  },
  {
    "id": "FAR_MCQ_044",
    "type": "MCQ",
    "question": "Which fund type accounts for resources that are legally restricted so that only earnings, not principal, may be used for the benefit of the government or its citizens?",
    "options": [
      "Special Revenue Fund",
      "Permanent Fund",
      "Private-Purpose Trust Fund",
      "Custodial Fund"
    ],
    "correctAnswer": "B",
    "explanation": "Permanent Funds are used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs (benefit the government or its citizenry)."
  },
  {
    "id": "FAR_MCQ_045",
    "type": "MCQ",
    "question": "A lessee incurs initial direct costs of $5,000 to negotiate a lease. How are these costs treated under ASC 842?",
    "options": [
      "Expensed immediately.",
      "Included in the Lease Liability.",
      "Included in the Right-of-Use (ROU) Asset.",
      "Amortized over 5 years straight-line separate from the lease."
    ],
    "correctAnswer": "C",
    "explanation": "Initial direct costs incurred by the lessee are capitalized as part of the Right-of-Use (ROU) Asset and amortized over the lease term."
  },
  {
    "id": "FAR_MCQ_046",
    "type": "MCQ",
    "question": "When should an expenditure for a long-lived asset be capitalized rather than expensed?",
    "options": [
      "When the cost is immaterial.",
      "When it restores the asset to its original condition.",
      "When it improves the asset's efficiency or extends its useful life.",
      "When it is a routine repair."
    ],
    "correctAnswer": "C",
    "explanation": "Expenditures that increase the utility (efficiency), extend the useful life, or increase the capacity of an asset are capitalized (Betterments). Routine repairs and maintenance that maintain the asset are expensed."
  },
  {
    "id": "FAR_MCQ_047",
    "type": "MCQ",
    "question": "Which of the following is required for a liability to be classified as 'Current'?",
    "options": [
      "It is due within 12 months or the operating cycle, whichever is longer.",
      "It is due within 3 months.",
      "It is a secured debt.",
      "It must be paid in cash."
    ],
    "correctAnswer": "A",
    "explanation": "Current liabilities are obligations whose liquidation is reasonably expected to require the use of existing resources properly classified as current assets, or the creation of other current liabilities, typically within one year or the operating cycle, whichever is longer."
  },
  {
    "id": "FAR_MCQ_048",
    "type": "MCQ",
    "question": "On June 1, a company declared a property dividend of marketable securities. The securities had a carrying value of $40,000 and a fair value of $55,000. What gain should the company recognize on the distribution?",
    "options": [
      "0",
      "15,000",
      "40,000",
      "55,000"
    ],
    "correctAnswer": "B",
    "explanation": "When a property dividend is declared, the property is adjusted to fair value, and a gain or loss is recognized. Gain = FV ($55,000) - CV ($40,000) = $15,000. The dividend is then recorded at the $55,000 fair value."
  },
  {
    "id": "FAR_MCQ_049",
    "type": "MCQ",
    "question": "Under IFRS, how is a bank overdraft generally reported on the Statement of Cash Flows?",
    "options": [
      "As a component of Cash and Cash Equivalents.",
      "As a financing activity.",
      "As an operating activity.",
      "As an investing activity."
    ],
    "correctAnswer": "A",
    "explanation": "Under IFRS, bank overdrafts that are repayable on demand and form an integral part of an entity's cash management are often included as a component of cash and cash equivalents. (Under US GAAP, they are financing liabilities)."
  },
  {
    "id": "FAR_MCQ_050",
    "type": "MCQ",
    "question": "Which financial statement is unique to a Private-Purpose Trust Fund compared to a Permanent Fund?",
    "options": [
      "Statement of Net Position.",
      "Statement of Changes in Fiduciary Net Position.",
      "Balance Sheet.",
      "Statement of Cash Flows."
    ],
    "correctAnswer": "B",
    "explanation": "Fiduciary funds (like Private-Purpose Trust) present a 'Statement of Changes in Fiduciary Net Position'. Permanent funds are governmental funds and present a 'Statement of Revenues, Expenditures, and Changes in Fund Balances'."
  },
  {
    "id": "FAR_MCQ_051",
    "type": "MCQ",
    "question": "A company has a defined benefit pension plan. The Projected Benefit Obligation (PBO) is $500,000 and the Fair Value of Plan Assets is $420,000. What should be reported on the balance sheet?",
    "options": [
      "Noncurrent Asset of $80,000.",
      "Current Liability of $80,000.",
      "Noncurrent Liability of $80,000.",
      "Accumulated Other Comprehensive Income of $80,000."
    ],
    "correctAnswer": "C",
    "explanation": "The funded status is Plan Assets ($420k) - PBO ($500k) = ($80,000) underfunded. This is a liability. It is generally noncurrent unless the expected payout in the next year exceeds the plan assets."
  },
  {
    "id": "FAR_MCQ_052",
    "type": "MCQ",
    "question": "Which of the following is considered a 'cash equivalent'?",
    "options": [
      "Treasury bill with an original maturity of 6 months, purchased 2 months before maturity.",
      "Treasury bill with an original maturity of 6 months, purchased 4 months before maturity.",
      "Marketable equity security.",
      "Restricted cash for bond sinking fund."
    ],
    "correctAnswer": "A",
    "explanation": "Cash equivalents are short-term, highly liquid investments with an *original maturity to the holder* of 3 months or less. A 6-month T-Bill purchased 2 months before it matures qualifies."
  },
  {
    "id": "FAR_MCQ_053",
    "type": "MCQ",
    "question": "An asset retirement obligation (ARO) should be initially recognized at:",
    "options": [
      "The undiscounted expected future cash flow.",
      "Fair value.",
      "The cost of the asset.",
      "Zero until the asset is retired."
    ],
    "correctAnswer": "B",
    "explanation": "An ARO is initially recognized at Fair Value (usually the present value of the expected future restoration costs) and the associated asset cost is increased by the same amount."
  },
  {
    "id": "FAR_MCQ_054",
    "type": "MCQ",
    "question": "Which ratio measures the efficiency of a company's use of its assets?",
    "options": [
      "Current Ratio",
      "Debt to Equity",
      "Asset Turnover",
      "Times Interest Earned"
    ],
    "correctAnswer": "C",
    "explanation": "Asset Turnover (Net Sales / Average Total Assets) measures how efficiently a company uses its assets to generate revenue."
  },
  {
    "id": "FAR_MCQ_055",
    "type": "MCQ",
    "question": "In a partnership liquidation, if a partner has a capital deficiency (debit balance) and is personally insolvent, how is the deficiency handled?",
    "options": [
      "The partner owes nothing.",
      "The other partners absorb the deficiency according to their profit/loss sharing ratios.",
      "The partnership records a loss.",
      "The deficiency remains as a receivable indefinitely."
    ],
    "correctAnswer": "B",
    "explanation": "If a partner with a deficit is insolvent and cannot pay, the remaining solvent partners must absorb the deficit in proportion to their respective profit and loss sharing ratios."
  },
  {
    "id": "FAR_MCQ_056",
    "type": "MCQ",
    "question": "When computing Diluted EPS, convertible bonds are assumed to be converted at:",
    "options": [
      "The end of the year.",
      "The beginning of the year (or date of issuance if later).",
      "The date they were actually converted.",
      "Never."
    ],
    "correctAnswer": "B",
    "explanation": "The 'If-Converted' method assumes conversion happens at the beginning of the period (or issuance date if later) to determine the maximum dilution."
  },
  {
    "id": "FAR_MCQ_057",
    "type": "MCQ",
    "question": "Under the remeasurement method, which exchange rate is used for inventory carried at cost?",
    "options": [
      "Current Rate",
      "Average Rate",
      "Historical Rate",
      "Weighted Average Rate"
    ],
    "correctAnswer": "C",
    "explanation": "Under the Remeasurement (Temporal) method, non-monetary items carried at historical cost (like Inventory) are remeasured using the Historical Rate."
  },
  {
    "id": "FAR_MCQ_058",
    "type": "MCQ",
    "question": "What is the primary purpose of the 'Management's Discussion and Analysis' (MD&A) in a government's financial report?",
    "options": [
      "To provide an auditor's opinion.",
      "To provide a narrative introduction, overview, and analysis of the financial activities.",
      "To list all specific expenditures.",
      "To present the budget."
    ],
    "correctAnswer": "B",
    "explanation": "MD&A is Required Supplementary Information (RSI) that provides an objective and easily readable analysis of the government's financial activities based on currently known facts, decisions, or conditions."
  },
  {
    "id": "FAR_MCQ_059",
    "type": "MCQ",
    "question": "An entity is defending a patent infringement suit. Legal counsel believes it is 'probable' the entity will lose and estimates the loss to be between $100,000 and $200,000, with no amount within the range being more likely than another. What amount should be accrued?",
    "options": [
      "100,000",
      "150,000",
      "200,000",
      "0"
    ],
    "correctAnswer": "A",
    "explanation": "Under US GAAP, if a loss is probable and a range exists with no best estimate, the *minimum* amount in the range ($100,000) is accrued. (Note: Under IFRS, the midpoint is used)."
  },
  {
    "id": "FAR_MCQ_060",
    "type": "MCQ",
    "question": "A company sells a product with a 2-year warranty. Based on history, warranty costs are estimated at 2% of sales. Sales for the year were $500,000. Actual warranty expenditures were $3,000. What is the warranty expense for the year?",
    "options": [
      "3,000",
      "7,000",
      "10,000",
      "13,000"
    ],
    "correctAnswer": "C",
    "explanation": "Warranty Expense is recognized in the period of sale based on the estimate. Expense = $500,000 * 2% = $10,000. The $3,000 payout reduces the liability, not the expense."
  },
  {
    "id": "FAR_TBS_001",
    "type": "TBS",
    "question": "On January 1, Year 1, Lessee Corp entered into a 5-year lease for equipment. Review the lease terms in the exhibits and complete the amortization schedule and initial journal entry.",
    "exhibits": [
      {
        "title": "Lease Agreement",
        "content": "<strong>Lessor:</strong> Mach Co.<br><strong>Lessee:</strong> Lessee Corp<br><strong>Term:</strong> 5 Years<br><strong>Annual Payment:</strong> $20,000 due at End of Year<br><strong>Implicit Rate:</strong> 5%<br><strong>Transfer of Ownership:</strong> No<br><strong>Purchase Option:</strong> None"
      },
      {
        "title": "PV Factors",
        "content": "PV of Ordinary Annuity of $1 at 5% for 5 periods = 4.32948<br>PV of $1 at 5% for 5 periods = 0.78353"
      }
    ],
    "items": [
      {
        "type": "grid",
        "title": "Part 1: Lease Liability Amortization",
        "headers": ["Year", "Payment", "Interest Exp (5%)", "Principal Red.", "Lease Liab Balance"],
        "rows": [
          { "label": "Inception", "type": "input" },
          { "label": "Year 1", "type": "input" },
          { "label": "Year 2", "type": "input" }
        ],
        "correctAnswer": [
          [0, 0, 0, 86590],
          [20000, 4330, 15670, 70920],
          [20000, 3546, 16454, 54466]
        ]
      },
      {
        "type": "journal-entry",
        "title": "Part 2: Initial Recording (Jan 1, Year 1)",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Cash", "Right-of-Use Asset", "Lease Liability", "Rent Expense", "Interest Expense"],
        "rows": [
          { "label": "Entry 1", "type": "select-input-input" },
          { "label": "Entry 2", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Right-of-Use Asset", 86590, 0],
          ["Lease Liability", 0, 86590]
        ]
      }
    ],
    "explanation": "<strong>Calculations:</strong> PV = 20,000 * 4.32948 = 86,590. <br>Year 1 Int = 86,590 * 0.05 = 4,330 (rounded). Prin = 20,000 - 4,330 = 15,670. Bal = 86,590 - 15,670 = 70,920.<br>Year 2 Int = 70,920 * 0.05 = 3,546. Prin = 20,000 - 3,546 = 16,454. Bal = 70,920 - 16,454 = 54,466."
