QUESTION: 2105

A dividend that distributes more than 25% of the outstanding shares before the dividend is called:

a liquidating dividend
illegal
a large stock dividend
a capitalizing dividend

Answer(s): C

Explanation:

Large stock dividends distribute greater than 25% of outstanding shares before the dividend and small stock dividends distribute less than or equal to 25% of previously outstanding shares.

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QUESTION: 2106

The loss from an uncollectible account is

an asset
a regular expense of doing business
a liability
a reduction in revenue

Answer(s): B

Explanation:

The benefit from selling on credit to customers far outweighs the cost of losses from uncollectible accounts.
These losses are a regular expense of doing business.

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QUESTION: 2107

If the estimated life of a long-term asset is increased, which of the following is true?

The depreciation expense increases
II. Taxes decrease
III. Income increases
IV. Cashflow decreases
I & II
III & IV
I & III
I, III & IV

Answer(s): B

Explanation:

The increase in the asset's life estimate decreases the depreciation expense. Hence, income increases, taxes increase and cashflow decreases (due to higher taxes).

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QUESTION: 2108

When merchandise inventory is purchased under a perpetual system, which account is debited?

Cash
Merchandise Inventory
Accounts Payable
Purchases

Answer(s): B

Explanation:

The perpetual inventory system records purchases of merchandise inventory directly into a balance sheet account called Merchandise Inventory.

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Free CFA-Level-I Exam Braindumps (page: 527)

QUESTION: 2105

Explanation:

QUESTION: 2106

Explanation:

QUESTION: 2107

Explanation:

QUESTION: 2108

Explanation: