Why do the corporation's directors declare stock dividends?
Answer(s): B
Declaring a stock dividend will increase the number of shares outstanding and thereby keep the per share price low enough to be an attractive investment. Stock dividends may also show the company management's confidence in the present and future performance of the company.
Which of the following is the proper method of reporting the value of financial instruments on a firm's balance sheet?
Answer(s): D
Company's are required by accounting regulations to record and report the value of financial instruments such as derivatives at cost.
A financial auditor's report is required to:
IV is usually reported to management but not in the audit report. Also, a financial auditor, would, in the course of her audit, check for material misstatements but is not responsible for unearthing fraudulent activities.
Accounting Standards are best described as
Answer(s): C
Accounting standards have been through a long development process and are subject to continual innovation, modification, and change. Currently, the Financial Accounting Standards Board (FASB), composed of seven full-time paid members, functions as the standard-setting body of the accounting profession.
A firm using LIFO accounting has a LIFO reserve of 900, with a LIFO ending inventory of 8,100. It is currently in the 40% tax bracket. If it switches to FIFO accounting, which of the following is true?
Answer(s): A
LIFO Reserve = FIFO Ending inventory value - LIFO Ending inventory value Therefore, the ending inventory under FIFO = 8,100 + 900 = 9,000. The deferred taxes increase by 900*0.4 = 360 and the equity increases by 900*(1-0.4) = 540.
Post your Comments and Discuss Test Prep CFA-Level-I exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the CFA-Level-I content, but please register or login to continue.