  },
{
    "id": "FAR_TBS_002",
    "type": "TBS",
    "question": "Prepare the Bank Reconciliation for Company A for December 31, Year 1.",
    "exhibits": [
      {
        "title": "Bank Statement",
        "content": "<strong>Ending Balance (12/31):</strong> $50,000<br><strong>Note:</strong> Bank collected a $5,000 Note Receivable for Company A (plus $200 interest, less $50 fee).<br><strong>Service Charge:</strong> $100<br><strong>NSF Check from Customer:</strong> $800"
      },
      {
        "title": "Company Ledger",
        "content": "<strong>Ending Cash Balance (12/31):</strong> $41,700<br><strong>Deposits in Transit:</strong> $8,000<br><strong>Outstanding Checks:</strong> $12,050"
      }
    ],
    "items": [
      {
        "type": "grid",
        "title": "Bank Reconciliation",
        "headers": ["Item", "Amount ($)"],
        "rows": [
          { "label": "Adjusted Bank Balance", "type": "input" },
          { "label": "Adjusted Book Balance", "type": "input" }
        ],
        "correctAnswer": [
          [45950],
          [45950]
        ]
      },
      {
        "type": "mcq-group",
        "title": "Analysis",
        "questions": [
          {
            "prompt": "The NSF check requires a journal entry to:",
            "options": ["Debit Cash", "Credit Cash", "No Entry"],
            "correct": "Credit Cash"
          },
          {
            "prompt": "The Note collection by the bank requires a journal entry to:",
            "options": ["Debit Cash", "Credit Cash", "No Entry"],
            "correct": "Debit Cash"
          }
        ]
      }
    ],
    "explanation": "<strong>Bank Side:</strong> $50,000 (Bal) + $8,000 (DIT) - $12,050 (OS Checks) = $45,950.<br><strong>Book Side:</strong> $41,700 (Bal) + $5,150 (Note+Int-Fee) - $100 (Svc) - $800 (NSF) = $45,950."
  },
  {
    "id": "FAR_TBS_003",
    "type": "TBS",
    "question": "Determine the proper classification of the following Cash Flow items.",
    "exhibits": [],
    "items": [
      {
        "type": "mcq-group",
        "title": "Statement of Cash Flows Classification",
        "questions": [
          {
            "prompt": "Cash paid for interest",
            "options": ["Operating", "Investing", "Financing", "Non-Cash"],
            "correct": "Operating"
          },
          {
            "prompt": "Cash paid for dividends to shareholders",
            "options": ["Operating", "Investing", "Financing", "Non-Cash"],
            "correct": "Financing"
          },
          {
            "prompt": "Cash received from sale of equipment",
            "options": ["Operating", "Investing", "Financing", "Non-Cash"],
            "correct": "Investing"
          },
          {
            "prompt": "Principal payment on finance lease",
            "options": ["Operating", "Investing", "Financing", "Non-Cash"],
            "correct": "Financing"
          },
          {
            "prompt": "Amortization of bond discount",
            "options": ["Operating", "Investing", "Financing", "Non-Cash"],
            "correct": "Non-Cash"
          }
        ]
      }
    ],
    "explanation": "Interest paid is Operating (US GAAP). Dividends paid are Financing. Sale of fixed assets is Investing. Principal payments on debt/leases are Financing. Amortization is a non-cash adjustment to Net Income in Operating section (Indirect Method)."
  },
  {
    "id": "FAR_TBS_004",
    "type": "TBS",
    "question": "Parent Co acquired 80% of Sub Co on Jan 1. Calculate the controlling and non-controlling interest (NCI) and Goodwill.",
    "exhibits": [
      {
        "title": "Acquisition Details",
        "content": "<strong>Consideration Paid (Cash):</strong> $800,000<br><strong>FV of NCI (20%):</strong> $200,000<br><strong>BV of Sub Net Assets:</strong> $600,000<br><strong>FV Adjustments:</strong> Equipment is worth $100,000 more than Book Value. All other assets are at FV."
      }
    ],
    "items": [
      {
        "type": "grid",
        "title": "Consolidation Worksheet",
        "headers": ["Item", "Amount ($)"],
        "rows": [
          { "label": "Total Fair Value of Sub (100%)", "type": "input" },
          { "label": "Fair Value of Identifiable Net Assets", "type": "input" },
          { "label": "Goodwill", "type": "input" }
        ],
        "correctAnswer": [
          [1000000],
          [700000],
          [300000]
        ]
      },
      {
        "type": "mcq-group",
        "title": "Conceptual",
        "questions": [
          {
            "prompt": "How is NCI reported on the Balance Sheet?",
            "options": ["Liability", "Mezzanine", "Equity", "Contra-Asset"],
            "correct": "Equity"
          }
        ]
      }
    ],
    "explanation": "Total FV = Paid $800k + NCI $200k = $1,000,000.<br>FV Net Assets = BV $600k + Equip Adj $100k = $700,000.<br>Goodwill = Total FV ($1M) - FV Net Assets ($700k) = $300,000.<br>NCI is reported in the Equity section, separate from parent's equity."
  },
  {
    "id": "FAR_TBS_005",
    "type": "TBS",
    "question": "Record the journal entries for the issuance of Common Stock and Preferred Stock.",
    "exhibits": [
      {
        "title": "Corporate Charter",
        "content": "<strong>Common Stock:</strong> $1 par value. Issued 10,000 shares for $15/share.<br><strong>Preferred Stock:</strong> $100 par value, 5%. Issued 1,000 shares for $110/share."
      }
    ],
    "items": [
      {
        "type": "journal-entry",
        "title": "Entry 1: Issuance of Common Stock",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Cash", "Common Stock", "APIC - Common", "Preferred Stock", "APIC - Preferred"],
        "rows": [
          { "label": "1", "type": "select-input-input" },
          { "label": "2", "type": "select-input-input" },
          { "label": "3", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Cash", 150000, 0],
          ["Common Stock", 0, 10000],
          ["APIC - Common", 0, 140000]
        ]
      },
      {
        "type": "journal-entry",
        "title": "Entry 2: Issuance of Preferred Stock",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Cash", "Common Stock", "APIC - Common", "Preferred Stock", "APIC - Preferred"],
        "rows": [
          { "label": "1", "type": "select-input-input" },
          { "label": "2", "type": "select-input-input" },
          { "label": "3", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Cash", 110000, 0],
          ["Preferred Stock", 0, 100000],
          ["APIC - Preferred", 0, 10000]
        ]
      }
    ],
    "explanation": "<strong>Common:</strong> Cash = 10k * 15 = 150k. CS = 10k * 1 = 10k. APIC = Plug (140k).<br><strong>Preferred:</strong> Cash = 1k * 110 = 110k. PS = 1k * 100 = 100k. APIC = Plug (10k)."
  },
  {
    "id": "FAR_TBS_006",
    "type": "TBS",
    "question": "Prepare the journal entries for the Bond Issuance and the first interest payment.",
    "exhibits": [
      {
        "title": "Bond Details",
        "content": "<strong>Face Value:</strong> $1,000,000<br><strong>Stated Rate:</strong> 8% (paid semi-annually on June 30 and Dec 31)<br><strong>Market Rate:</strong> 10%<br><strong>Issue Date:</strong> January 1, Year 1<br><strong>Term:</strong> 5 Years<br><strong>Issue Price:</strong> $922,780"
      }
    ],
    "items": [
      {
        "type": "journal-entry",
        "title": "Entry 1: Issuance on Jan 1, Year 1",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Cash", "Bonds Payable", "Discount on Bonds Payable", "Premium on Bonds Payable", "Interest Expense"],
        "rows": [
          { "label": "1", "type": "select-input-input" },
          { "label": "2", "type": "select-input-input" },
          { "label": "3", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Cash", 922780, 0],
          ["Discount on Bonds Payable", 77220, 0],
          ["Bonds Payable", 0, 1000000]
        ]
      },
      {
        "type": "journal-entry",
        "title": "Entry 2: Interest Pmt on June 30, Year 1",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Cash", "Interest Expense", "Discount on Bonds Payable", "Bonds Payable"],
        "rows": [
          { "label": "1", "type": "select-input-input" },
          { "label": "2", "type": "select-input-input" },
          { "label": "3", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Interest Expense", 46139, 0],
          ["Discount on Bonds Payable", 0, 6139],
          ["Cash", 0, 40000]
        ]
      }
    ],
    "explanation": "<strong>Issuance:</strong> Cash Dr $922,780. BP Cr $1,000,000. Discount Dr Plug ($77,220).<br><strong>Interest:</strong> Cash Paid = $1M * 4% = $40,000. Interest Exp = CV ($922,780) * 5% (semiannual mkt) = $46,139. Discount Amort = 46,139 - 40,000 = 6,139."
  },
  {
    "id": "FAR_TBS_007",
    "type": "TBS",
    "question": "Calculate Basic and Diluted Earnings Per Share (EPS) for Year 1.",
    "exhibits": [
      {
        "title": "Financial Data",
        "content": "<strong>Net Income:</strong> $500,000<br><strong>Common Shares Outstanding (Jan 1):</strong> 100,000<br><strong>Preferred Stock (Convertible):</strong> 10,000 shares, $100 par, 6% cumulative. Convertible into 3 shares of common each. Dividends were declared.<br><strong>Stock Options:</strong> 20,000 options exercisable at $20. Average market price $25."
      }
    ],
    "items": [
      {
        "type": "grid",
        "title": "EPS Calculation",
        "headers": ["Metric", "Value"],
        "rows": [
          { "label": "Preferred Dividends", "type": "input" },
          { "label": "Basic EPS Numerator", "type": "input" },
          { "label": "Basic EPS Denominator", "type": "input" },
          { "label": "Basic EPS", "type": "input" },
          { "label": "Diluted EPS", "type": "input" }
        ],
        "correctAnswer": [
          [60000],
          [440000],
          [100000],
          [4.40],
          [3.73]
        ]
      }
    ],
    "explanation": "<strong>Basic:</strong> Pref Div = 10,000 * $100 * 6% = $60,000. Num = 500k - 60k = 440k. Denom = 100k. Basic EPS = $4.40.<br><strong>Diluted:</strong> <br>1. Options (Treasury Stock Method): Proceeds = 20k * 20 = 400k. Buyback = 400k / 25 = 16k shares. Incremental = 20k - 16k = 4,000 shares.<br>2. Conv Pref (If-Converted): Add back dividends ($60k) to Numerator -> $500k. Add shares (10k * 3 = 30k) to Denom.<br>Total Diluted Num = $500,000. Total Diluted Denom = 100k + 4k + 30k = 134,000.<br>Diluted EPS = 500,000 / 134,000 = 3.73."
  },
  {
    "id": "FAR_TBS_008",
    "type": "TBS",
    "question": "Determine the correct Inventory Valuation using Lower of Cost or Net Realizable Value (LCNRV).",
    "exhibits": [
      {
        "title": "Inventory Data",
        "content": "The company uses FIFO.<br><br><strong>Item A:</strong> Cost $100, Selling Price $120, Disposal Cost $5.<br><strong>Item B:</strong> Cost $80, Selling Price $75, Disposal Cost $2.<br><strong>Item C:</strong> Cost $50, Selling Price $60, Disposal Cost $15."
      }
    ],
    "items": [
      {
        "type": "grid",
        "title": "Inventory Valuation",
        "headers": ["Item", "NRV", "Final Inventory Value"],
        "rows": [
          { "label": "Item A", "type": "input" },
          { "label": "Item B", "type": "input" },
          { "label": "Item C", "type": "input" }
        ],
        "correctAnswer": [
          [115, 100],
          [73, 73],
          [45, 45]
        ]
      }
    ],
    "explanation": "LCNRV Rule: Compare Cost vs NRV (Selling Price - Disposal Costs).<br>Item A: NRV = 120-5=115. Cost=100. Lower=100.<br>Item B: NRV = 75-2=73. Cost=80. Lower=73.<br>Item C: NRV = 60-15=45. Cost=50. Lower=45."
  },
  {
    "id": "FAR_TBS_009",
    "type": "TBS",
    "question": "Prepare the Year 1 adjusting entries for the following situations.",
    "exhibits": [
      {
        "title": "Situations",
        "content": "1. <strong>Supplies:</strong> Beg Balance $500. Purchases $2,000. Count at year-end shows $800 on hand.<br>2. <strong>Insurance:</strong> Paid $12,000 on Oct 1, Year 1 for a 1-year policy (recorded as Prepaid Insurance)."
      }
    ],
    "items": [
      {
        "type": "journal-entry",
        "title": "Entry 1: Supplies Adjustment",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Supplies Expense", "Supplies", "Prepaid Insurance", "Insurance Expense"],
        "rows": [
          { "label": "1", "type": "select-input-input" },
          { "label": "2", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Supplies Expense", 1700, 0],
          ["Supplies", 0, 1700]
        ]
      },
      {
        "type": "journal-entry",
        "title": "Entry 2: Insurance Adjustment",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Supplies Expense", "Supplies", "Prepaid Insurance", "Insurance Expense"],
        "rows": [
          { "label": "1", "type": "select-input-input" },
          { "label": "2", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Insurance Expense", 3000, 0],
          ["Prepaid Insurance", 0, 3000]
        ]
      }
    ],
    "explanation": "<strong>Supplies:</strong> Avail = 500+2000=2500. End=800. Used=1700. Dr Exp, Cr Asset.<br><strong>Insurance:</strong> 12,000 / 12 months = 1,000/mo. Oct/Nov/Dec = 3 months. Exp = 3,000."
  },
  {
    "id": "FAR_TBS_010",
    "type": "TBS",
    "question": "Reconcile the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance to the Government-Wide Statement of Activities.",
    "exhibits": [
      {
        "title": "Data",
        "content": "<strong>Net Change in Fund Balance (Govt Funds):</strong> $100,000<br><strong>Capital Outlay (purchased equipment):</strong> $50,000<br><strong>Depreciation Expense:</strong> $20,000<br><strong>Bond Proceeds (issued debt):</strong> $80,000<br><strong>Principal Repayments:</strong> $10,000"
      }
    ],
    "items": [
      {
        "type": "grid",
        "title": "Reconciliation Worksheet",
        "headers": ["Item", "Amount (+/-)"],
        "rows": [
          { "label": "Net Change in Fund Balance", "type": "input" },
          { "label": "Add: Capital Outlay", "type": "input" },
          { "label": "Less: Depreciation", "type": "input" },
          { "label": "Less: Bond Proceeds", "type": "input" },
          { "label": "Add: Principal Repayments", "type": "input" },
          { "label": "Change in Net Position (Govt Wide)", "type": "input" }
        ],
        "correctAnswer": [
          [100000],
          [50000],
          [-20000],
          [-80000],
          [10000],
          [60000]
        ]
      }
    ],
    "explanation": "Start: 100k.<br>+ Cap Outlay (Asset on GW, Exp on Fund) +50k.<br>- Depr (Exp on GW, none on Fund) -20k.<br>- Bond Proceeds (Liab on GW, Rev on Fund) -80k.<br>+ Principal (Liab Red on GW, Exp on Fund) +10k.<br>Total = 100+50-20-80+10 = 60,000."
  },
  {
    "id": "FAR_TBS_011",
    "type": "TBS",
    "question": "Determine the accounting treatment for the following Contingencies.",
    "exhibits": [],
    "items": [
      {
        "type": "mcq-group",
        "title": "Contingency Analysis",
        "questions": [
          {
            "prompt": "Lawsuit A: Probable loss, amount estimated $100k.",
            "options": ["Accrue 100k", "Disclose Only", "No Disclosure"],
            "correct": "Accrue 100k"
          },
          {
            "prompt": "Lawsuit B: Reasonably Possible loss, amount $50k.",
            "options": ["Accrue 50k", "Disclose Only", "No Disclosure"],
            "correct": "Disclose Only"
          },
          {
            "prompt": "Lawsuit C: Remote chance of loss.",
            "options": ["Accrue", "Disclose Only", "No Disclosure"],
            "correct": "No Disclosure"
          },
          {
            "prompt": "Lawsuit D: Probable Gain of $200k.",
            "options": ["Accrue Gain", "Disclose Only", "No Disclosure"],
            "correct": "Disclose Only"
          }
        ]
      }
    ],
    "explanation": "Probable & Estimable = Accrue. Reasonably Possible = Disclose. Remote = Ignore. Gain Contingencies = Never accrue (conservatism), disclose if probable/material."
  },
  {
    "id": "FAR_TBS_012",
    "type": "TBS",
    "question": "Calculate the depreciation expense for Year 1 and Year 2 using the Double-Declining Balance (DDB) method.",
    "exhibits": [
      {
        "title": "Asset Info",
        "content": "<strong>Cost:</strong> $100,000<br><strong>Salvage Value:</strong> $10,000<br><strong>Useful Life:</strong> 5 Years<br><strong>Purchase Date:</strong> January 1, Year 1"
      }
    ],
    "items": [
      {
        "type": "grid",
        "title": "Depreciation Schedule (DDB)",
        "headers": ["Year", "Book Value Beg", "Rate", "Expense", "Accum Depr End", "Book Value End"],
        "rows": [
          { "label": "Year 1", "type": "input" },
          { "label": "Year 2", "type": "input" }
        ],
        "correctAnswer": [
          [100000, 0.4, 40000, 40000, 60000],
          [60000, 0.4, 24000, 64000, 36000]
        ]
      }
    ],
    "explanation": "Rate = 1/5 * 2 = 40%.<br>Year 1: 100,000 * 40% = 40,000. BV = 60,000.<br>Year 2: 60,000 * 40% = 24,000. BV = 36,000.<br>Note: Ignore salvage value in DDB calculation until the end (floor)."
  },
  {
    "id": "FAR_TBS_013",
    "type": "TBS",
    "question": "Record the Equity Method entries for Investor Co.",
    "exhibits": [
      {
        "title": "Investment Activity",
        "content": "Jan 1: Purchased 40% of Investee for $400,000.<br>Dec 31: Investee reported Net Income of $100,000.<br>Dec 31: Investee paid dividends of $20,000."
      }
    ],
    "items": [
      {
        "type": "journal-entry",
        "title": "Entry 1: Record Share of Income",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Cash", "Investment in Affiliate", "Dividend Income", "Equity in Earnings", "Retained Earnings"],
        "rows": [
          { "label": "1", "type": "select-input-input" },
          { "label": "2", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Investment in Affiliate", 40000, 0],
          ["Equity in Earnings", 0, 40000]
        ]
      },
      {
        "type": "journal-entry",
        "title": "Entry 2: Record Dividend Received",
        "headers": ["Account Name", "Debit", "Credit"],
        "accountOptions": ["", "Cash", "Investment in Affiliate", "Dividend Income", "Equity in Earnings"],
        "rows": [
          { "label": "1", "type": "select-input-input" },
          { "label": "2", "type": "select-input-input" }
        ],
        "correctAnswer": [
          ["Cash", 8000, 0],
          ["Investment in Affiliate", 0, 8000]
        ]
      }
    ],
    "explanation": "Income: 100k * 40% = 40k. Increase Investment, Rec Revenue.<br>Divs: 20k * 40% = 8k. Increase Cash, Decrease Investment."
  },
  {
    "id": "FAR_TBS_014",
    "type": "TBS",
    "question": "Calculate Revenue to be recognized in Year 1 using the Percentage of Completion method.",
    "exhibits": [
      {
        "title": "Contract Details",
        "content": "<strong>Contract Price:</strong> $1,000,000<br><strong>Estimated Total Cost:</strong> $800,000<br><strong>Costs Incurred in Year 1:</strong> $200,000<br><strong>Billings in Year 1:</strong> $150,000<br><strong>Collections in Year 1:</strong> $100,000"
      }
    ],
    "items": [
      {
        "type": "grid",
        "title": "Calculation",
        "headers": ["Item", "Amount"],
        "rows": [
          { "label": "Percentage Complete (%)", "type": "input" },
          { "label": "Revenue to Recognize", "type": "input" },
          { "label": "Gross Profit to Recognize", "type": "input" }
        ],
        "correctAnswer": [
          [25],
          [250000],
          [50000]
        ]
      }
    ],
    "explanation": "Pct Complete = Costs Incurred / Est Total Costs = 200k / 800k = 25%.<br>Revenue = 25% * $1,000,000 = $250,000.<br>Gross Profit = Rev (250k) - Cost (200k) = $50,000."
  },
  {
    "id": "FAR_TBS_015",
    "type": "TBS",
    "question": "Classify the following NFP expenses as 'Program Services' or 'Supporting Services'.",
    "exhibits": [],
    "items": [
      {
        "type": "mcq-group",
        "title": "Expense Classification",
        "questions": [
          {
            "prompt": "Salary of scientists conducting research (Medical Research Org)",
            "options": ["Program", "Supporting"],
            "correct": "Program"
          },
          {
            "prompt": "Cost of printing fundraising brochures",
            "options": ["Program", "Supporting"],
            "correct": "Supporting"
          },
          {
            "prompt": "Salary of the CEO",
            "options": ["Program", "Supporting"],
            "correct": "Supporting"
          },
          {
            "prompt": "Medicine distributed to patients",
            "options": ["Program", "Supporting"],
            "correct": "Program"
          }
        ]
      }
    ],
    "explanation": "Program services relate to the mission (Research, Medicine). Supporting services relate to Management/General (CEO) and Fundraising."
  }
]