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Free CFA-Level-I Exam Braindumps (page: 490)

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A firm has 1,000 common shares valued at 30 each outstanding. It has also issued 500 preferred shares of face value 100 and a coupon of 5% and a debt of 50,000 with a coupon rate of 6%. The firm's net income after taxes is 14,300. Then, the EPS reported by the firm is ________.

  1. 7.87
  2. 11.8
  3. 14.3
  4. 8.8

Answer(s): B

Explanation:

For a simple capital structure, Basic EPS = (Net Income - Preferred dividends)/weighted # of common shares Therefore, Basic EPS = (14,300 - 500*100*5%)/1,000 = 11.8.



Use the following financial data on Enterprise:

  1. Sale of equipment $32,000
  2. Loss on equipment sale $9,000
  3. Dividends paid $12,500
  4. Purchase of an office suite $104,000
  5. Common stock repurchase $45,000
  6. Dividends received from investments $8,500
  7. Interest received on Treasury bonds $1,200
  8. Supplier accounts paid $3,700
  9. Cash collection from customers $14,200
  10. Ending cash balance $98,000
    The operating cash flow for 1998 was ________.
  11. $32,700
  12. $29,200
  13. $20,200
    N. $7,700

Answer(s): C

Explanation:

Items f, g, h and i are operating events.



Which of the following best describes the distinction between expenses and losses?

  1. Losses result from peripheral or incidental transactions, whereas expenses result from ongoing major or central operations of the entity.
  2. Losses are extraordinary charges, whereas expenses are ordinary charges.
  3. Losses are reported net of related tax effect, whereas expenses are not reported net of tax.
  4. Losses are material items, whereas expenses are immaterial items.
  5. None of these answers.

Answer(s): A

Explanation:

Expenses are outflows or other using up of assets or incurrence of liabilities from delivering or producing goods, services or key operations. Losses are defined as decreases in equity (net assets) except those that result from expenses or distributions to owners.



In preparing its cash flow statement for the year ended December 31, 1998, Roman Co. collected the following data:

Gain on sale of equipment $6,000
Proceeds from sale of equipment 10,000
Purchase of A.S. Inc. bonds (par value $200,000) 180,000
Amortization of bond discount 2,000
Dividends declared 45,000
Dividends paid 38,000
Proceeds from sale of treasury stock
(carrying amount of $65,000) 75,000

In its December 31, 1998 statement of cash flows, what amount should Roman report as net cash provided by financing activities?

  1. $20,000
  2. $37,000
  3. $75,000
  4. $30,000
  5. $27,000

Answer(s): B

Explanation:

Financing activities include the issuance and repurchase of shares, dividends paid and changes in long-term liabilities. In this case, there were dividends paid of $38,000 and proceeds from sale of treasury stock of $75,000. Therefore, the net cash provided from financing activities is $37,000 ($75,000-38,000).






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