63. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. A company uses the LIFO inventory method, but most of the other companies in the same industry use FIFO. Which of the following best describes one of the adjustments that would be made to the company’s financial statements to comparem it with other companies in the industry? The amount reported for the company’s ending inventory should be:
A. increased by the ending balance in its LIFO reserve.
B. decreased by the ending balance in its LIFO reserve.
C. increased by the change in its LIFO reserve for that period.
Answer: A
“Inventories,” Elbie Antonites, CFA, and Michael Broihahn, CFA 2009 Modular Level I, Volume 3, p. 312
“Financial Statement Analysis: Applications,” Thomas R. Robinson, CFA, Jan Hendrik van Greuning, CFA, R. Elaine Henry, CFA and Michael A. Broihahn CFA
2009 Modular Level I, Volume 3, p. 599
Study Session 9-35-e, f, 10-42-e Analyze the financial statements of companies using different inventory accounting methods to compare and describe the effect of the different methods on cost of goods sold, inventory balances, and other financial statement items; and compute and describe the effects of the choice of inventory method on profitability, liquidity, activity and solvency ratios.
Calculate adjustments to reported financial statements related to inventory assumptions in order to aid in comparing and evaluating companies. Determine and justify appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company. LIFO Reserve = FIFO Inventory – LIFO Inventory
Adding the ending balance in the LIFO reserve to the LIFO inventory would equal the ending balance for inventory on a FIFO basis.
64. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. An analyst gathers the following information about a company:
| Average market price per share of common stock during the year |
$40 |
| Exercise price per share for options on 50,000 common shares |
$50 |
| Exercise price per share for warrants on 20,000 common shares |
$30 | Using the treasury stock method, the number of incremental shares used to compute diluted earnings per share is closest to:
A. 5,000.
B. 15,000.
C. 20,000.
Answer: A
“Understanding The Income Statement,” Thomas R. Robinson, CFA, Hennie van Greuning, CFA, Elaine Henry, CFA, and Michael A. Broihahn, CFA 2009 Modular Level I, Volume 3, pp. 171-173
Study Session 8-32-h Describe the components of earnings per share and calculate a company’s earnings per share (both basic and diluted earnings per share) for both a simple and complex capital structure.
Diluted EPS is calculated using the treasury stock method that considers what would be the effect if the options or warrants had been exercised. Only options or warrants that are in-the-money are included, as out-of-the-money options would not be exercised. Therefore only the warrants are dilutive: their exercise price is below the average market price of the stock. Using the treasury stock method, the number of new shares issued on exercise is reduced by the number of shares that could be purchased with the cash received upon exercise of the warrants: 20,000($30) = $600,000 in proceeds. $600,000 / $40 = 15,000 shares treasury stock. Incremental shares using the treasury stock method = 20,000 – 15,000 = 5,000.
65. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted. At the beginning of the year, a lessee company enters into a new lease agreement that is correctly classified as a finance lease, with the following terms:
| Annual lease payments due at the end of the year |
$100,000 |
| Lease term |
5 years |
| Appropriate discount rate |
12% |
| Depreciation method |
straight-line basis |
| Estimated salvage value |
$0 | With respect to the effect of the lease on the company’s financial statements in the first year of the lease, which of the following is most accurate? The reduction in the company’s:
A. pretax income is $72,096.
B. cash flow from financing is $56,742.
C. cash flow from operations is $72,096.
Answer: B
“Long-term Liabilities and Leases,” Elizabeth Gordon and R. Elaine Henry, CFA 2009 Modular Level I, Volume 3, pp. 447-453
Study Session 9-38-g
Determine the effects of finance and operating leases on the financial statements and ratios of the lessees and lessors.
The present value of the lease is $360,477.62. (n = 5, I = 12%, PMT = $100,000) 12% of the original PV is $43,257.31 and represents the interest component of the payment in the first year. The difference between the annual payment and the interest is the amortization of the lease obligation included in cash flow from financing. $100,000 – 43,257.31 = $56,742.69.
Depreciation is $360,477.62 / 5 or $72,095.52 so the total reduction in pretax income would be interest plus depreciation or $115,352.83. Cash flow from operations would be reduced by the amount of the interest only because the depreciation would be added back to determine cash flow from operations.
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发表于 2009-6-29 13:44
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