QUESTION: 1521

Warranty liabilities:

are estimated liabilities
must also result in an expense during the same period as the revenue from the sale of the product
result when a company sells a product
all of these answers

Answer(s): D

Explanation:

All responses meet the definition of a warranty liability.

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QUESTION: 1522

An auditor will express an adverse opinion if

the firm' s ability to continue as a going concern is subject to substantial doubt.
none of these answers.
a qualified opinion cannot be expressed because the auditor lacks independence.
a violation of GAAP is sufficiently material that a qualified opinion is not justified.
a severe scope limitation has been imposed by the client.

Answer(s): D

Explanation:

The auditor will express a qualified opinion when the statements are fairly presented in accordance with GAAP except for the effects of the matter to which the qualification applies. When the statements as a whole are not fairly presented in conformity with GAAP, a qualified opinion will be inappropriate, and an adverse opinion must be expressed.

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QUESTION: 1523

A firm has a high debt-to-asset ratio. In an inflationary environment, in order to improve this ratio in earlier years, it will prefer:

FIFO inventory valuation and accelerated depreciation.
FIFO inventory valuation and straight-line depreciation.
LIFO inventory valuation and straight-line depreciation.
LIFO inventory valuation and accelerated depreciation.

Answer(s): B

Explanation:

To improve the ratio, it uses FIFO and straight-line depreciation to increase income and hence, retained earnings. FIFO also increases current and total assets in inflationary conditions, improving the debt-to-asset ratio.

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QUESTION: 1524

The statement of cash flows includes sections on all of the following except ________.

financing activities
purchasing activities
investing activities
operating activities

Answer(s): B

Explanation:

Operating, investing and financing are the 3 activities depicted on that statement of cash flows.

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Free CFA-Level-I Exam Braindumps (page: 381)

QUESTION: 1521

Explanation:

QUESTION: 1522

Explanation:

QUESTION: 1523

Explanation:

QUESTION: 1524

Explanation: