CNA Financial Reporting and Analysis 1

Question 1

Which financial statement reports a company's revenues, expenses, and net income over a specific period?

Accepted Answer

Income Statement

Answer

The Income Statement (also called Profit & Loss statement) summarizes revenues and expenses over an accounting period to show net income or net loss.

Question 2

Under US GAAP, which inventory costing method assumes that the most recently purchased goods are sold first?

Accepted Answer

LIFO

Answer

LIFO (Last-In, First-Out) assumes the most recently acquired inventory units are sold first, which can reduce taxable income during periods of rising prices.

Question 3

What does the current ratio measure?

Accepted Answer

A company's short-term liquidity

Answer

The current ratio (current assets ÷ current liabilities) measures a company's ability to meet its short-term obligations with its short-term assets.

Question 4

Which accounting concept requires that revenue be recognized when it is earned, regardless of when cash is received?

Accepted Answer

Revenue recognition principle

Answer

The revenue recognition principle (codified under ASC 606) states that revenue is recorded when performance obligations are satisfied, not necessarily when cash changes hands.

Question 5

On a classified balance sheet, which of the following is typically listed as a long-term asset?

Accepted Answer

Goodwill

Answer

Goodwill is an intangible long-term asset recorded when a company acquires another business for more than the fair value of its net identifiable assets.

CNA - Certified National Accountant Practice Test

CNA - Certified National Accountant Practice Test

CNA Financial Reporting and Analysis 1