QUESTION: 2053

How should the effect of a change in accounting estimate be accounted for?

None of these answers.
By reporting pro forma amounts for prior periods.
In the period of change and future periods if the change affects both.
By restating amounts reported in financial statements of prior periods.
As prior-period adjustments to beginning retained earnings.

Answer(s): C

Explanation:

The effect of a change in accounting estimate must be accounted for as a component of income from continuing operations in the period of change and in future periods.

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QUESTION: 2054

In a period of falling prices, the FIFO inventory method

neither of these answers is correct
both of these answers are correct
magnifies the effects of the business cycle on income
gives the lowest possible value for ending inventory

Answer(s): B

Explanation:

The first-in-first-out (FIFO) method is based on the assumption that the costs of the first items acquired should be assigned to the first items sold, therefore ending inventory on hand is based on the most recent prices.

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QUESTION: 2055

Realized gains and losses from sales of assets are measured as

fair value of asset less net book value of asset.
sales price of asset less net book value of asset.
net book value less fair value of asset.
sales price of asset less fair value of asset.

Answer(s): B

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QUESTION: 2056

A firm has total assets of 5,320, net sales of 8,395, average receivables of 894, current assets of 2,393 and a current ratio of 1.2. Its average receivables collection period equals ________.

41.73 days
29.92 days
23.19 days
38.87 days
Receivables turnover ratio = Net annual sales/average receivables

Answer(s): D

Explanation:

This is measured by two ratios in slightly different ways:
E. Receivables turnover ratio = Net annual sales/average receivables
F. Average receivables collection period = 365/receivables turnover In this case, receivables turnover = 8,395/894 = 9.39. Therefore, average receivables collection period = 365/9.39 = 38.87 days. Notice that the collection period is measured in "days."

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Free CFA-Level-I Exam Braindumps (page: 514)

QUESTION: 2053

Explanation:

QUESTION: 2054

Explanation:

QUESTION: 2055

QUESTION: 2056

Explanation: