CFA Level I:FSA : Financial Reporting mechanics(Reading 23) 习题精选 accounting, recording

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1.In accrual accounting, if an adjusting entry results in the reduction of an asset and the recording of an expense, the originating entry recorded was most likely a(n):

A. Prepaid expense.
B. Accrued expense.
C. Deferred revenue.


Ans: A.
The adjusting entry to record the expiry of a prepaid expense is the reduction of an asset (the prepaid) and the recognition of the expense.
For example, to record insurance expense:
Insurance expense                             100
Prepaid insurance expense                  100


B is incorrect. Accrued expense is an accounting expense recognized in the books before it is paid for. It is a liability, and is usually current. For example, at the end of the month, a company will accrue its salary expense before actually paying the employees. The entry is:
Salary expense       100
Salary payable        100


C is incorrect. Deferred revenue is advance payment or unearned revenue, recorded on the recipient’s balance sheet as a liability, until the services have been rendered or products have been delivered. For example, if a firm gets advance payment before deliver the good, it needs to make the following entry:
Cash                               100
Deterred revenue              100

cityboy

2.  The segment of an accounting system that reports business transaction by account is the:

A. Trial balance.

B. General ledger.

C. Financial statements.
   
Ans: B.

The general ledger contains all the journal entries that are posted to the general journal and other specialized journals, except that the general ledger sorts the data by account where the general journal and the specialized journal records the transactions by date. The general ledger is considered the core of an accounting system.

  

A is incorrect. A trial balance is prepared at the end of an accounting period prior to the financial statements. A trial balance reports only ending balances (and not transactions) for each account. Adjusting entries are then made, if required, and then an adjusted trial balance can be prepared, for as many cycles as are necessary.

  

C is incorrect. Financial statements are prepared from an adjusted trial balance and provide a picture of the firm’s financial status. However, the financial statements do not report business transactions by account; they are much to summarized for that.

cityboy

3. At the start of the year, a company’s capital contributed by owners and retained earnings accounts had balances of $10,000 and $6,000, respectively. During the year, the following events took place: Net income earned $4,000 Interest paid on debt $ 500 Repayment of long-term debt $1,000 Proceeds from shares issued $1,000 Dividends paid $ 600 The end of year owners’ equity is closest to: A. $19,400. B. $19,900. C. $20,400.

Ans: C. Start of year capital contributed by owners $10,000 Additional shares issued 1,000 Initial retained earnings 6,000   Net income 4,000   Dividends paid (600) Increase in retained earnings 3,400 3,400 Ending owners’ equity $20,400

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5. A company fails to record accrued wages for a reporting period. What effect will this error have on the company’s financial statement?

A. Assets and liabilities are understated.

B. Assets and owners’ equity are overstated.

C. Liabilities are understated and owners’ equity is overstated.

  
   
Ans: C.

Accrued wages should be recorded as a liability (wages payable). Failing to record a liability for accrued wages will understate wage expense, which leads to an overstatement of net income. Since net income is overstated, retained earnings and owners’ equity are both overstated. Assets are unaffected.

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6. The least likely reason that a security analyst needs to understand the accounting process is to:

A. prevent earnings manipulation by management.

B. make adjustments to reflect items not reported in the financial statements.

C. aid in the assessment of management’s judgment in accruals and valuations.

  
   
Ans: A.

Understanding the accounting process may assist an analyst in identifying earnings manipulation, but it will not prevent the manipulation of earnings by management. It is important for analysts to understand the accounting process so they can make adjustments for items not reported and to aid in the assessment of management’s judgment of accruals and valuations.

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7. What is the most likely effect on the accounting equation when a company purchases office equipment with cash?

A. Assets increase, and liabilities increase.

B. There is no effect on the accounting equation.

C. Assets decrease, and owners’ equity decreases.

  
   
Ans: B.

There would be no effect on the accounting equation because the company has exchanged one asset for another. Cash has decreased, and office equipment, a capital asset, has increased.

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8. Which of the following statements is most accurate?

A. Accrued revenue arises when a company receives cash prior to earning the revenue.

B. A valuation adjustment for an asset converts its historical cost to its depreciated value.

C. Accrued expenses arise when a company incurs expenses that have not yet been paid as of the end of the accounting period.

  
   
Ans: C.

The principle of accrual accounting requires that revenue is recorded when the firm earns it and expenses are recorded as the firm incurs them, regardless of whether cash has actually been paid.

Accrued expense—the firm owes cash for expenses it has incurred. Expense increase and a liability for accrued expenses increases as well. The liability decreases when the firm pays cash to satisfy it.

  

A is incorrect. Accrued revenue arises when a company receives cash before it provides a good or service to customers.

  

B is incorrect. A valuation adjustment for an asset converts its historical cost to current market value.

cityboy

9. At the start of a month, a retailer paid $5,000 in cash for different types of candies. He sold candies costing $2,000 for $3,000 during the month. The most likely effect of these transactions on the retailer’s accounting equation for the month is that assets will:

A. be unchanged.

B. increase by $1,000.

C. decrease by $2,000.

  
   
Ans: B.

Buying $5,000 of candies will decrease cash by $5,000 and increase inventory by $5,000. Selling $2,000 of candies for $3,000 will decrease inventory by $2,000, and increase either cash (if cash collected in the same accounting period) or accounts receivable (if sold on credit) by $3,000. The combined effect is an increase of $1,000 in assets.

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10. Which of the following statements best describes a trial balance? A trial balance is a document or computer file that:

A. shows all business transactions by account.

B. lists account balances at a particular point in time.

C. contains business transactions recorded in the order in which they occur.

  
   
Ans. B.

A trial balance is a document that lists account balances at a particular point in time.

At the end of the accounting period, an initial trial balance is prepared that shows the balances in each account. If any adjusting entries are needed, they will be recorded and reflected in an adjusted trial balance.

  

A is incorrect. Journal entries show all business transactions by account.

  

C is incorrect. A listing of all the journal entries in order of their dates is called the general journal.

cityboy

11. Under IFRS, which of the following financial statement elements most accurately represents inflows of economic resources to a company?

A. Assets.

B. Equity.

C. Revenues.

  
   
Ans: C.

The financial statement elements under International Financial Reporting Standards (IFRS) are: Assets, Liabilities, Owners’ Equity, Revenue, and Expenses. Revenues are inflows of economic resources.

  

A is incorrect. Assets are the firm’s economic resources.

  

C is incorrect. Equity is the owners’ residual claim of a firm’s resources, which is the amount by which assets exceed liabilities.