QUESTION: 2077

The interest expense on a premium bond _______ over time.

decreases
remains constant
can increase or decrease, depending on interest rate movements
increases

Answer(s): A

Explanation:

Remember that the book value of the liability of any straight bond equals the face value at maturity. Hence, when the bond is issued at a premium, the premium amount is amortized over the life of the bond. The outstanding liability thus decreases steadily toward the face value. The decreasing liability decreases the interest expense over time.

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QUESTION: 2078

According to the FASB conceptual framework, which of the following situations violates the concept of reliability?

Financial statements include property with a carrying amount increased to management's estimate of market value.
None of these answers.
Financial statements are issued 9 months late.
Data on segments having the same expected risks and growth rates are reported to analysts estimating future profits.
Management reports to stockholders regularly refer to new projects undertaken, but that financial statements never report project results.

Answer(s): A

Explanation:

Reliability has 3 primary qualities: verifiability, neutrality and representational faithfulness. Neutrality is violated here as information should not be prepared or reported to obtain a predetermined result, and should be free from bias.

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QUESTION: 2079

The accumulated depreciation account should show

total depreciation for fixed assets since the business was formed
current depreciation expense plus estimated depreciation for next year
total depreciation for fixed assets still in use
only the depreciation expense recognized during the current 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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QUESTION: 2080

Costs that can be reasonably associated with specific revenues but not with specific products should be

capitalized and then amortized over a period not to exceed 60 months.
expensed in the period in which the related revenue is recognized.
capitalized and then amortized over a period not to exceed 40 years.
allocated to specific products based on the best estimate of the production processing time.
charged to expense in the period incurred.

Answer(s): B

Explanation:

The expense recognition principle of "associating cause and effect" or "matching" applies when a direct cause and effect relationship can be demonstrated between costs and particular revenues.

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Free CFA-Level-I Exam Braindumps (page: 520)

QUESTION: 2077

Explanation:

QUESTION: 2078

Explanation:

QUESTION: 2079

Explanation:

QUESTION: 2080

Explanation: