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    PracticeCPA®CPA FAR Practice Exam 4Question 43
    Easy1 markMultiple Choice
    Area III: Select TransactionsFARFair ValueHierarchy

    CPA · Question 43 · Area III: Select Transactions

    Under ASC 820, which of the following inputs is considered Level 1 in the fair value hierarchy?

    Answer options:

    A.

    Unadjusted quoted prices in active markets for identical assets.

    B.

    Quoted prices for similar assets in active markets.

    C.

    Inputs other than quoted prices that are observable (e.g., interest rates).

    D.

    Unobservable inputs (e.g., management's cash flow forecast).

    How to approach this question

    Level 1: Quoted prices, Identical assets, Active market. Level 2: Similar assets or observable inputs. Level 3: Unobservable inputs.

    Full Answer

    A.Unadjusted quoted prices in active markets for identical assets.✓ Correct
    A
    Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

    Common mistakes

    Confusing Level 1 (Identical) with Level 2 (Similar).
    Question 42All questionsQuestion 44

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