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CFA CFA I Exam
CFA Level I Chartered Financial Analyst (Page 138 )

Updated On: 30-Jan-2026
Page 138 of 793
PDF with 3960 Questions

Minority interest on the consolidated balance sheet is listed ________.

  1. none of these answers
  2. as a liability
  3. between liabilities and shareholders' equity
  4. as a component of shareholders' equity
  5. as an asset

Answer(s): C

Explanation:

Minority interest represents the proportionate stake of minority shareholders in a company's majority- owned subsidiary that is consolidated. Minority interest is neither a liability nor equity but it is a financing component and, therefore, is presented between liabilities and shareholders' equity.



What impact will the amortization of an intangible asset over a longer than appropriate period have on a firm?

  1. It will result in higher than otherwise sales revenues.
  2. None of these answers.
  3. All of these answers.
  4. It will reduce a firm's current income tax liability.
  5. It will improve reported earnings.

Answer(s): E

Explanation:

Earnings, not revenues will be improved because amortizing an intangible asset over a longer than appropriate period reduces the annual amortization expense; this improves pre-tax and after-tax profits.



The interest expense on a premium bond _______ over time.

  1. decreases
  2. remains constant
  3. can increase or decrease, depending on interest rate movements
  4. increases

Answer(s): A

Explanation:

Remember that the book value of the liability of any straight bond equals the face value at maturity. Hence, when the bond is issued at a premium, the premium amount is amortized over the life of the bond. The outstanding liability thus decreases steadily toward the face value. The decreasing liability decreases the interest expense over time.



According to the FASB conceptual framework, which of the following situations violates the concept of reliability?

  1. Financial statements include property with a carrying amount increased to management's estimate of market value.
  2. None of these answers.
  3. Financial statements are issued 9 months late.
  4. Data on segments having the same expected risks and growth rates are reported to analysts estimating future profits.
  5. Management reports to stockholders regularly refer to new projects undertaken, but that financial statements never report project results.

Answer(s): A

Explanation:

Reliability has 3 primary qualities: verifiability, neutrality and representational faithfulness. Neutrality is violated here as information should not be prepared or reported to obtain a predetermined result, and should be free from bias.



The accumulated depreciation account should show

  1. total depreciation for fixed assets since the business was formed
  2. current depreciation expense plus estimated depreciation for next year
  3. total depreciation for fixed assets still in use
  4. only the depreciation expense recognized during the current year

Answer(s): C

Explanation:

Depreciation recognized and accumulated on fixed assets still on the books is reflected in the Accumulated Depreciation account(s).



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