CFA level 1 Exam with precise detailed ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answers
According to the IFRS what are the 5 qualities of financial information that improve ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
reliability - correct answer✔✔faithful representation, substance over form, prudence, ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
neutrality, completeness ||\\//||
According to IFRS what condition must be met for revenue recognition to occur? - correct ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔Costs can be reliably measured ||\\//|| ||\\//|| ||\\//|| ||\\//||
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? - correct answer✔✔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.
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 - correct answer✔✔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.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Under IFRS the preparation of a complete set of financial statements is best described as a: -
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
correct answer✔✔general requirement for financial statements.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
, 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: - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔Amortized Cost ||\\//||
Bonds payable issued by a company are financial liabilities that are measured at amortized
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
cost.
What features are unique to financial statements in IFRS - correct answer✔✔Noncurrent
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Assets and noncurrent liabilities are listed before current assets and current liabilities. Also,
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
minority interest must be shown as a component of equity.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
What features are unique to financial statements in U.S. GAAP - correct answer✔✔Current
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
assets and current liabilities are listed before noncurrent assets and noncurrent liabilities.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Minority interest is listed separately from equity or liabilities. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
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? - correct ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔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.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
To gain insight into what portion of a company's assets is liquid, an analyst will most likely
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
use: - correct answer✔✔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
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
The following info is available ||\\//|| ||\\//|| ||\\//|| ||\\//||
||\\//|| Company A Company B ||\\//|| ||\\//|| ||\\//||
answers
According to the IFRS what are the 5 qualities of financial information that improve ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
reliability - correct answer✔✔faithful representation, substance over form, prudence, ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
neutrality, completeness ||\\//||
According to IFRS what condition must be met for revenue recognition to occur? - correct ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔Costs can be reliably measured ||\\//|| ||\\//|| ||\\//|| ||\\//||
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? - correct answer✔✔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.
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 - correct answer✔✔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.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Under IFRS the preparation of a complete set of financial statements is best described as a: -
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
correct answer✔✔general requirement for financial statements.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
, 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: - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔Amortized Cost ||\\//||
Bonds payable issued by a company are financial liabilities that are measured at amortized
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
cost.
What features are unique to financial statements in IFRS - correct answer✔✔Noncurrent
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Assets and noncurrent liabilities are listed before current assets and current liabilities. Also,
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
minority interest must be shown as a component of equity.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
What features are unique to financial statements in U.S. GAAP - correct answer✔✔Current
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
assets and current liabilities are listed before noncurrent assets and noncurrent liabilities.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Minority interest is listed separately from equity or liabilities. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
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? - correct ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔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.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
To gain insight into what portion of a company's assets is liquid, an analyst will most likely
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
use: - correct answer✔✔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
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
The following info is available ||\\//|| ||\\//|| ||\\//|| ||\\//||
||\\//|| Company A Company B ||\\//|| ||\\//|| ||\\//||
