CFA (USA) Level 1 test

2. Which of the following statements about a corporation’s annual reports, SEC filings, and press releases is most accurate?


Which of the following statements regarding an audit and a standard auditor’s opinion is most accurate?


When using the FIFO method to compute cost of goods sold and ending inventory, how do you determine what goes in the ending inventory column and what goes into the cogs column?

Example: Opening Inv. 9,000 units@ $16

purchase 4/16: 27,000 units @ $18

purchase 7/28: 30,000 units @ $23 how would that be split to get the Ending Inventory and the COGS if goods sold was 60,000 units?


Based on the following data, what is the diluted EPS?

? Net Income for the period was $250,000, while the tax rate was 35%.

? Common shares outstanding at the beginning of the year were 50,000

? 10,000 shares common stock issued on March 1st.

? 5.5% convertible bonds, convertible into 25 shares of common stock. Issue price $1,000, 200 bonds issued on June 1st of the year.

? 4.75% convertible preferred stock, $100 par, 3,100 shares outstanding at beginning of year. Each convertible into 4 shares of common stock

? 6.2% convertible preferred stock, $100 par, 2,100 shares outstanding at beginning of year. Each convertible into 1 share of common stock.

? 7,500 warrants are outstanding with an exercise price of $50. Each warrant is convertible into 1 share of common stock. Average market price of common is $55.00 per share.


On the above question calculate the basic EPS?


9. Calculate financial leverage ratio for the following data:

Net income 215

Sales 3050

Equity 1190

Assets 2300


For a recent year a corporation's financial statements reported the following:

Net Income $100,000

Depreciation Expense 10,000

Increase in Accounts Receivable 30,000

Decrease in Accounts Payable 15,000

Based on the above information, what amount will the corporation report as Cash Provided by Operating Activities on the cash flow statement?


Which of the following statements is False?


Which of the following statements are true?


Data corp. manufactures and sells computer equipment. The following information is available concerning a transaction between Data and Venture, Inc.:

• On November 30, 2009 Data Corp. received a signed purchase order from Venture Inc. for 100 model D computers at a price of $150,000. Under the terms of the purchase order, data arranges and pays for shipping, risk of ownership passes upon delivery, and the transaction is not subject to revocation.

• On December 29, 2009 100 model D computers were shipped from Data Corp. factory

• On December 31, 2009 Data corp. received cash payment for the computers in the amount of $150,000

• On January 2, 2010 the computers were received at Venture Inc, Headquarters.

Data corp. should recognize $150,000 of revenue as of:


White corp. financial statements for the year ended-December 2010 included the following:

Income Statements

Sales $8,000,000

Cost of Goods Sold (3,000,000)

Gross Profit 4,200,000

Wages (1,000,000)

Depreciation (600,000)

Interest (500,000)

Taxes (600,000)

Net Income $1,500,000

Selected Balance Sheet Accounts:

Dec. 31, 2000 Dec. 31, 2001

Accounts Receivable $1,200,000 $1,500,000

Inventory 800,000 1,000,000

Accounts Payable 600,000 400,000

Equipment 5,300,000 5,500,000

White prepares its statement of cash flow using direct method. The Cash Flow from Operations (CFO) section of the statement will show Cash Collections of;


The following information is derived from the financial records of brown company for the year ended December 31, 2009:

Sales $3,400,000

Cost of Goods Sold ( 2,100,000)

Depreciation (300,000)

Interest Paid (200,000)

Gain on Sale of Old Equipment 400,000

Income Taxes Paid (300,000)

Net Income $900,000

• Brown issued bonds on June 30, 2009 and received proceeds of $4,000,000.

• Old equipment with a book value of $2,000,000 was sold on August 15, 2009 for $2,400,000 cash.

• Brown purchased land for a new factory on September 30, 2009 for $3,000,000 issuing a $2,000,000 note and paying the balance in cash.

Using the definition of free cash flow as cash flow from operations less capital expenditures, Brown free cash flow available to equity shareholders for 2009 is:


Under the US FASB conceptual framework, audited financial statements must do all the following except:


Which of the following statements regarding basic and diluted EPS is least accurate?


If a reliable estimate of total costs of the contract does not exist, which of the following revenue recognition methods should be


BWT, Inc. shows the following data in its financial statements at the end of the year.

Assume all securities were outstanding at the beginning of the year:

• 6.125% convertible bonds, convertible into 33 shares of common stock. Issue price $1,000, 100 bonds outstanding.

• 6.25% convertible preferred stock, $100 par, 2,315 shares outstanding. Convertible into 3.3 shares of common stock, Issue price $100.

• 8% convertible preferred stock, $100 par, 2,572 shares outstanding. Convertible into 5 common shares, Issue price $80.

• 9,986 warrants are outstanding with an exercise price of $38. Each warrant is convertible into 1 share of common. Average market price of common is $52.00 per share.

• Common shares outstanding at the beginning of the year were 40,045.

• Net Income for the period was $200,000, while the tax rate was 40%.

Part 1)

what were the preferred dividends paid this whole year?


19. BWT, Inc. shows the following data in its financial statements at the end of the year.

Assume all securities were outstanding at the beginning of the year:

• 6.125% convertible bonds, convertible into 33 shares of common stock. Issue price $1,000, 100 bonds outstanding.

• 6.25% convertible preferred stock, $100 par, 2,315 shares outstanding. Convertible into 3.3 shares of common stock, Issue price $100.

• 8% convertible preferred stock, $100 par, 2,572 shares outstanding. Convertible into 5 common shares, Issue price $80.

• 9,986 warrants are outstanding with an exercise price of $38. Each warrant is convertible into 1 share of common. Average market price of common is $52.00 per share.

• Common shares outstanding at the beginning of the year were 40,045.

• Net Income for the period was $200,000, while the tax rate was 40%.

Part 2)

What was the after-tax interest charge?


19. BWT, Inc. shows the following data in its financial statements at the end of the year.

Assume all securities were outstanding at the beginning of the year:

• 6.125% convertible bonds, convertible into 33 shares of common stock. Issue price $1,000, 100 bonds outstanding.

• 6.25% convertible preferred stock, $100 par, 2,315 shares outstanding. Convertible into 3.3 shares of common stock, Issue price $100.

• 8% convertible preferred stock, $100 par, 2,572 shares outstanding. Convertible into 5 common shares, Issue price $80.

• 9,986 warrants are outstanding with an exercise price of $38. Each warrant is convertible into 1 share of common. Average market price of common is $52.00 per share.

• Common shares outstanding at the beginning of the year were 40,045.

• Net Income for the period was $200,000, while the tax rate was 40%.

Part 3)

How many new shares had to be issued to facilitate warrant conversion?


19. BWT, Inc. shows the following data in its financial statements at the end of the year.

Assume all securities were outstanding at the beginning of the year:

• 6.125% convertible bonds, convertible into 33 shares of common stock. Issue price $1,000, 100 bonds outstanding.

• 6.25% convertible preferred stock, $100 par, 2,315 shares outstanding. Convertible into 3.3 shares of common stock, Issue price $100.

• 8% convertible preferred stock, $100 par, 2,572 shares outstanding. Convertible into 5 common shares, Issue price $80.

• 9,986 warrants are outstanding with an exercise price of $38. Each warrant is convertible into 1 share of common. Average market price of common is $52.00 per share.

• Common shares outstanding at the beginning of the year were 40,045.

• Net Income for the period was $200,000, while the tax rate was 40%.

Part 4)

What were the basic and diluted EPS for the year?


During periods of decreasing prices, a firm will report higher net income if its inventory cost assumption is:


ssume that Hunter Round Restaurant Supply currently uses the last in, first out (LIFO) method to account for inventory and that the business environment is one of rising prices and stable or growing inventory balances. In addition, Hunter Round has an effective tax rate of zero percent due to tax loss carrybacks. All else equal, which of the following statements is least likely valid? By using LIFO instead of first in, first out (FIFO), Hunter Round has:


What is a company’s equity if their return on equity (ROE) is 12%, and their net income is 10 million?


How will dilutive securities affect earnings per share (EPS) when determining diluted earnings per share?


Extraordinary items are:





























































































































Description:

Financial Reporting and Analysis
Study Session 7 & 8

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