QUESTION: 1853

Which of the following is/are true about an auditor's opinion?

If an auditor finds that the firm's financial statements fairly represent the company's financial performance and position, he will issue an unqualified opinion.
II. If an auditor finds that some parts of the firm's financial statements are questionable or do not have sufficient verifiable corroboration, he will issue a qualified opinion.
III. If an auditor finds that the audit is insufficient in scope to render an opinion, he will not issue an opinion.
I only
I & III
I & II
III only

Answer(s): C

Explanation:

If an auditor finds that the audit is insufficient in scope to render an opinion, he will issue a Disclaimer of opinion.

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QUESTION: 1854

Which of the following is NOT a financing cash flow?

Both "cash used for share repurchase" and "cash received from issuing bonds."
Cash used for share repurchase.
Cash received from issuing bonds.
Cash acquired from the sale of a liquid asset.

Answer(s): D

Explanation:

You should read the question carefully. It asks for the cash flow that is not a financing cash flow. Cash used for share repurchase and cash received from debt issue are both financing cash flows while cash received from asset sales is an investing cash flow.

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QUESTION: 1855

The following data pertain to Cosmotron Company's financial state as of Dec 31, 1994:

Net Income $400
Increase in inventory $120
Decrease in accounts receivable $45
Increase in payables $165
Depreciatio n$100
Dividends paid$85
Tax rate 30%

What was Cosmotron's operating cash flow in 1994?

$590
$490
$675
$505

Answer(s): A

Explanation:

In this case, OCF = 400 - 120 + 45 + 165 + 100 = $590. Dividends paid are investing cash flows and not part of OCF. Note that tax rate is not relevant in the indirect method since it has already been factored into in the net income figure.

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QUESTION: 1856

The accumulated depreciation account should show:

total depreciation for fixed assets since the business was formed
only the depreciation expense recognized during the current year
total depreciation for fixed assets still in use
current depreciation expense plus estimated depreciation for next year

Answer(s): C

Explanation:

Depreciation recognized and accumulated on fixed assets still on the books is reflected in the Accumulated Depreciation account(s).

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Free CFA-Level-I Exam Braindumps (page: 464)

QUESTION: 1853

Explanation:

QUESTION: 1854

Explanation:

QUESTION: 1855

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QUESTION: 1856

Explanation: