QUESTION: 1753

Under the indirect method, when reporting the cash flow from operations the starting point is

the net changes of the operating asset and liability accounts.
cost of goods sold.
net income.
all noncash expenses.
cash collections.

Answer(s): C

Explanation:

Under the indirect method the starting point is the period's net income.

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QUESTION: 1754

The Management Discussion and Analysis Section of the annual report ________.

is optional but normally included in the annual report
is required by the SEC only if the company has suffered from unfavorable trends or there are significant uncertainty concerning liquidity of the company
is required by the SEC only if they have a qualified audit opinion
is required by the SEC

Answer(s): D

Explanation:

Companies with publicly traded securities have been required since 1968 to provide a discussion of earnings in the MD&A section.

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QUESTION: 1755

Which of the following is/are TRUE?

The cash flow from operations are higher when expenses are capitalized.
II. Total cash flows are higher when the expenses are capitalized.
III. Capitalization of interest costs leads to higher net income.
IV. Capitalization of interest costs is not allowed under GAAP.
II, III & IV
I, II, III & IV
III & IV
I & III

Answer(s): D

Explanation:

While CFO is lower under expensing since the entire cash expense is charged against it, expensing leads to a lower total income, causing lower tax payments. Hence, total cash flows are higher under expensing.

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QUESTION: 1756

In a given period, the firm's beginning gross investment is 4,000 and ending gross investment is 12,000. The accumulated depreciation at the beginning was 800 and the ending balance in this account was 900. The firm uses straight-line depreciation. The average age of the firm's assets at the end of the period is ________.

5 years
13.3 years
9 years
15 years

Answer(s): C

Explanation:

Note that: Average age = Accumulated depreciation/Depreciation expense. Depreciation expense = 900-800 = 100. Hence, Avg. age = 900/100 = 9 years.

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Free CFA-Level-I Exam Braindumps (page: 439)

QUESTION: 1753

Explanation:

QUESTION: 1754

Explanation:

QUESTION: 1755

Explanation:

QUESTION: 1756

Explanation: