QUESTION: 1601

Tracy company reports the following in its statement of cash flows:

Net Income $1,000
Depreciation and Amortization 350
Decrease (Increase) in Accounts receivable (10)

Decrease (increase) in inventory 200
Decrease (increase) in prepaid expenses 80
Increase (decrease) in trade payables (300)
Increase (decrease) in taxes payable 75
Cash Flow from operations 1,395

Tracy used the indirect method of determining cash flow from operations (CFO), had they used the direct method

CFO would have been higher as gains are not deducted in arriving at CFO.
CFO would have been the same.
it is not possible to determine what CFO would have been without more information.
CFO would have been lower as losses and depreciation are not added back in arriving at CFO.

Answer(s): B

Explanation:

The method does not affect the CFO.

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QUESTION: 1602

Financial accounting data has some inherent limitations. Which of the following are limitations?

not all economic events are easily quantifiable
II. many accounting entries rely heavily on estimates
III. historical cost can distort statements
IV. inflation can distort accounting data
II, III and IV
I, II and III
I, III and IV
I, II, III and IV

Answer(s): D

Explanation:

All of the responses can be considered limitations of financial accounting data.

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QUESTION: 1603

Which of the following is/are component(s) of Shareholder's equity?

Preferred equity
II. Retained earnings
III. Treasury shares
II & III
I only
I, II & III
I & III

Answer(s): C

Explanation:

All of the selections appear in the Shareholders' Equity section of the balance sheet.

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QUESTION: 1604

Which inventory costing method is most useful in estimating the amount of inventory lost or destroyed by theft, fire, or other hazards?

FIFO
None of these answers
average cost method
gross profit method
LIFO

Answer(s): D

Explanation:

The historical relationship between cost of goods sold and sales is applied to sales of the current period as a way of estimating COGS during the current period. COGS is then subtracted from the cost of goods available for sale to get the estimated cost of the ending inventory.

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Free CFA-Level-I Exam Braindumps (page: 401)

QUESTION: 1601

Explanation:

QUESTION: 1602

Explanation:

QUESTION: 1603

Explanation:

QUESTION: 1604

Explanation: