For Individuals For Educators

Ace your certifications with Practice Exams and AI assistance.

Browse Exams
For Educators
Blog

Privacy Policy
Terms of Service
Cookie Policy
Support

AWS SAA Exam Prep
PMI PMP Exam Prep
CPA Exam Prep
GCP PCA Exam Prep

© 2026 TinyHive Labs. Company number 16262776.

Practice CPA®CPA FAR Practice Exam 4Question 49

Easy1 markMultiple Choice

Area III: Select TransactionsFARContingenciesGain Contingency

CPA · Question 49 · Area III: Select Transactions

A company is the plaintiff in a lawsuit. Legal counsel states it is probable the company will win $1,000,000. How should this be reported?

Answer options:

A.

Accrue $1,000,000 gain.

B.

Accrue $1,000,000 gain and disclose.

C.

No disclosure or accrual.

D.

Disclose in notes only.

How to approach this question

Gain Contingencies: Never accrue (conservatism). Disclose if probable/material. Recognize only when realized (cash received/final judgment).

Full Answer

D.Disclose in notes only.✓ Correct

D

Gain contingencies are not recognized in the financial statements until realized. If probable, they should be disclosed.

Common mistakes

Accruing probable gains (symmetry with probable losses is NOT applied).

Question 48 All questions Question 50

Practice the full CPA FAR Practice Exam 4

50 questions · hints · full answers · grading

Sign up free Take the exam

More questions from this exam

Q01Orion Corp. is preparing its Statement of Cash Flows for the year ended December 31, Year 1, usin...Hard Q02Parent Co. acquired 80% of Sub Co. on January 1, Year 1. During Year 1, Parent sold inventory to ...Hard Q03A nongovernmental not-for-profit organization received a $500,000 pledge in Year 1 to be used for...Medium Q04A nongovernmental not-for-profit entity reports the following cash flows for the current year:<br...Medium Q05A city government levies a special property tax dedicated solely to the repayment of general obli...Medium

View all 50 questions →