CFAI Mock afternoon session

No.17: what does the question mean by ‘require to cap expenses at 15% above budget’?, why does that tell us he doesn’t need to inform the partners of the increase in cost is not higher than the 15% budget variance contingency agreed? Also, No.53: why using short-term debt to reduce an existing account payable won’t increase CFO? should short-term debt be classified into CFF?

on # 17, cap means he cannot spend beyond 15%. Therefore, once he reached 50% mark, does he have a duty to inform anyone?? - the answer is NO - am not sure abt 53 - Good Luck!

question 17 - Basically he has to inform them if the costs go over 15 percent, since the lighting fixtures were only 5 percent of total costs, the 50 percent increase is immaterial to report to the bosses.

Q 53 You create a short term liability of say $100,000 and wipe out your AP of $100,000. You still have the same SHORT term liabilities. You do however shift the from expense (100% CFO impact) to liability (CFF principle + small CFO impact for 1 yr. interest). I think this actually DOES help your CFO but compared to the other 2 options, it will help your CFO the least.

thanks all for ur help!! @Matt: i think this totally makes sense…some answers given on MOCK is just not good…