QUESTION: 1553

Which accounting principle is consistent with reporting financial results that can be compared with previous periods?

matching
adequate disclosure
materiality
consistency

Answer(s): D

Explanation:

The consistency principle requires that an accounting procedure, once adopted by a company, remain in use from one period to the next unless users are informed of the change.

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QUESTION: 1554

Contingent losses are generally recognized when they are ________.

measurable
probable and measurable
measurable and realized
probable

Answer(s): B

Explanation:

Contingent losses are generally recognized when they are both probable and measurable.

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QUESTION: 1555

Which of the following is/are true about available-for-sale securities?

They are current assets.
II. They are reported at fair market value.
III. Changes in their reported value are allocated directly to retained earnings.
I & II
II only
II & III
I, II & III

Answer(s): D

Explanation:

Marketable securities classified as "Available-for-sale" are financial securities which management does not intend to hold to maturity and may or may not sell in the near future. They may be categorized as either current or non-current assets, depending on the management's projected horizon over which they will be sold. They are reported on the balance sheet at the fair market value and changes in their values are reported as a separate component of shareholder equity.

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QUESTION: 1556

Peterborough's capital structure was as follows:

Dec. 31, 1995 Dec. 31, 1996
Outstanding shares of stock:
Common $110,000 $110,000
Convertible preferred $10,000 $10,000
8% convertible bonds $1,000,000 $1,000,000

During 1996, Peterborough paid dividends of $3.00 per share on its preferred stock. The preferred shares are convertible into 20,000 common shares and are considered common stock equivalents. The 8% bonds are convertible into 30,000 common shares but are not considered common stock equivalents. Net income for 1996 was $850,000. Assume that the income tax rate is 30%. The primary earnings per share for 1996 is ________.

$7.45
$6.31
$6.54
$7.73
$7.08

Answer(s): C

Explanation:

As common stock equivalent (CSE), the preferred stock must be considered in the calculation of primary earnings per share (PEPS) and assumed to have no preferred dividends paid. PEPS is then $6.54 ($850,000/ (110,000 + 20,000)).

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Free CFA-Level-I Exam Braindumps (page: 389)

QUESTION: 1553

Explanation:

QUESTION: 1554

Explanation:

QUESTION: 1555

Explanation:

QUESTION: 1556

Explanation: