QUESTION: 1641

All of the following are attributes of depreciation except

depreciation stays on the balance sheet as long as the asset is owned by the corporation.
depreciation provides funds for replacement of an asset.
depreciation is allocation of the cost of an asset over its useful life.
the purpose of depreciation is to charge against operations, by means of allocation, the cost of an asset.

Answer(s): B

Explanation:

Depreciation is a non-cash expense. It shows up as an increase to cash on the statement of cash flows.

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QUESTION: 1642

The balance sheet

reports all of the cash inflows and shows specifically how that cash was used.
is a report that shows the change in the financial position of a firm.
reports the firm resources and how those resources were specifically used.
reports the firm resources, claims on those resources, and stockholders' equity at specific points in time.
reports the assets and liabilities of the firm for the accounting period.

Answer(s): D

Explanation:

The balance sheet reports the categories and amounts of assets, liabilities, and stockholders' equity at specific points in time.

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QUESTION: 1643

How should holdings of equity securities of less than a 20% interest generally be classified on a firm's balance sheet?

As either trading or available-for-sale securities
Using the equity method
All of these answers
As controlling interest securities
None of these answers

Answer(s): A

Explanation:

So long as it is management intent, these securities should be classified as either trading or availablefor-sale securities. The equity method is used to account for an equity interest where management has an ability to exert significant influence over an investee's business activities.

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QUESTION: 1644

Which of the following is/ are true?

An increase in inventories has a positive impact on cash flows.
II. An increase in receivables has a positive impact on cash flows.
III. Deferred taxes increase current cash balance.
IV. Utilization of tax loss carry-forwards has a positive impact on cash flows.
III & IV
II & III
I & II
I, II, III & IV

Answer(s): A

Explanation:

An increase in inventories implies cash was spent to obtain more goods than were sold. An increase in receivables implies part of the sales were made on credit, not a cash basis. Both of these have a negative impact on cash flows. Deferring taxes implies some of the cash expense was delayed into the future, increasing the current cash balance. Utilization of tax loss carry-forwards implies a reduction in the taxable income by the amount of the carry-forward. This reduces cash expense on taxes.

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Free CFA-Level-I Exam Braindumps (page: 411)

QUESTION: 1641

Explanation:

QUESTION: 1642

Explanation:

QUESTION: 1643

Explanation:

QUESTION: 1644

Explanation: