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Free CFA-Level-I Exam Braindumps (page: 492)

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Calculate the book value per share of General Industries common stock, given the following information. Par value of common stock, $1 per share; total assets, $12,565,000; retained earnings, $5,550,000; total liabilities, $5,012,500; number of common shares outstanding, 475,000; number of preferred shares outstanding, 0.
Market value of common stock, $96.25.

  1. $26.45
  2. $96.25
  3. None of these answers
  4. $15.90
  5. $10.55

Answer(s): D

Explanation:

The book value of the firm's common stock is $15.90 which is calculated as follows: total assets of $12,565,000, minus total liabilities of $5,012,500, minus, preferred stock outstanding of $0, divided by the number of common shares outstanding of 475,000.



The XYZ Company operates a catering service specializing in business luncheons for large businesses. XYZ requires customers to place their orders two weeks in advance of the scheduled events. XYZ bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Conceptually, XYZ should recognize revenue from its catering services at the date when a ________.

  1. billing is mailed
  2. customer's payment is received
  3. customer places an order
  4. luncheon is served
  5. none of these answers

Answer(s): D

Explanation:

Revenues should be recognized when they are realized or realizable and earned. The most common time at which these two conditions are met is when the product or service is delivered.



An EPS amount is always shown for:

  1. income before extraordinary items and the cumulative effect of accounting changes
  2. income from continuous operations
  3. cumulative effect of accounting changes
  4. all of these answers are correct

Answer(s): D

Explanation:

All of the responses are true.



In a period of rising prices, the inventory method that gives the lowest possible value for ending inventory is:

  1. weighted average
  2. LIFO
  3. FIFO
  4. gross profit

Answer(s): B

Explanation:

The ending inventory under LIFO is priced at the earliest, and thus the lowest prices (in a period of rising prices) than any of the other methods.






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