QUESTION: 1481

Below is an example of an incorrectly prepared statement of cash flows. The descriptions of activities are correct.

Cash from operating activities$60,000
Net Income(4,000)
Depreciation(2,000)
Increase in accounts receivable(1,000)
Increase in deferred tax liability$53,000

Cash from investing activities($48,000)
Purchase of marketable securities2,500
Dividends received1,500
Dividends paid($44,000)

Cash from financing activities(500)
Increase in Short-term debt(2,500)
Increase in Long-term debt($3,000)

Increase in cash$6,000

The correct change in cash for the year is ________

None of these answers
$19,000
$15,000
$4,000

Answer(s): B

Explanation:

$60,000 + $4,000 - $2,000 + $1,000 - $48,000 + $2,500 - $1,500 + $500 + $2,500 = $19,000.

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QUESTION: 1482

Which of the following is/are true about potentially dilutive securities?

Options and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, whichever is later.
II. Warrants enter into the Diluted EPS calculations only if the maximum stock price during the period exceeds the exercise price.
III. In Diluted EPS calculations, convertible bonds considered potentially dilutive only if their yield is less than two-thirds the average yield on Aa bonds.
I & II
I only
I, II & III
II & III

Answer(s): B

Explanation:

In Diluted EPS, all potentially dilutive securities are assumed converted to common stock and appropriate adjustments made to the income number. If this process serves to increase Diluted EPS, then the anti-dilutive security is left out of the calculations.
The conversion assumptions for options and warrants are as follows:
1. They are assumed to be exercised at the beginning of the period or at the time of issuance, whichever is later.
2. They enter into the Diluted EPS calculations only if the average stock price during the period exceeds the exercise price.
Convertible bonds, regardless of their historical or current yield, are included in Diluted EPS calculations unless they are anti-dilutive.

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QUESTION: 1483

Which of the following are operating cash flows?

Interest received
II. Interest paid
III. Dividends received
IV. Dividends paid
I, II, III & IV
I, II & IV
I & III
I, II & III

Answer(s): D

Explanation:

It is very important to remember the following points about dividends and interests:
1. Dividends received from stock investments are considered operating cash flows.
2. Dividends paid on equity are considered financing cash flows.
3. Interest payments on debt are considered operating cash flows.
4. Interest received from debt investments are considered operating cash flows.

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QUESTION: 1484

Which of the following is not a current asset?

Accumulated Depreciation
Allowance for Uncollectible Accounts
Notes Receivable
Prepaid Insurance

Answer(s): A

Explanation:

Accumulated Depreciation is a contra account to the fixed asset account(s), which are reported in the ling-term asset section of the balance sheet.

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Free CFA-Level-I Exam Braindumps (page: 371)

QUESTION: 1481

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QUESTION: 1482

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