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CFA CFA I Exam
CFA Level I Chartered Financial Analyst (Page 131 )

Updated On: 30-Jan-2026
Page 131 of 793
PDF with 3960 Questions

Which of the following would not be reported as an extraordinary item?

  1. gain or loss on sale of fixed assets
  2. gain or loss from passing of a new law
  3. gain or loss from early retirement of debt
  4. uninsured loss from a flood

Answer(s): A

Explanation:

An item must be both unusual and infrequent (and material in amount) to be classified as extraordinary.



Current liabilities are defined as those that come due:

  1. within a year.
  2. the shorter of "within an operating cycle" or "within a year."
  3. within an operating cycle.
  4. the longer of "within an operating cycle" or "within a year."

Answer(s): D

Explanation:

The classification of liabilities into short and long-term is somewhat subjective but for balance-sheet purposes, all obligations that are coming due within a year or an operating cycle, whichever is longer, are considered to be current



Sparten, Inc., a plumbing contractor, received a check for $3,000 on June 30 for services to be performed in the following fiscal month. During the July accounting period, Sparten completed all but $500 of the job. What adjusting entry needs to be made at the end of July?

  1. increase Cash and Revenue for $3,000
  2. decrease Accounts Receivable and increase Revenue for $2,500
  3. increase Unearned Revenue and decrease Cash for $500
  4. debit Unearned Revenue and credit Revenue for $2,500

Answer(s): D

Explanation:

When the check was received on June 30, a liability was established for $3,000 because revenue could not be recognized until it was earned. During July, $2,500 of revenue was earned and should be recognized, along with a reduction (debit) to the Unearned Revenue account.



At the end of a fiscal period, any revenue that has been earned but not received should be credited to an appropriate

  1. revenue account
  2. asset account
  3. liability account
  4. expense account

Answer(s): A

Explanation:

Revenue should be recognized in the period in which it is earned and is credited to the appropriate revenue account.



The following information is from the financial statements of Complex Capitalists for 1997 and 1998:

Dec. 31, 1997 - 1 million common shares outstanding, capital structure all-equity March 31, 1998 - issued 200,000 common shares.
May 31, 1998 - issued 800,000 warrants exercisable at a strike of 35. The average price during 1998 was 34 and the maximum price was 39. Given the above example, the Diluted EPS will use how many shares?

  1. 1.2 million
  2. 2.0 million
  3. 1.617 million
  4. 1.15 million

Answer(s): D

Explanation:

Options and warrants enter into the Diluted EPS calculations only if the average stock price during the period exceeds the exercise price. In this case, since the average price is less than the strike price, the warrants are anti-dilutive and ignored in the calculation of Diluted EPS. Hence, weighted number of shares used = 1 million + 9/12*200,000 = 1.15 million.



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