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Free CFA-Level-I Exam Braindumps (page: 488)

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Which of the following is not subject to depreciation?

  1. automobiles
  2. machinery
  3. land
  4. land improvements

Answer(s): C

Explanation:

Land has unlimited useful life and is not consumed when it is used, and therefore not subject to depreciation.



When preparing a direct method statement of cash flows, the calculation of equity financing cash flows requires analysis of the change in stockholders' equity, separating all of the following except

  1. investments in affiliates.
  2. dividends declared.
  3. net income.
  4. shares issued/repurchased.
  5. changes in valuation accounts.

Answer(s): A

Explanation:

Cash flows from investments in joint ventures and affiliates and long-term investments in securities are components of cash flows from investing activities.



The Basic EPS represents which of the following?

  1. The net income divided by number of shares outstanding.
    II. The amount of net income available for distribution to common stock holders, per share.
    III. The net income after preferred dividends, expressed per common share.
    IV. Net income after preferred dividends divided by total equity.
  2. II & III
  3. III & IV
  4. I, II & IV
  5. I, II, III & IV

Answer(s): A

Explanation:

For a simple capital structure, Basic EPS = (Net Income - Preferred dividends)/weighted # of common shares = The amount of net income available for distribution to common stock holders, per share. Net income after preferred dividends divided by total equity is not true since total equity includes preferred equity whereas the denominator of Basic EPS consists only of common shares.



Which of the following would affect the comparability of accounting information for a given company from one accounting period to the next?

  1. Change in accounting principles
    II. Disposition of segment of business
    III. Acquisition of company accounted for using purchase accounting IV. Change in auditors
  2. I, III and IV
  3. I and III
  4. I, II and III
  5. I and II

Answer(s): C

Explanation:

A change in the representation by an accounting firm has no material effect on the accounting information.






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