Cisco®
Oracle
CompTIA
Checkpoint
ISC
EC-Council
EXIN
Fortinet
ITIL®
Juniper
Microsoft
VMware
Avaya
SAP
Google
Salesforce
Amazon
Palo Alto Networks
ISC2
Splunk®
All Vendors
  2. Home
  3. Exams
  4. Test Prep
  5. CFA-Level-I

Free Test Prep CFA-Level-I Exam Questions (page: 83)

Page 83 of 496
PDF with 3963 Questions

At the end of a fiscal period, any revenue that has been earned but not received should be credited to an appropriate

  1. revenue account
  2. asset account
  3. liability account
  4. expense account

Answer(s): A

Explanation:

Revenue should be recognized in the period in which it is earned and is credited to the appropriate revenue account.



The following information is from the financial statements of Complex Capitalists for 1997 and 1998:

Dec. 31, 1997 - 1 million common shares outstanding, capital structure all-equity March 31, 1998 - issued 200,000 common shares.
May 31, 1998 - issued 800,000 warrants exercisable at a strike of 35. The average price during 1998 was 34 and the maximum price was 39. Given the above example, the Diluted EPS will use how many shares?

  1. 1.2 million
  2. 2.0 million
  3. 1.617 million
  4. 1.15 million

Answer(s): D

Explanation:

Options and warrants enter into the Diluted EPS calculations only if the average stock price during the period exceeds the exercise price. In this case, since the average price is less than the strike price, the warrants are anti-dilutive and ignored in the calculation of Diluted EPS. Hence, weighted number of shares used = 1 million + 9/12*200,000 = 1.15 million.



When a plant asset is sold for more than its book value

  1. book value of the asset minus gain on disposal equals cash received
  2. cash received plus accumulated depreciation plus gain on disposal equals the original cost
  3. original cost minus accumulated depreciation equals cash received plus gain on disposal
  4. cash received plus accumulated depreciation minus gain on disposal equals the original cost

Answer(s): D

Explanation:

Gain or loss on disposal of a fixed asset is calculated by subtracting the book value (Original cost - Accumulated Depreciation) from the cash received.



In practice, companies who use the direct method in presenting cash flows from operations:

  1. must also disclose cash flows from operations using the indirect method.
  2. must classify interest paid as an investing activity.
  3. must be privately held or closely held corporations.
  4. are not required to report cash flows not incurred during the ordinary course of business.

Answer(s): A

Explanation:

The advantage of the indirect method is it reconciles differences between net income and cash flows from operating activities.



The amount by which a plant asset depreciated is classified as

  1. a liability
  2. an asset
  3. an expense
  4. revenue

Answer(s): C

Explanation:

Depreciation is the periodic allocation of the cost of a tangible, long-term asset over its estimated useful life, and therefore a period expense.



Under an inflationary environment with a constant inventory quantity, the LIFO Reserve tends to ________.

  1. increase over time.
  2. decrease over time.
  3. stays constant over time.
  4. fluctuate with COGS.

Answer(s): A

Explanation:

As prices increase and LIFO layers are maintained, the inventory value at FIFO keeps increasing while that at LIFO remains constant. Hence, the reserve keeps increasing.



At December 31, 1996, Eaton Corp. reported $1,750,000 of appropriated retained earnings for the construction of a new office building, which was completed in 1997 at a cost of $1,500,000. In 1997, Eaton appropriated $1,200,000 of retained earnings for the construction of a new plant. Also, $2,000,000 of cash was restricted for the retirement of bonds due in 1998. In its 1997 balance sheet, what amount should Eaton report as appropriated retained earnings?

  1. $2,950,000
  2. $3,200,000
  3. $1,450,000
  4. $1,750,000
  5. $1,200,000

Answer(s): E

Explanation:

Appropriating retained earnings is a formal way of marking a portion of retained earnings for other uses. This is done by reducing retained earnings and transferring the money to appropriated retained earnings. When the appropriation is no longer necessary, the money is moved back to retained earnings.



Which of the following would not be a limitation of the balance sheet?

  1. Long-lived assets may not reflect their market value because they are stated at historical cost.
  2. Significant assets and liabilities may be omitted because GAAP does not require their inclusion.
  3. GAAP permits companies to delay recognition of value changes, such as employee benefit plans.
  4. Some assets and liabilities are carried at historical cost bearing little relationship to their real market value.
  5. The firm's market value would not be able to be estimated due to historical costing.

Answer(s): E

Explanation:

The balance sheet does not report the market value of a firm's assets, liabilities, or equity, although the information provided can be useful when estimating the market value of the firm or its securities.



Viewing page 83 of 496



Post your Comments and Discuss Test Prep CFA-Level-I exam prep with other Community members:

CFA-Level-I Exam Discussions & Posts