CFA Level 1 QUESTIONS AND
ANSWERS WITH VERIFIED SOLUTIONS
100% CORRECT RATED A+
faithful representation, substance over form, prudence, neutrality, completeness -
ANSWER✔✔According to the IFRS what are the 5 qualities of financial
information that improve reliability
Costs can be reliably measured - ANSWER✔✔According to IFRS what condition
must be met for revenue recognition to occur?
Current ratio will decrease.
Accruing wages increases both current liabilities and expenses, but collecting
receivables has no effect on current assets or sales therefore the current ratio and
net income both decrease. - ANSWER✔✔A company accrued wages of $2,000
and collected accounts receivable of $10,000. What best describes the effect of
these two transactions on the company?
200,000 for both the stock split and the stock dividend.
Stock dividends and splits are treated in the same way for purposes of determining
weighted average number of shares outstanding the adj in the # of shares is made
as if the stock split or dividend occurred at the beginning of the year. -
ANSWER✔✔A company had 100,000 shares outstanding on 1 Jan 2009. The
company has no plans to issue additional shares or purchase treasury shares during
the year, but is planning either a two-for-one stock split or a 100 percent stock
dividend on 1 July. The number of shares used to determine eps at 31 Dec 2009 is
general requirement for financial statements. - ANSWER✔✔Under IFRS the
preparation of a complete set of financial statements is best described as a:
, Amortized Cost
Bonds payable issued by a company are financial liabilities that are measured at
amortized cost. - ANSWER✔✔A company issued bonds in 2009 that mature in
2019. The measurement basis that will most likely be used on the 2009 balance
sheet for the bonds is:
Noncurrent Assets and noncurrent liabilities are listed before current assets and
current liabilities. Also, minority interest must be shown as a component of equity.
- ANSWER✔✔What features are unique to financial statements in IFRS
Current assets and current liabilities are listed before noncurrent assets and
noncurrent liabilities. Minority interest is listed separately from equity or
liabilities. - ANSWER✔✔What features are unique to financial statements in U.S.
GAAP
The debt to equity ratio but not the interest coverage ratio.
The adjustments to convert operating leases would increase the amount of total
debt in the debt-equity ratio thus increasing the ratio; the portion of the lease
payments estimated to be lease interest expense would lower the interest coverage
ratio. - ANSWER✔✔An analyst makes the appropriate adjustments to the financial
statements of retail companies that are lessees using a substantial number of
operating leases. Compared to ratios computed from the unadjusted statements, the
ones computed from the adjusted statements would most likely be higher for: debt
to equity or interest coverage?
the common-size balance sheets.
because it expresses all data as a percentage of total assets.
note: current ratio is a measure of a company's ability to repay its short term debt -
ANSWER✔✔To gain insight into what portion of a company's assets is liquid, an
analyst will most likely use:
ANSWERS WITH VERIFIED SOLUTIONS
100% CORRECT RATED A+
faithful representation, substance over form, prudence, neutrality, completeness -
ANSWER✔✔According to the IFRS what are the 5 qualities of financial
information that improve reliability
Costs can be reliably measured - ANSWER✔✔According to IFRS what condition
must be met for revenue recognition to occur?
Current ratio will decrease.
Accruing wages increases both current liabilities and expenses, but collecting
receivables has no effect on current assets or sales therefore the current ratio and
net income both decrease. - ANSWER✔✔A company accrued wages of $2,000
and collected accounts receivable of $10,000. What best describes the effect of
these two transactions on the company?
200,000 for both the stock split and the stock dividend.
Stock dividends and splits are treated in the same way for purposes of determining
weighted average number of shares outstanding the adj in the # of shares is made
as if the stock split or dividend occurred at the beginning of the year. -
ANSWER✔✔A company had 100,000 shares outstanding on 1 Jan 2009. The
company has no plans to issue additional shares or purchase treasury shares during
the year, but is planning either a two-for-one stock split or a 100 percent stock
dividend on 1 July. The number of shares used to determine eps at 31 Dec 2009 is
general requirement for financial statements. - ANSWER✔✔Under IFRS the
preparation of a complete set of financial statements is best described as a:
, Amortized Cost
Bonds payable issued by a company are financial liabilities that are measured at
amortized cost. - ANSWER✔✔A company issued bonds in 2009 that mature in
2019. The measurement basis that will most likely be used on the 2009 balance
sheet for the bonds is:
Noncurrent Assets and noncurrent liabilities are listed before current assets and
current liabilities. Also, minority interest must be shown as a component of equity.
- ANSWER✔✔What features are unique to financial statements in IFRS
Current assets and current liabilities are listed before noncurrent assets and
noncurrent liabilities. Minority interest is listed separately from equity or
liabilities. - ANSWER✔✔What features are unique to financial statements in U.S.
GAAP
The debt to equity ratio but not the interest coverage ratio.
The adjustments to convert operating leases would increase the amount of total
debt in the debt-equity ratio thus increasing the ratio; the portion of the lease
payments estimated to be lease interest expense would lower the interest coverage
ratio. - ANSWER✔✔An analyst makes the appropriate adjustments to the financial
statements of retail companies that are lessees using a substantial number of
operating leases. Compared to ratios computed from the unadjusted statements, the
ones computed from the adjusted statements would most likely be higher for: debt
to equity or interest coverage?
the common-size balance sheets.
because it expresses all data as a percentage of total assets.
note: current ratio is a measure of a company's ability to repay its short term debt -
ANSWER✔✔To gain insight into what portion of a company's assets is liquid, an
analyst will most likely use:
