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Free CFA-Level-I Exam Braindumps (page: 480)

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PDF with 3963 Questions

Which of the following groups will have seniority in the event of bankruptcy of a company?

  1. all have same seniority
  2. preferred stockholders
  3. common stockholders
  4. debt holders

Answer(s): D

Explanation:

Debt holders are paid first.



What does FASB refer to?

  1. The Financial Analysts Standards Board.
  2. The Federal Accounting Society Board of Directors.
  3. The Financial Accounting Standards Board.
  4. None of these answers.

Answer(s): C

Explanation:

The Financial Accounting Standards Board.



A product financing arrangement exists when

  1. the party who manufactures the inventory gives extended terms to certain preferred customers.
  2. a party transfers ownership of inventory to a purchaser yet retains the inventory in their own warehouse.
  3. all of the answers would be accounted for as product financing arrangements.
  4. a party bearing the risks and rewards of ownership transfers inventory to a purchaser, and in a related transaction agrees to repurchase the product at a specified price over a specified time.

Answer(s): D

Explanation:

The key to product financing is that the purchaser retains very little of the risk because typically whatever does not sell, the seller agrees to buy back at a specified price.



Which of the following qualifies as a disposal of a segment of a business?

  1. Perrier Inc., producer of bottled spring water and soft drinks, discontinues production of its bottled spring water. This operation is self-contained.
  2. Superpharm Drugs, operator of chain of discount drug stores, reaches an agreement to sell its Boston location to a competitor.
  3. Irving Inc. supplies its own service stations and independent operators from its refineries. The firm decides to discontinue marketing to independents.
  4. None of these answers.
  5. Treadrite, a shoe manufacturer, has decided to discontinue its line of work boots. The firm's operations are concentrated in single plant.

Answer(s): A

Explanation:

A segment is a component of an entity whose activities represent a separate major product line and activities can be physically and operationally distinguished from the remainder of the entity for financial reporting purposes. The discontinued spring water operation thus qualifies as disposal of a segment.






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