Chartered Financial Analyst Level I Financial Statement Analysis

1.Ada, controller at Harbor Glass, finds ending inventory was overstated and the error was not corrected. What does that do to this year's cost of goods sold and net income?

2.Ben compares FIFO with LIFO at Lumen Steel while purchase prices are rising. Which ending inventory and net income does FIFO report?

3.Cara's notes for North Pier Mills show LIFO cost of goods sold of 500. The LIFO reserve rose by 20. What is FIFO cost of goods sold?

4.Derek's LIFO inventory at Red Cedar Goods is 140, and the LIFO reserve is 35. What is FIFO inventory?

5.Elena buys a machine for Oakline Tools: cost 48,000, salvage value 3,000, and a five-year life. What is annual straight-line depreciation?

6.Farid's machine at Brightpath Transit cost 50,000 and has a five-year life, so the double-declining rate is 40 percent. What is year-1 depreciation if salvage is not subtracted first?

7.Gina's machine at Maple Row Foods has a book value of 30,000 after its first double-declining year. The rate stays 40 percent. What is year-2 depreciation?

8.Hiro lists cash 20, receivables 30, inventory 40, prepaids 10, and current liabilities 50 at Silver Current. What is the current ratio?

9.Iris lists cash 20, receivables 30, inventory 40, prepaids 10, and current liabilities 50 at Fieldnote Apparel. The quick ratio uses only cash and receivables. What is it?

10.Jonah's sales at Cobalt Retail are 720 and receivables are 90. The year has 360 days. What is days of sales outstanding?

11.Keiko's cost of goods sold at Kindred Paper is 480, and average inventory is 60. What is inventory turnover?

12.Luis reports net income of 40, sales of 400, average assets of 200, and average equity of 160 at Westbridge Parts. What is return on equity?

13.Mina's profit margin is 10 percent, asset turnover is 1.0, and the equity multiplier is 2.5 at Sable Marine. What is DuPont return on equity?

14.Nate's firm, Copperline Stores, reports EBIT of 90 and interest of 15. What is interest coverage?

15.Olga starts from net income of 100 at Orchard Devices, adds depreciation of 30, and subtracts capital spending of 40 and a working-capital increase of 10. The firm has no debt. What is free cash flow to the firm?

16.Paulo collects cash from customers of Pinion Works for goods those customers have already received. Which cash-flow section reports that collection?

17.Quinn pays cash for a machine that Quarry Instruments will use for several years. Which cash-flow section reports that payment?

18.Rosa's company, Riverbank Media, pays a cash dividend to its own shareholders. Which section reports that payment?

19.Samir's company, Summit Ceramics, pays cash interest to its lenders. Under the classification this exam uses, which section includes that payment?

20.A customer of Tidehouse Goods pays Talia cash before the goods are delivered. What is recorded now, and when is revenue recognized?

21.Uma's contract at Union Forge says control passes when the truck leaves the dock. The customer has not unpacked the shipment. When is revenue recognized?

22.Victor's contract at Vale Printing transfers control only when the goods arrive. At year-end the shipment is still in transit. What remains true?

23.Willa sells a receivable of 100,000 at Windham Optics with no recourse. Control of the receivable transfers, and the fee is 3,000. What does she record?

24.Xander's allowance at Yardley Components has a credit balance of 1,200. The required balance is 3,500. What is bad-debt expense?

25.Yara's allowance at Zephyr Apparel has a debit balance of 400. The required ending credit balance is 3,500. What is bad-debt expense?

26.Zane accrues warranty cost at Arden Bakery in the financial statements now and may deduct it for tax only when it is paid. What deferred tax balance results?

27.Aisha's profit at Birch Logistics is taxed later than it is booked. The temporary difference is 20,000 and the tax rate is 25 percent. What is recorded?

28.Bruno's counsel says a loss at Cinder Rail is probable. The range is 10 to 30, and no amount in the range is more likely than another. What does he accrue?

29.Celeste's counsel says a gain at Dove Street Labs is probable and can be estimated. How is that gain reported before it is realized?

30.A fire damages Dario's warehouse at Elm Street Hardware after year-end. On the balance-sheet date the building was undamaged. How is the fire treated for that year?

31.After year-end, a customer of Esme at Fern Data files for bankruptcy because of conditions that already existed at year-end. What happens to the receivable?

32.Felix reports net income of 500,000, preferred dividends of 40,000, and 92,000 weighted-average common shares at Goldfinch Publishing. What is basic earnings per share?

33.Greta declares a 10 percent stock dividend on 10,000 shares at Hearth Tile. Par is 1 and fair value is 8. By how much do retained earnings fall?

34.Hassan bought treasury stock at 20 and reissued it at 26 under the cost method at Ivy Court Hotels. Where does the difference of 6 go?

35.Ingrid bought treasury stock at 20 and reissued it at 14 at Juniper Paint. There is no prior paid-in capital from treasury stock. Where does the shortfall of 6 go?

36.Jules changes the estimated remaining life of a machine at Kettle Metals. How is that change applied?

37.Kira switches inventory accounting at Larkspur Seeds from LIFO to FIFO. How is that switch applied?

38.Leon finds an arithmetic error in last year's depreciation at Moss Glen Furniture. How is that item treated?

39.Maren's asset at Northstar Freight has a remaining book value of 60,000, four years left, and no salvage value. What is the new annual straight-line depreciation?

40.Nico at Orchid Cosmetics capitalizes a cost that a peer expenses. Cash spent is the same. In the spending year, how do Nico's assets and profit compare?

41.Odette's operating cash flow at Pinecone Outdoor looks strong only because payables were stretched. What should an analyst infer about that cash?

42.For several years at Quartz Analytics, Priya's income sits far above operating cash flow, and receivables grow faster than sales. What can that pattern indicate?

43.Rafael prepares a common-size income statement for a competitor of Reed Instruments. How is each line expressed?

44.Soren sees inventory at Saltbox Grocery rise from 18 percent of assets to 30 percent while sales stay flat. What can that shift indicate?

45.Thea's sales at Thornfield Mills are 200 and cost of goods sold is 120. What is the gross margin?

46.Umar compares a finance lease at Upwell Pumps with a short rental that is expensed as incurred. How do the lessee's assets and liabilities differ under the finance lease?

47.Vera compares debt with equity at Violet Packaging and omits a lease liability from the debt. What does that omission do to measured leverage?

48.Wesley reviews goodwill recorded on an acquisition at Willow Dental Supply. How is that goodwill treated after the acquisition date?

49.Ximena holds a patent with a finite legal life at Xenon Displays. How is the patent's cost allocated?

50.Yusuf records an impairment loss on equipment at Yellowbird Coffee. What do profit, book value, and the entry's own cash effect show?

51.Zara's bank statement at Ashwood Lumber shows 13,100. Deposits in transit are 2,000 and outstanding checks are 2,500. What is the adjusted bank balance?

52.Amir's books at Banyan Textiles show 12,400. An NSF check is 180, a bank fee is 20, and the bank collected a note of 400. What is the adjusted book balance?

53.Bianca has 150 units left at Cedar Pharmacy. The newest purchase is 100 units at 15, and the units before that cost 12. What is FIFO ending inventory?

54.Colin began with 100 units at 10 and purchased 300 units at 12 at Driftwood Boats. What is the weighted-average unit cost?

55.Dahlia sells 250 units at Eaglecrest Mining from a pool that began with 100 units at 10 and added 300 units at 12. The weighted-average cost is 11.50. What is cost of goods sold?

56.Emmett's inventory item at Foxglove Labs cost 40. It can be sold for 50 after he spends 14 to complete it. What is net realizable value?

57.Fatima carries an item at Granite Apparel at a cost of 40. Its net realizable value is 36. What write-down does she record?

58.Grant owns 30 percent of an investee at Halcyon Shipping. The investee earns 100,000 and pays dividends of 40,000. What does the equity method record as Grant's income?

59.Hana owns 30 percent of an investee at Indigo Retail that earns 100,000 and pays dividends of 40,000. By how much does the equity-method investment account rise?

60.Ivan's parent at Jetty Seafood owns 80 percent of a subsidiary that earned 50,000. What is the noncontrolling interest in those earnings?

61.Jade's parent at Kingswell Tools sold goods to its subsidiary, and the subsidiary still holds them. What does consolidation do with the profit inside those goods?

62.Kenji's bond at Lantern Glass was issued at a discount. What amount is used for periodic interest expense?

63.Lila's bond at Marlowe Books has a carrying amount of 96,000, a yield of 8 percent, and coupon cash of 6,000. What are interest expense and the discount amortization?

64.Mateo has a deferred tax asset for a loss carryforward at Nimbus Software. When is that asset recognized?

65.Nadia's days of sales outstanding at Olive Branch Foods rise, and the credit terms did not change. What does the longer measure indicate?

66.Oscar defines the cash conversion cycle at Peakform Athletic as inventory days plus receivable days minus payable days. What does a longer cycle mean?

67.Petra's firm at Quill Paper expenses research immediately. A peer capitalizes development once feasibility is met. In a year of heavy successful development spending, how does Petra's firm look?

68.Ravi's other comprehensive income at Ridgeview Solar includes a foreign-currency translation gain that never entered net income. Where does that gain still count?

69.Selene's company at Stonegate Cement declares a 2-for-1 stock split. What happens to the share count, par per share, and total equity?

