CFA study session 7: Financial reporting &
analysis | Accurate Questions & Answers |
Latest (2026/2027) Updated Version |
100% Guaranteed Pass
1. Expenses on the income statement may be grouped by:
A. nature, but not by function.
B. function, but not by nature.
C. either function or nature. - ANSWER ✓ C. either function or nature.
2. An example of an expense classification by function is:
A. tax expense.
B. interest expense.
C. cost of goods sold. - ANSWER ✓ C. cost of goods sold.
3. Denali Limited, a manufacturing company, had the following income
statement information:
Revenue $4,000,000
Cost of goods sold $3,000,000
, Other operating expenses $500,000
Interest expense $100,000
Tax expense $120,000
Denali's gross profit is equal to
A. $280,000.
B. $500,000.
C. $1,000,000. - ANSWER ✓ C. $1,000,000.
4. Under IFRS, income includes increases in economic benefits from:
A. increases in liabilities not related to owners' contributions.
B. enhancements of assets not related to owners' contributions.
C. increases in owners' equity related to owners' contributions, - ANSWER
✓ B. enhancements of assets not related to owners' contributions.
5. Fairplay had the following information related to the sale of its products during
2009, which was its first year of business:
Revenue $1,000,000
Returns of goods sold $100,000
Cash collected $800,000
Cost of goods sold $700,000
, Under the accrual basis of accounting, how much net revenue would be
reported on Fairplay's 2009 income statement?
A. $200,000.
B. $900,000.
C. $1,000,000. - ANSWER ✓ B. $900,000. (1m - 100k)
6. If the outcome of a long-term contract can be measured reliably, the preferred
accounting method under both IFRS and US GAAP is:
A. the cost recovery method.
B. the completed contract method.
C. the percentage-of-completion method. - ANSWER ✓ C. the percentage-
of-completion method.
7. At the beginning of 2009, Florida Road Construction entered into a contract to
build a road for the government. Construction will take four years. The
following information as of 31 December 2009 is available for the contract:
Total revenue according to contract $10,000,000
Total expected cost $8,000,000
Cost incurred during 2009 $1,200,000
Assume that the company estimates percentage complete based on costs
incurred as a percentage of total estimated costs. Under the completed
contract method, how much revenue will be reported in 2009?
, A. None.
B. $300,000.
C. $1,500,000. - ANSWER ✓ A. None.
8. During 2009, Argo Company sold 10 acres of prime commercial zoned land to
a builder for $5,000,000. The builder gave Argo a $1,000,000 down payment
and will pay the remaining balance of $4,000,000 to Argo in 2010. Argo
purchased the land in 2002 for $2,000,000. Using the installment method,
how much profit will Argo report for 2009?
A. $600,000.
B. $1,000,000.
C. $3,000,000. - ANSWER ✓ A. $600,000. (([5m-2m]/5m)*1m)
9. During 2009, Argo Company sold 10 acres of prime commercial zoned land to
a builder for $5,000,000. The builder gave Argo a $1,000,000 down payment
and will pay the remaining balance of $4,000,000 to Argo in 2010. Argo
purchased the land in 2002 for $2,000,000. How much profit will Argo report
for 2009 using the cost recovery method?
A. None.
B. $600,000.
C. $1,000,000. - ANSWER ✓ A. None. (1m < 2m)
analysis | Accurate Questions & Answers |
Latest (2026/2027) Updated Version |
100% Guaranteed Pass
1. Expenses on the income statement may be grouped by:
A. nature, but not by function.
B. function, but not by nature.
C. either function or nature. - ANSWER ✓ C. either function or nature.
2. An example of an expense classification by function is:
A. tax expense.
B. interest expense.
C. cost of goods sold. - ANSWER ✓ C. cost of goods sold.
3. Denali Limited, a manufacturing company, had the following income
statement information:
Revenue $4,000,000
Cost of goods sold $3,000,000
, Other operating expenses $500,000
Interest expense $100,000
Tax expense $120,000
Denali's gross profit is equal to
A. $280,000.
B. $500,000.
C. $1,000,000. - ANSWER ✓ C. $1,000,000.
4. Under IFRS, income includes increases in economic benefits from:
A. increases in liabilities not related to owners' contributions.
B. enhancements of assets not related to owners' contributions.
C. increases in owners' equity related to owners' contributions, - ANSWER
✓ B. enhancements of assets not related to owners' contributions.
5. Fairplay had the following information related to the sale of its products during
2009, which was its first year of business:
Revenue $1,000,000
Returns of goods sold $100,000
Cash collected $800,000
Cost of goods sold $700,000
, Under the accrual basis of accounting, how much net revenue would be
reported on Fairplay's 2009 income statement?
A. $200,000.
B. $900,000.
C. $1,000,000. - ANSWER ✓ B. $900,000. (1m - 100k)
6. If the outcome of a long-term contract can be measured reliably, the preferred
accounting method under both IFRS and US GAAP is:
A. the cost recovery method.
B. the completed contract method.
C. the percentage-of-completion method. - ANSWER ✓ C. the percentage-
of-completion method.
7. At the beginning of 2009, Florida Road Construction entered into a contract to
build a road for the government. Construction will take four years. The
following information as of 31 December 2009 is available for the contract:
Total revenue according to contract $10,000,000
Total expected cost $8,000,000
Cost incurred during 2009 $1,200,000
Assume that the company estimates percentage complete based on costs
incurred as a percentage of total estimated costs. Under the completed
contract method, how much revenue will be reported in 2009?
, A. None.
B. $300,000.
C. $1,500,000. - ANSWER ✓ A. None.
8. During 2009, Argo Company sold 10 acres of prime commercial zoned land to
a builder for $5,000,000. The builder gave Argo a $1,000,000 down payment
and will pay the remaining balance of $4,000,000 to Argo in 2010. Argo
purchased the land in 2002 for $2,000,000. Using the installment method,
how much profit will Argo report for 2009?
A. $600,000.
B. $1,000,000.
C. $3,000,000. - ANSWER ✓ A. $600,000. (([5m-2m]/5m)*1m)
9. During 2009, Argo Company sold 10 acres of prime commercial zoned land to
a builder for $5,000,000. The builder gave Argo a $1,000,000 down payment
and will pay the remaining balance of $4,000,000 to Argo in 2010. Argo
purchased the land in 2002 for $2,000,000. How much profit will Argo report
for 2009 using the cost recovery method?
A. None.
B. $600,000.
C. $1,000,000. - ANSWER ✓ A. None. (1m < 2m)
