QUESTION: 2001

When purchased, plant assets are recorded at ________.

future value
market value
lower of cost or market
cost

Answer(s): D

Explanation:

Fixed assets are recorded at cost, which includes all normal and reasonable expenditures necessary to get the asset in place and ready to use.

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QUESTION: 2002

From tax perspective, which of the following depreciation methods is usually the best?

Double declining
Modified accelerated
Straight line
Sum-of-digits

Answer(s): A

Explanation:

Since Double Declining results in the biggest depreciation expense of the four in the initial years, it allows the biggest deferral of tax payments. These deferrals can sometimes be for an indefinite period, thus avoiding them almost altogether.

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QUESTION: 2003

Gamma-Theta is a financial software firm with gross sales of 176,000 last year. Its cost of goods sold equaled 25,685. Gamma-Theta's corporate tax rate is 35%. If its net income after taxes was 70,279, its operating expenses were ________.

31,889
42,193
29,495
51,722

Answer(s): B

Explanation:

Gamma-Theta's pre-tax income equals 70,279/0.65 = 108,122. Now, pre-tax income = gross sales - cost of goods sold - operating expenses. Therefore, 108,122 = 176,000 - 25,685 - operating expenses. This gives operating expenses = 42,193.

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QUESTION: 2004

Restricted cash balances are ________.

non-current assets
not considered assets
none of these answers
regarded as part of long-term equity

Answer(s): A

Explanation:

At times, firms earmark cash deposits and balances for meeting longer term obligations like sinking funds or plant expansions. Such restricted cash balances are reported as non-current assets even though they are in a liquid form, since they are not available to satisfy current liabilities.

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Free CFA-Level-I Exam Braindumps (page: 501)

QUESTION: 2001

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QUESTION: 2002

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QUESTION: 2003

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QUESTION: 2004

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