CFA LEVEL - 1 MOCK PAPER
100% Correct Answers & Rationale (100% verified &Graded A+).
FINANCIALREPORTINGANALYSIS
1. Which of the following statements is most accurate?
A. A classified balance sheet is one which departs materially from accounting standards as per
an auditor’s opinion.
B. A classified balance sheet is grouped into current and non-current assets and liabilities.
C. The excess of current assets over current liabilities is known as liquidity.
Correct Answer:B
2. An asset or liability is created on the balance sheet when revenue is recognized before cash is
received and vice versa. Which of the following combinations is most accurate regarding the
creation of an asset or liability?
Correct Answer:B
3. Balance sheet provides financial information of a company:
A. For a particular period such as a quarter, or a year.
B. At a specific point in time.
C. In terms of two basic elements: assets and liabilities.
Correct Answer:B
4. Which of the following statements is most accurate about balance sheets? A. Under US GAAP,
intangibles are valued at historical cost.
B. Under US GAAP, a classified balance sheet presents non-current liabilities after current
liabilities.
C. In a liquidity-based presentation, land use rights is ordered above bank deposits.
Correct Answer:B
Page 1
,5. The balance sheet is based upon which of the following equations? A. Assets = Liabilities +
Equity.
B. Assets = Liabilities – Equity. C. Assets = Equity – Liabilities.
Correct Answer:A
6. Which of the following is least likely correct about balance sheets?
A. Different assets and liabilities on the balance sheet have different measurement bases.
B. Equity in the balance sheet is a measure of the intrinsic value of a company.
C. Items on the balance sheet are measured at current value at the end of the reporting period
that are subject to change.
Correct Answer:B
7. Current and non-current classifications of assets are not required for liquidity-based
presentation providing reliable information under:
A. IFRS.
B. US GAAP.
C. Both.
Correct Answer:A
8. Generally, which of the following accounting standards require that assets and liabilities
be presented as a separate classifications: current and non-current?
A. USGA
PP
B. IFRS.
C. Both.
Correct
Answe
r:B
9. Which of the following is least likely a criterion for classification of a liability as current? A. It is
expected to be settled in the entity’s normal operating cycle.
B. It is expected to be settled in one year after the balance sheet date.
C. The entity has an unconditional right to defer settlement of the liability for at least one year
after the balance sheet date.
Correct Answer:C
Page 2
, 10. The excess of current assets over current liabilities is called:
A. current ratio.
B. net assets.
C. net working capital.
Correct Answer:C
11. Which of the following is least likely classified as a current asset?
A. Prepaid expense.
B. Marketable securities.
C. Trades payable.
Correct Answer:C
12. Which of the following is a contra asset account?
A. Bad debt expense.
B. Doubtful debt allowance.
C. Trade receivables.
Correct Answer:C
13. Which of the following is least likely a current liability?
A. Deferred income.
B. Income tax payable.
C. Prepaid expense.
Correct Answer:C
14. The following information is available for Melissa March Ltd.
What is the total value of the company’s current liabilities?
A. $27,000. B. $34,500.
C.$39,000.
Correct Answer:A
15. Deferred income arises when:
A. delivery of goods and services is done, payment is yet to be received.
B. delivery of goods and services and payment are both due.
C. delivery of goods and services is due, payment has been received.
Page 3
100% Correct Answers & Rationale (100% verified &Graded A+).
FINANCIALREPORTINGANALYSIS
1. Which of the following statements is most accurate?
A. A classified balance sheet is one which departs materially from accounting standards as per
an auditor’s opinion.
B. A classified balance sheet is grouped into current and non-current assets and liabilities.
C. The excess of current assets over current liabilities is known as liquidity.
Correct Answer:B
2. An asset or liability is created on the balance sheet when revenue is recognized before cash is
received and vice versa. Which of the following combinations is most accurate regarding the
creation of an asset or liability?
Correct Answer:B
3. Balance sheet provides financial information of a company:
A. For a particular period such as a quarter, or a year.
B. At a specific point in time.
C. In terms of two basic elements: assets and liabilities.
Correct Answer:B
4. Which of the following statements is most accurate about balance sheets? A. Under US GAAP,
intangibles are valued at historical cost.
B. Under US GAAP, a classified balance sheet presents non-current liabilities after current
liabilities.
C. In a liquidity-based presentation, land use rights is ordered above bank deposits.
Correct Answer:B
Page 1
,5. The balance sheet is based upon which of the following equations? A. Assets = Liabilities +
Equity.
B. Assets = Liabilities – Equity. C. Assets = Equity – Liabilities.
Correct Answer:A
6. Which of the following is least likely correct about balance sheets?
A. Different assets and liabilities on the balance sheet have different measurement bases.
B. Equity in the balance sheet is a measure of the intrinsic value of a company.
C. Items on the balance sheet are measured at current value at the end of the reporting period
that are subject to change.
Correct Answer:B
7. Current and non-current classifications of assets are not required for liquidity-based
presentation providing reliable information under:
A. IFRS.
B. US GAAP.
C. Both.
Correct Answer:A
8. Generally, which of the following accounting standards require that assets and liabilities
be presented as a separate classifications: current and non-current?
A. USGA
PP
B. IFRS.
C. Both.
Correct
Answe
r:B
9. Which of the following is least likely a criterion for classification of a liability as current? A. It is
expected to be settled in the entity’s normal operating cycle.
B. It is expected to be settled in one year after the balance sheet date.
C. The entity has an unconditional right to defer settlement of the liability for at least one year
after the balance sheet date.
Correct Answer:C
Page 2
, 10. The excess of current assets over current liabilities is called:
A. current ratio.
B. net assets.
C. net working capital.
Correct Answer:C
11. Which of the following is least likely classified as a current asset?
A. Prepaid expense.
B. Marketable securities.
C. Trades payable.
Correct Answer:C
12. Which of the following is a contra asset account?
A. Bad debt expense.
B. Doubtful debt allowance.
C. Trade receivables.
Correct Answer:C
13. Which of the following is least likely a current liability?
A. Deferred income.
B. Income tax payable.
C. Prepaid expense.
Correct Answer:C
14. The following information is available for Melissa March Ltd.
What is the total value of the company’s current liabilities?
A. $27,000. B. $34,500.
C.$39,000.
Correct Answer:A
15. Deferred income arises when:
A. delivery of goods and services is done, payment is yet to be received.
B. delivery of goods and services and payment are both due.
C. delivery of goods and services is due, payment has been received.
Page 3
