QUESTION: 1745

All of the following are components of Shareholder's equity EXCEPT ________.

par value
dividends paid
retained earnings
capital contributed in excess

Answer(s): B

Explanation:

Dividends declared are part of equity.

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QUESTION: 1746

Most components of the balance sheet are reported at

historical cost plus allowance for inflation.
fair market value.
historical cost.
replacement value.

Answer(s): C

Explanation:

Most components of the balance sheet are reported at historical cost, that is, the exchange price at their acquisition date.

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Holiday Corp. holds 10,000 shares of its $10 par value common stock as treasury stock reacquired in 1994 for $120,000. On December 12, 1996, Holiday reissued all 10,000 shares for $190,000. Under the cost method of accounting for treasury stock, the reissuance resulted in increasing

additional paid-in capital by $70,000.
treasury stock by $100,000.
capital stock by $100,000.
retained earnings by $70,000.
gain on sale of investments by $70,000.

Answer(s): A

Explanation:

Under the cost method, treasury stock is decreased by $120,000, cash is increased by $190,000 and the difference (which is like a gain) is reported as an increase in additional paid-in capital. Accounting rules do not allow a firm to record a gain or loss when it buys back treasury stock because the transaction is viewed as an equity transaction.

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QUESTION: 1748

Which of the following would occur prior to the completion of a long-term contract when using the completed- contract method as opposed to the percentage-of-completion method?

A firm's current period income tax liability would be lowered.
A firm's current period profits would be greater.
None of these answers.
All of these answers.
A firm's current period revenues would be greater.

Answer(s): A

Explanation:

A firm's income tax liability is lower under the competed-contract method because revenues and related income taxes on profits are deferred until the contract is completed. The percentage-of- completion method would recognize revenues earlier and would generate higher current period income tax liabilities.

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Free CFA-Level-I Exam Braindumps (page: 437)

QUESTION: 1745

Explanation:

QUESTION: 1746

Explanation:

QUESTION: 1747

Explanation:

QUESTION: 1748

Explanation: