QUESTION: 1585

Trading securities are carried on the books at ________.

current market value
acquisition cost or current market value
acquisition cost
lower-of-cost-or-market

Answer(s): A

Explanation:

Marketable securities are classified into various categories, one of which is "Trading securities." As the name implies, these financial securities are purchased with the intent to sell in the near future. They are therefore categorized as current assets and reported at the fair market value on the date of the balance sheet

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QUESTION: 1586

The following information should be used according to the provisions of SFAS 95 (Statement of Cash flows) and using the following data.

Net Income $50,000
Provision for bad debts $2,000
Increase in Inventory $1,000
Increase in accounts payable $2,000
Purchase of new equipment $15,000
Sale of equipment for $10,000 gain $20,000
Depreciation expense $5,000
Repurchase of common stock $10,000
Payment of dividend $4,000
Interest payment $3,000

What is net cash flow from operations?

$55,000
$48,000
$54,000
$58,000

Answer(s): B

Explanation:

$50,000 + $2,000 - $1,000 + $5,000 + $2,000 - $10,000

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QUESTION: 1587

In a period of rising prices, the inventory method that gives the highest possible value for ending inventory is:

weighted average
FIFO
LIFO
gross profit

Answer(s): B

Explanation:

The ending inventory under FIFO is priced at the most recent, and thus the highest prices (in a period of rising prices) than any of the other methods.

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QUESTION: 1588

When a marketable security's classification is changed, which of the following apply?

The transfer is accounted for at the amortized historical cost of the security.
II. The change in the fair value of the security is reported as part of the income statement.
III. The switch in classification is at management's discretion.
I & II
I, II & III
III only
I & III

Answer(s): C

Explanation:

When the classification of a marketable security is changed, the assignation of the security to the new account is carried out at the fair market value on the transfer date, with any gain or loss reflected separately on the income statement (in the case of trading and held-to-maturity securities) or as a separate component of shareholder equity (in the case of available-for-sale securities). The classification and reclassification of securities is largely based on management intent. This allows the firm to manipulate current income by timing the reclassifications. Consequently, any financial statement analysis must take into account the effects of such artificial effects on income.

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Free CFA-Level-I Exam Braindumps (page: 397)

QUESTION: 1585

Explanation:

QUESTION: 1586

Explanation:

QUESTION: 1587

Explanation:

QUESTION: 1588

Explanation: