Financial Statement Analysis

Select the best order in which the following items will appear on the income statement: 1. Cumulative effect of change in accounting principle. 2. Extraordinary items. 3. Discontinued operations. 4. Income taxes expense. 5. Earnings per share. 6. Net income. 7. Revenues. 8. Expenses. A. 7 - 8 - 3 - 2 - 1 - 4 - 6 - 5. B. 7 - 8 - 4 - 1 - 2 - 3 - 6 - 5. C. 7 - 8 - 1 - 2 - 3 - 4 - 6 - 5. D. 7 - 8 - 4 - 3 - 2 - 1 - 6 - 5.

Conti Corporation sells new homes on installment. If collectibility of the sales proceeds cannot be reasonably estimated, income is least likely to be overstated using which of the following revenue recognition methods? A. Installment method. B. Completed contract method. C. Cost recovery method. D. At the time the house is delivered.

Which of the following statements relating to the statement of cash flows is least likely to be true? A. Changes in operating assets and liabilities arising from acquisitions or divestitures are not included in the calculation of operating cash flow. B. A change in net foreign asset investments due solely to exchange rate fluctuations is reported as part of investing, and not operating, cash flow. C. For purposes of preparing the cash flow statement, cash includes both cash and short-term, highly liquid investments with maturities of 90 days or less. D. Investors and creditors use the statement of cash flows to assess a company�s ability to generate and manage cash flows, pay its liabilities and dividends, and to anticipate its need for financing.

  1. Revenues. 8. Expenses. 4. Income taxes expense. --------------------------------------------- (the ‘Line’) 3. Discontinued operations. 2. Extraordinary items. 1. Cumulative effect of change in accounting principle. 6. Net income. 5. Earnings per share. Is it D? - Dinesh S

D,B,C?

Conti Corporation sells new homes on installment. If collectibility of the sales proceeds cannot be reasonably estimated, income is least likely to be overstated using which of the following revenue recognition methods? A. Installment method. B. Completed contract method. C. Cost recovery method. D. At the time the house is delivered. --------- B = Completed contract Method, since no profit is recognized till the project is completed, so no chance of overstating the income Which of the following statements relating to the statement of cash flows is least likely to be true? A. Changes in operating assets and liabilities arising from acquisitions or divestitures are not included in the calculation of operating cash flow. B. A change in net foreign asset investments due solely to exchange rate fluctuations is reported as part of investing, and not operating, cash flow. C. For purposes of preparing the cash flow statement, cash includes both cash and short-term, highly liquid investments with maturities of 90 days or less. D. Investors and creditors use the statement of cash flows to assess a company�s ability to generate and manage cash flows, pay its liabilities and dividends, and to anticipate its need for financing. A. T B. T C. FALSE D. T C?? - Dinesh S

DBB?

DCB

Which of the following statements relating to the statement of cash flows is least likely to be true? A. Changes in operating assets and liabilities arising from acquisitions or divestitures are not included in the calculation of operating cash flow. B. A change in net foreign asset investments due solely to exchange rate fluctuations is reported as part of investing, and not operating, cash flow. C. For purposes of preparing the cash flow statement, cash includes both cash and short-term, highly liquid investments with maturities of 90 days or less. D. Investors and creditors use the statement of cash flows to assess a company�s ability to generate and manage cash flows, pay its liabilities and dividends, and to anticipate its need for financing. Last question… there is I believe a CFX (Cash flow due to exchange category)… so the item B should go to that, and not to Investing cashflows. So B is the choice on the last one. Conti Corporation sells new homes on installment. If collectibility of the sales proceeds cannot be reasonably estimated, income is least likely to be overstated using which of the following revenue recognition methods? A. Installment method. B. Completed contract method. C. Cost recovery method. D. At the time the house is delivered B again and D on the first one.

D. 7 - 8 - 4 - 3 - 2 - 1 - 6 - 5. B. Completed contract method. B. A change in net foreign asset investments due solely to exchange rate fluctuations is reported as part of investing, and not operating, cash flow.

DCB.

chadtap… did you think the bsas was hard… i thought the wording was tricky… i made 4 mistakes reading the questions wrong… bsas 2006 exam #1 was def hard and i did not do well 65%… but i learned from it… for example the q about cfo w/ the unearned revenue… i never seen that before it was a curve ball but now i fully understand it… overall bsas hurt my confidence. but i will take the afternoon section to learn from it…

the correct anwsers are D,C,and B respectively Reasons: 1. D 2.C - Income recognition is delayed the most under the cost recovery method because no profit is recognized until cash collections exceeds the cost of the asset sold. 3. B - Translation gains and losses resulting from exchange rate changes are excluded from the calculus of cash flows from operating, investing and financing activities. Instead, they are reported in a separate category called the effect of exchange rate changes on cash. (A), © and (D) are all true. Nikko, your right… there are a few questions with difficult wording (or I wasn’t paying close enough attention)…either way for $99 you sure do get a lot of questions to practice on… I think it is a pretty good deal overall…

I got D,C,C. messed up on the last one.

Good to know on #3. I had never heard that before. I think I may purchase the BSAS practice test. So far I’ve been using qbank and CFAI practice tests. Do people think BSAS would be a good compliment as well?

moto376 Wrote: ------------------------------------------------------- > Good to know on #3. I had never heard that before. > I think I may purchase the BSAS practice test. So > far I’ve been using qbank and CFAI practice tests. > Do people think BSAS would be a good compliment as > well? I dont think #3 would be tested in the exam… all we have for L1 is CFO + CFI + CFF though Cash Flows have a 4th component (CFX), it’s testable only at L2. -Dinesh S

Dinesh… you are probably right, but I thought this question was interesting and should be posted just in case…

chadtap… i have only done the 2006 am have you done the 2004-2005 q’s do u think they are outdated?

Nikko, No I havent done 04-05 yet… I prolly will just to have more practice even though they are most likely outdated… I did do the 2006 PM section last night and scored around a 72%…I thought some of the questions were harder on the PM section (EPS question which was posted last night)… All in all it will be interesting to see if these exams will help in the end… Good luck