# Thread: FREE CFA Level 1 sample questions everyday for December 2010 candidates

1. Originally Posted by vivek2812
but the question is asking which is the least likely. That means which is the option we could disregard when it comes to define a firm's asset. Option A do not support the accounting equation. I think then I will stick to my answer A as the correct option.
Even I overlooked the "least likely" part. It's good that Vivek pointed it out.

2. From now on i will read the question twice.. Well spoted Vivek

Assets = Liabilities + Owners’ equity. Option A does not conform to the accounting equation.

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Today's question (Questions and answers provided by Elan Guides)

Q25. To balance the accounting equation, an increase in a firm’s liabilities is least likely to be accompanied by:

A. An increase in its assets only
B. An increase in its owners’ equity only
C. A decrease in its owners’ equity only
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4. The answer should be B

5. Originally Posted by Cachia85
Can u pls explain the logic?

6. Ans is B. If the liability increases there are two ways to balance the equation:
1) Decrease the owners equity only by the same amount to keep the equation intact. Option C supports this view OR
2) Dont increase the owners equity and then the asset will be increased by the net increase in the liability. Option A supports this view.

Mind it friends it is again asking for least likely answer which is only B.

Vivek

7. Originally Posted by vivek2812
Ans is B. If the liability increases there are two ways to balance the equation:
1) Decrease the owners equity only by the same amount to keep the equation intact. Option C supports this view OR
2) Dont increase the owners equity and then the asset will be increased by the net increase in the liability. Option A supports this view.

Mind it friends it is again asking for least likely answer which is only B.

Vivek

This sounds correct!

8. Originally Posted by vivek2812
Ans is B. If the liability increases there are two ways to balance the equation:
1) Decrease the owners equity only by the same amount to keep the equation intact. Option C supports this view OR
2) Dont increase the owners equity and then the asset will be increased by the net increase in the liability. Option A supports this view.

Mind it friends it is again asking for least likely answer which is only B.

Vivek
This is very correct indeed, Thank you.

9. My Answer is Least likely B
Asset = Equity + Liability

An increase in L will result in an increase in a ...
Answer is least likely increase in Equity i go for B

An increase in a firm