CFA Level 1 QUESTIONS and ANSWERS — Analyzing Income Statements — Financial Statement Analysis
CFA Level 1 | Financial Statement Analysis | Analyzing Income Statements Practice questions for Revenue Recognition IFRS, Basic and Diluted EPS Calculation, Common-Size Income Statement Ratios, Expense Recognition Capitalization How to solve Problems. Exercise for Exam. Questions and answers. CONTENTS 0:00 Topic 2: REVENUE RECOGNITION 0:11 T2 Question 1 0:21 T2 Question 2 0:31 T2 Question 3 0:41 T2 Question 4 0:51 T2 Question 5 1:01 T2 Question 6 1:11 T2 Question 7 1:21 T2 Question 8 1:31 CORRECT ANSWERS 1:41 T2 Answer 1 — Income definition under IFRS. Asset increase. Liability increase. 2:34 T2 Answer 2 — Net revenue calculation. Sales returns and allowances. Gross sales. 3:06 T2 Answer 3 — Principal versus agent. Revenue recognition for commission. Net vs. gross revenue reporting. 3:43 T2 Answer 4 — Consignment sales. Revenue recognition timing. Transfer of control. 4:27 T2 Answer 5 — Revenue recognition over time. Performance obligations satisfied over time. Software maintenance contracts. 5:08 T2 Answer 6 — Deferred revenue. Unearned revenue. Contract liability. 5:46 T2 Answer 7 — Principal versus agent. Revenue recognition for principal. Gross revenue reporting. 6:36 T2 Answer 8 — Long-term contracts. Performance obligation satisfied over time. Output method. 7:17 More practice = Higher chance to pass 7:27 Topic 3: EXPENSE RECOGNITION 7:37 T3 Question 1 7:47 T3 Question 2 7:57 CORRECT ANSWERS 8:07 T3 Answer 1 — Expense recognition principles. Matching principle. Consumption of economic benefits. 8:53 T3 Answer 2 — Capitalizing vs. expensing contract costs. Profitability impact of capitalization. Asset increase from capitalization. 9:34 Topic 4: NON-RECURRING ITEMS 9:44 T4 Question 1 9:54 T4 Question 2 10:04 T4 Question 3 10:14 T4 Question 4 10:24 T4 Question 5 10:34 CORRECT ANSWERS 10:44 T4 Answer 1 — Unusual or infrequent items. Classification of losses. Continuing operations. 11:43 T4 Answer 2 — Changes in accounting policy. Retrospective application. Restatement of prior periods. 12:40 T4 Answer 3 — Changes in accounting policy. Inventory valuation method change. Retrospective application. 13:25 T4 Answer 4 — Unusual or infrequent items. US GAAP treatment. Separate line item within continuing operations. 14:26 T4 Answer 5 — Changes in accounting policy vs. changes in accounting estimate. Retrospective vs. prospective application. 15:33 Topic 5: EARNINGS PER SHARE 15:43 T5 Question 1 15:53 T5 Question 2 16:03 T5 Question 3 16:13 T5 Question 4 16:23 T5 Question 5 16:33 T5 Question 6 16:43 T5 Question 7 16:53 T5 Question 8 17:03 T5 Question 9 17:13 T5 Question 10 17:23 T5 Question 11 17:33 T5 Question 12 17:43 T5 Question 13 17:53 T5 Question 14 18:03 CORRECT ANSWERS 18:13 T5 Answer 1 — Basic EPS calculation. Weighted average number of shares outstanding. Time-weighting of share issuance. 18:54 T5 Answer 2 — Simple vs. complex capital structure. Basic EPS equals diluted EPS. No dilutive securities. 19:33 T5 Answer 3 — Diluted EPS calculation. If-converted method for convertible preferred stock. Numerator and denominator adjustments. 20:26 T5 Answer 4 — Diluted EPS calculation. Treasury stock method for stock options. Incremental shares. 21:29 T5 Answer 5 — Diluted EPS relationship to basic EPS. Antidilutive securities. Complex capital structure. 22:23 T5 Answer 6 — Diluted EPS denominator. Treasury stock method. 23:11 T5 Answer 7 — Diluted EPS calculation methods. Convertible preferred stock vs. stock options. 24:10 T5 Answer 8 — Diluted EPS calculation with multiple convertible securities. If-converted method for preferred stock and convertible debt. 25:22 T5 Answer 9 — Diluted EPS calculation. Weighted average shares for basic EPS. Treasury stock method for options. 26:22 T5 Answer 10 — Antidilutive securities. Inclusion criteria for diluted EPS. Maximum potential dilution. 27:21 T5 Answer 11 — Weighted average shares calculation. Stock split adjustment. Retroactive treatment for EPS. 28:04 T5 Answer 12 — Basic vs. diluted EPS. Convertible preferred stock impact. Difference calculation. 28:57 T5 Answer 13 — Basic EPS calculation. Preferred dividends adjustment. Stock split timing for EPS. 29:36 T5 Answer 14 — Antidilutive securities. Treatment in diluted EPS calculation. 30:32 Topic 6: INCOME STATEMENT RATIOS AND COMMON-SIZE ANALYSIS 30:42 T6 Question 1 30:52 T6 Question 2 31:02 T6 Question 3 31:12 T6 Question 4 31:22 T6 Question 5 31:32 CORRECT ANSWERS 31:42 T6 Answer 1 — Common-size income statement. Vertical analysis. Percentage of revenue. 32:23 T6 Answer 2 — Common-size analysis. Time-series analysis. Profitability assessment. 33:26 T6 Answer 3 — Common-size income statement analysis. Operating margin calculation. 34:22 T6 Answer 4 — Common-size income statement analysis. Trend analysis. 35:27 T6 Answer 5 — Common-size income statement analysis. Business strategy identification. #financialstatementanalysis #cfalevel1questions #2Mandarin