70.Tomas tests a convertible bond in the diluted earnings per share of Terrace Housing. When does that bond stay in the diluted figure?

71.Ursula's firm at Umber Ceramics buys its own shares and retires them. What happens to assets and equity?

72.Vince reconciles net income to operating cash flow at Vantage Motors, and payables increased. How does that increase enter the reconciliation?

73.Winnie's receivables at Whisper Pines increased during the year. In the reconciliation from net income to operating cash flow, what does she do with that increase?

74.Yuki's net income at Yellowline Transit includes a gain on the sale of a machine. How do the operating reconciliation and the cash proceeds treat that sale?

75.Andre adds depreciation when he reconciles net income to operating cash flow at Alder Medical Devices. Why is that add-back appropriate?

76.Beatriz sees large new borrowings and a dividend at Brookside Dairy. Operating cash flow is too small to cover the dividend. How was the dividend financed?

77.Cyrus expects to use a building at Crestview Construction for 25 years. The contractual life in the papers is 40 years. Over which period does he depreciate it?

78.Diana's roof at Dunewalk Properties will be replaced sooner than the building under it. Over which life is the roof depreciated?

79.Elias records an upward revaluation at Eastmill Flour that does not reverse a prior loss recognized in profit. Where does that increase go?

80.Freya applies the cost model to a building at Fairhaven Boats. Market value is now above book value. What amount stays on the balance sheet?

81.Gareth's loss contingency at Greenfield Produce is possible but not probable. How is it reported?

82.Helena's loss contingency at Highbar Steel is remote. What is the ordinary treatment?

83.Idris capitalizes software costs incurred before technical feasibility at Ironwood Software. What do those capitalized costs do to the current statements?

84.Jun invoices a customer at Jasper Printing under a bill-and-hold label, but the goods are not set aside and Jun can still use them. Is this revenue yet?

85.Kelsey pushes extra shipments to a distributor at Kelso Apparel at year-end. The distributor has a right of return it is expected to use. How should revenue reflect that?

86.Lars is constructing a building at Lowland Timber, and the customer controls that building as it is constructed. When is revenue recognized?

87.Mei sells one contract at Meadow Robotics promising a machine and two years of service. How is the price divided, and when is each part revenue?

88.Nabil's contract at Northline Energy includes a bonus he may have to reverse in a significant amount. When does that bonus enter the transaction price?

89.Ophelia collects cash at Oakmont Clinics for a sale on which returns are expected. What is recorded for those expected returns?

90.Pablo's gross receivables at Pebble Toys are 80, and the allowance for doubtful accounts is 5. What net amount does he report?

91.Rhea writes off one specific account at Redoak Furniture under the allowance method. What happens to gross receivables, the allowance, and net receivables?

92.Simon collects an account at Sandpiper Airlines that had already been written off. He uses the allowance method. What does that recovery do to net income?

93.Tara exchanges similar inventory at Tindale Chemicals in a deal with no commercial substance. Fair values would suggest a gain. What does she recognize?

94.Ulrich exchanges an asset at Upland Mining in a transaction that has commercial substance. How is the exchange measured?

95.Veda holds debt at Veranda Home and her business model is to collect the contractual cash flows through maturity. How is that held-to-maturity debt reported?

96.Walter holds a trading debt security at Westfall Instruments. An unrealized gain appears before any sale. Where does that gain go?

97.Xia owns a passive equity holding at Clearwater Sensors, and a dividend is declared. How does that dividend compare with an equity-method dividend?

98.Yasmin owns 30 percent of an investee at Yarrow Pharma, holds a board seat, and does not control the investee. Which method applies?

99.Zachary's company at Fathom Marine controls a subsidiary, and other investors own the rest. How are the subsidiary's assets and those other owners reported?

100.Anika jointly controls a joint venture at Aster Freight and does not consolidate it. Which method reports that investment?

101.Boris's book income of 200 at Bramble Foods includes tax-exempt interest of 20. The statutory rate is 25 percent. What is tax expense?

102.Camille records a valuation allowance against a deferred tax asset at Calloway Media. What does that allowance do to tax expense?

103.Devon reads the segment note and the consolidated statements of Drake Engineering. What do the segment disclosures add?

104.Estelle finds a sale by Evergreen Nurseries to a related party at a price no outsider would pay. What is the reporting concern?

105.After the statements of Fable Games are issued, Finn learns material facts that already existed at the report date. Users are still relying on those statements. What should he do?

106.Gemma's work at Glenmore Utilities raises serious doubt about continuing as a going concern. How is that doubt reported?

107.Hugo's gross margin at Hartwell Machinery falls sharply, and the firm's strategy did not change. What is the sound next step?

108.Imani reads a clean audit opinion on the financial statements of Ivory Linens. What does that opinion mean?