CNA Skills and Competencies 2 — Questions and Answers
Question 1: A CNA accountant is preparing a cost-benefit analysis for a capital investment. Which discount rate is most appropriate for evaluating the project's net present value?
- The company's weighted average cost of capital (WACC) (Correct answer)
- The prime lending rate published by the Federal Reserve
- The current 10-year Treasury bond yield
- The company's return on equity from the prior fiscal year
Correct answer: The company's weighted average cost of capital (WACC)
WACC reflects the blended cost of all financing sources and is the standard hurdle rate for NPV analysis.
Question 2: When reconciling a bank statement, which item would INCREASE the balance per books?
- Outstanding checks
- A bank credit memo for interest earned (Correct answer)
- Deposits in transit
- NSF check returned by the bank
Correct answer: A bank credit memo for interest earned
A bank credit memo represents income credited by the bank that has not yet been recorded in the books, so it increases the book balance.
Question 3: Which internal control procedure is most effective at preventing fictitious vendor payments?
- Requiring dual signatures on checks above a threshold
- Rotating accounting staff assignments annually
- Segregating the duties of purchasing, receiving, and payment authorization (Correct answer)
- Performing monthly bank reconciliations
Correct answer: Segregating the duties of purchasing, receiving, and payment authorization
Segregation of duties ensures no single employee can initiate, approve, and record a payment, eliminating the primary fraud opportunity.
Question 4: A company's accounts receivable turnover ratio decreased significantly year-over-year. What is the most likely implication?
- Customers are paying invoices more quickly
- The company extended more lenient credit terms or collection efficiency declined (Correct answer)
- Revenue increased substantially during the period
- Operating expenses were reduced during the year
Correct answer: The company extended more lenient credit terms or collection efficiency declined
A lower AR turnover means receivables are taking longer to convert to cash, suggesting looser credit policies or weaker collections.
Question 5: Under ASC 842, how should a lessee classify a lease where the lease term is 90% of the asset's remaining economic life?
- Operating lease
- Finance lease (Correct answer)
- Short-term lease exemption applies
- The lease should be expensed immediately
Correct answer: Finance lease
Under ASC 842, if the lease term is for the major part of the asset's remaining economic life (typically ≥75%), it is classified as a finance lease.
Question 6: Which analytical skill is most critical when identifying errors in a trial balance?
- Ability to apply LIFO inventory valuation
- Cross-referencing debits and credits to ensure the balance sheet equation holds (Correct answer)
- Preparing cash flow projections using the indirect method
- Calculating depreciation under the units-of-production method
Correct answer: Cross-referencing debits and credits to ensure the balance sheet equation holds
Verifying that total debits equal total credits and tracing discrepancies to source documents is the core skill for resolving trial balance errors.
Question 7: A manager asks a CNA accountant to exclude a known liability from the balance sheet to improve the debt-to-equity ratio before a loan application. The accountant should:
- Comply if the amount is immaterial
- Comply only if approved by the CFO
- Refuse and explain that omitting known liabilities violates GAAP and professional ethics (Correct answer)
- Reclassify the liability as a contingency footnote instead
Correct answer: Refuse and explain that omitting known liabilities violates GAAP and professional ethics
Deliberately omitting known liabilities violates GAAP and the professional integrity standards required of a CNA, regardless of who approves it.
CNA Skills and Competencies 2
A CNA accountant is preparing a cost-benefit analysis for a capital investment.
Which discount rate is most appropriate for evaluating the project's net present value?