QUESTION: 2041

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?

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

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QUESTION: 2042

Extraordinary items are placed on the income statement:

after net income from continuing operations and net of tax.
as a footnote to the statement as they are 1 time items and are not a part of the normal course of business for a corporation.
within income from operations net of tax.
after net income from continuing operations and before taxes.

Answer(s): A

Explanation:

Extraordinary items are always included net of tax after the net income from continuing operations. These items are unusual items for the company and occur infrequently.

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QUESTION: 2043

What is the primary function of the Securities and Exchange Commission as it relates to a company's financial statements?

None of these answers.
To function as the standard-setting body of the accounting profession.
To provide the investment public with completely independent and unbiased advice regarding the purchase of good quality public securities.
To ensure that a public company makes full and accurate disclosure of all pertinent information relating to a company's business.

Answer(s): D

Explanation:

To ensure that a public company makes full and accurate disclosure in the company's registration statement of all pertinent information relating to a company's business, its securities, its financial position and earnings, and the underwriting arrangements.

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QUESTION: 2044

Minority interest on the consolidated balance sheet is listed ________.

none of these answers
as a liability
between liabilities and shareholders' equity
as a component of shareholders' equity
as an asset

Answer(s): C

Explanation:

Minority interest represents the proportionate stake of minority shareholders in a company's majority- owned subsidiary that is consolidated. Minority interest is neither a liability nor equity but it is a financing component and, therefore, is presented between liabilities and shareholders' equity.

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Free CFA-Level-I Exam Braindumps (page: 511)

QUESTION: 2041

Explanation:

QUESTION: 2042

Explanation:

QUESTION: 2043

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QUESTION: 2044

Explanation: