Cisco
CompTIA
ISC
EC-Council
EXIN
Fortinet
ITIL
Juniper
Microsoft
VMware
Avaya
SAP
Google
NVIDIA
Salesforce
Amazon
Palo Alto Networks
ISC2
Splunk
ServiceNow
All Vendors
  2. Home
  3. Exams
  4. CFA
  5. CFA I

CFA CFA I Exam
CFA Level I Chartered Financial Analyst (Page 127 )

Updated On: 26-Jan-2026
Page 127 of 793
PDF with 3960 Questions

MacDonald Inc. reported net income of $300,000 for 1996. Changes occurred in several balance sheet accounts as follows:

Equipment $25,000 increase
Accumulated depreciation 40,000 increase
Note payable 30,000 increase

Additional information:

During 1996, MacDonald sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.

In December 1996, MacDonald purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000.

Depreciation expense for the year was $52,000.

In MacDonald's 1996 statement of cash flows, net cash used in investing activities is ________.

  1. $12,000
  2. $18,000
  3. $20,000
  4. $32,000
  5. $2,000

Answer(s): E

Explanation:

The purchase and sale of equipment are investing activities. The firm spent $20,000 cash to buy equipment and received $18,000 cash (net book value was $13,000 plus $5,000 gain) by selling its old equipment.
Therefore, the net cash used in investing is $2,000. The issuance of a note payable is part of the acquisition price of equipment and is classified as a noncash financing and investing activity.



"Horizontal analysis" refers to:

  1. comparison of various quantities in a common-sized financial statement.
  2. comparison of a firm's financial statements with those of a similar firm.
  3. comparative analysis of financial statements as they evolve over time.
  4. comparative study of a firm's dependencies on businesses in the different industries in which it is active.

Answer(s): C

Explanation:

In comparative financial analysis, one of the important parts is detecting trends in the changes that occur over time in the different financial statements. This trend analysis is quirkily referred to as "horizontal analysis," probably because comparison implies a side-by-side analysis of the financial items in the statements. Two popular techniques in horizontal analysis are "year-to-year change" analysis and "Index number trend series" analysis.



Which of the following is NOT a disclosure requirement for financial instruments?

  1. Firms must present fair valuations of financial instruments in the financial statements or accompanying notes.
  2. Firm must present reasons for not meeting any of the disclosure requirements.
  3. Firms must disclose the purposes of holding any speculative financial instruments.
  4. Firms must disclose significant assumptions used to value financial instruments.

Answer(s): C

Explanation:

Firms must disclose the purposes of holding any speculative financial instruments.



The purpose of the Management Report is to:

  1. analyze favorable and unfavorable trends affecting the firm.
    II. reinforce senior management's responsibilities for the company's financial and internal control systems.
    III. review the firm's financial condition in light of short-term liquidity requirements and proposed investment activities.
    IV. emphasize the roles of management, directors and auditors in the preparation of financial statements.
  2. I, II & III
  3. II & III
  4. II, III & IV
  5. II & IV

Answer(s): D

Explanation:

I & III are part of Management's Discussion & Analysis (MD&A)



The Statement of Stockholders' Equity does not report

  1. any minimum pension liability.
  2. any cumulative impact on prior period earnings.
  3. the investment of the owners in the firm.
  4. the various accounting adjustments that reflect selected market value changes in noncurrent assets.
  5. the effect of exchange rate changes on certain foreign subsidiaries.

Answer(s): B

Explanation:

Any cumulative impact on prior period earnings is reported net of tax after extraordinary items and discontinued operations on the income statement.



Viewing page 127 of 793
Viewing questions 631 - 635 out of 3960 questions



Post your Comments and Discuss CFA CFA I exam prep with other Community members:

Join the CFA I Discussion