QUESTION: 2069

When purchased, plant assets are recorded at:

cost
market value
future value
lower of cost or market

Answer(s): A

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: 2070

If an independent auditor has not become satisfied by means of other auditing procedures with respect to opening inventories, they should

either disclaim an opinion on the statement of income or qualify the opinion thereon, regardless of the degree of materiality of the amounts involved.
either disclaim an opinion on the statement of income or qualify the opinion thereon, depending on the degree of materiality of the amounts involved.
disclaim an opinion or qualify the opinion on the statements as a whole.
express an adverse opinion on the statements taken as a whole when the amount in question is material.

Answer(s): B

Explanation:

If the auditor has become satisfied as to current inventory, the auditor may use alternative procedures to become satisfied as to opening inventories. But if they cannot become satisfied regarding inventories, a qualified opinion or a disclaimer of opinion may be expressed, depending on materiality. Because cost of goods sold is dependent on opening inventories, an unqualified opinion on the income statement is not possible.

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QUESTION: 2071

The cumulative effect of changing to a new accounting principle on the amount of retained earnings at the beginning of the period in which the change is made should be included in net income of ________.

the period of change and future periods
the period of change
future periods
none of these answers
neither future periods nor the period of change

Answer(s): B

Explanation:

A change from one acceptable method of accounting to another should be accounted for as the cumulative effect of a change in accounting principle. The cumulative effect should be recognized as a component of net income, net of tax effect, in the period of change.

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QUESTION: 2072

A company is currently being sued by a customer. A reasonable estimate can be made of the costs that would result from a ruling unfavorable to the company, and the amount involved is material. The company's managers, lawyers, and auditors agree that there is a remote likelihood of an unfavorable ruling. This contingency

none of these answers.
should be disclosed as a parenthetical comment in the balance sheet.
should be disclosed as an appropriation of retained earnings.
should be disclosed in a footnote.
need not be disclosed in a footnote.

Answer(s): E

Explanation:

Losses arising from litigation should be accrued if both probable and reasonably estimable, and should be disclosed if reasonably possible. In this case, the likelihood is remote. Therefore, no disclosure is required.

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Free CFA-Level-I Exam Braindumps (page: 518)

QUESTION: 2069

Explanation:

QUESTION: 2070

Explanation:

QUESTION: 2071

Explanation:

QUESTION: 2072

Explanation: