CPA FAR Practice Test

CPA FAR PP&E, Intangibles & Investments Practice Questions

PP&E, Intangibles & Investments makes up 7 of every 50 questions on a Tigertest CPA FAR practice test. Here are 10 of the 28 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on the AICPA's 2026 FAR blueprint. Original multiple-choice questions; simulations not included. Not affiliated with the AICPA or NASBA.

1. 1. A machine's price is $100,000. Sales tax is $6,000, freight $2,000 and installation $4,000. Repairing damage caused while installing it cost $1,500. The machine's capitalized cost is:

   • A.$100,000
   • B.$112,000
   • C.$113,500
   • D.$106,000

   Answer: B. Cost includes everything needed to get the asset ready for use: $100,000 + $6,000 + $2,000 + $4,000 = $112,000. Repairing avoidable damage is an expense, not a cost of the asset.

2. 2. A company buys land with an old building for $300,000, demolishes the building for $20,000 and sells the salvage for $3,000. Title fees are $2,000, and architect fees for the new building are $15,000. The land's cost is:

   • A.$334,000
   • B.$300,000
   • C.$322,000
   • D.$319,000

   Answer: D. Land = $300,000 + $20,000 - $3,000 + $2,000 = $319,000. Net demolition cost belongs to the land; the architect's fees belong to the new building.

3. 3. Equipment costing $90,000 with a $6,000 salvage value and a 7-year life is bought on April 1. Straight-line depreciation for the calendar year of purchase is:

   • A.$9,000
   • B.$3,000
   • C.$12,000
   • D.$9,643

   Answer: A. Annual depreciation is ($90,000 - $6,000) / 7 = $12,000, and 9 months of it is $9,000. Ignoring salvage gives $9,643.

4. 4. An asset costs $50,000, has a $5,000 salvage value and a 5-year life. Using double-declining balance, depreciation in year 2 is:

   • A.$10,800
   • B.$9,000
   • C.$12,000
   • D.$20,000

   Answer: C. The rate is 40%. Year 1 is $50,000 x 40% = $20,000; year 2 is ($50,000 - $20,000) x 40% = $12,000. Salvage is ignored until book value nears it.

5. 5. A machine costs $400,000, has a $40,000 salvage value and is expected to produce 900,000 units. It produces 120,000 units this year. Units-of-production depreciation is:

   • A.$40,000
   • B.$36,000
   • C.$48,000
   • D.$53,333

   Answer: C. The rate is ($400,000 - $40,000) / 900,000 = $0.40 per unit, and 120,000 x $0.40 = $48,000. Leaving out salvage gives $53,333.

6. 6. Equipment that cost $70,000 with accumulated depreciation of $52,000 is sold for $21,000. The company records:

   • A.A $3,000 gain
   • B.A $21,000 gain
   • C.An $18,000 loss
   • D.A $3,000 loss

   Answer: A. Carrying amount is $70,000 - $52,000 = $18,000. Proceeds of $21,000 exceed it by $3,000, a gain.

7. 7. An asset group held for use has a carrying amount of $500,000, undiscounted future cash flows of $520,000 and a fair value of $430,000. The impairment loss is:

   • A.$20,000
   • B.$70,000
   • C.$90,000
   • D.$0

   Answer: D. Under ASC 360 the carrying amount is first compared with undiscounted cash flows. $520,000 exceeds $500,000, so the asset is recoverable and no loss is recognized, even though fair value is lower.

8. 8. An asset held for use has a carrying amount of $800,000, undiscounted future cash flows of $700,000 and a fair value of $610,000. The impairment loss is:

   • A.$0
   • B.$190,000
   • C.$100,000
   • D.$90,000

   Answer: B. The carrying amount exceeds undiscounted cash flows, so the asset is not recoverable. The loss is carrying amount minus fair value: $800,000 - $610,000 = $190,000.

9. 9. After an impairment loss on equipment held for use, the equipment's fair value recovers. Reversing the loss is:

   • A.Permitted through OCI
   • B.Not permitted
   • C.Permitted up to original cost
   • D.Required if value recovers

   Answer: B. Under U.S. GAAP the written-down amount becomes the new cost basis for an asset held for use. Restoring a previously recognized impairment loss is prohibited.

10. 10. A building classified as held for sale has a carrying amount of $260,000, a fair value of $250,000 and costs to sell of $15,000. The loss to recognize is:

    • A.$15,000
    • B.$0
    • C.$10,000
    • D.$25,000

    Answer: D. Held-for-sale assets are measured at the lower of carrying amount and fair value less costs to sell: $250,000 - $15,000 = $235,000, so the loss is $260,000 - $235,000 = $25,000.