QUESTION: 1937

The construction of cash flow statement using the indirect method requires which of the following?

Income Statement.
II. Balance Sheet.
III. Statement of Retained Earnings.
IV. Statement of Shareholders' Equity.
I & II
I, II & III
I, II & IV
I & III

Answer(s): A

Explanation:

In the indirect method of construction of the cash flow statement, you start with the net income and start adding back non-cash expenses, adjusting for tax effects. In addition, one needs to look at changes in assets and liabilities accounts to back out investing and financing cash flows. Thus, you need both income statement and the balance sheet for the indirect method of cash flow construction.

Reveal Solution Next Question

QUESTION: 1938

Which of the following is a long-term liability?

Cost of goods sold
Bonds
Commercial paper
Accounts payable
None of these answers

Answer(s): B

Explanation:

Only bonds would be a long-term liability. Long-term liabilities are repaid over a time frame of greater than one year. Bonds are repaid over many years, whereas accounts payable and commercial paper are current liabilities (repaid over less than one year); cost of goods sold is an expense not a liability.

Reveal Solution Next Question

QUESTION: 1939

According to FASB, initial franchise fees should be recognized as income when

the franchisee shows the ability to pay the fee.
the franchisor has substantially performed or satisfied all material services and conditions.
the franchisor has collected the majority of fee in cash.
the franchisor bills the franchisee.

Answer(s): B

Explanation:

Accounting and reporting standards for franchisors require that revenue be recognized when the franchisor has substantially performed or satisfied all material services and conditions.

Reveal Solution Next Question

QUESTION: 1940

The retail industry has __________ asset turnover ratio compared to that of a capital intensive industry like the auto industry.

a higher
about the same
a higher and lower are both possible
a lower

Answer(s): A

Explanation:

Total asset turnover = net sales/average total assets Since the auto industry is highly capital intensive compared to the retail industry, it require far more capital assets to generate the same revenues as the retail industry.

Reveal Solution Next Question

Free CFA-Level-I Exam Braindumps (page: 485)

QUESTION: 1937

Explanation:

QUESTION: 1938

Explanation:

QUESTION: 1939

Explanation:

QUESTION: 1940

Explanation: