2017LevelIMockExam:MorningSessionThemorningsessionofthe2017LevelICharteredFinancialAnalyst(CFA?)MockExaminationhas120questions.Tosimulatethedayexperience,candidatesareadvisedallocateanaverageofminutesperquestionforatotalof180minutes(3hours)forthissessiontheexam.TopicMinutes1-18EthicalandProfessionalStandardsQuantitativeMethodsEconomics272118361218919-3233-4445-6869-7677-8889-9495-106107-110111-120FinancialStatementAnalysisCorporateFinanceEquityInvestmentsDerivativeInvestmentsFixedIncomeInvestmentsAlternativeInvestmentsPortfolioManagementTotal:18615180ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.1.IncaseswhereapplicablelocallawsgoverningcalculationandpresentationofinvestmentperformanceconflictwithGIPSstandards,firmsare:A.requiredcomplywithregulationsandmakedisclosureoftheconflictclaimGIPScompliance.B.unabletoclaimGIPScomplianceincaseswherelocalregulationsprohibitaccuratecalculation.C.requiredcalculateandmaintainsetsofperformancedatainordertoclaimGIPScompliance.2.RossNelson,CFA,managesaccountsforhigh-net-worthclients,includinghisownfamily'saccount.Hehasnobeneficialownershipinhisfamily'saccount.BecauseNelsonisconcernedabouttheappearanceofimproperbehaviorinmanaginghisfamily'saccount,whenhispurchasesablockofsecurities,Nelsonallocateshisfamily'saccountonlythosesharesremainafterhisotherclientaccountshavetheirordersfilled.Theformanaginghisfamily'saccountisbasedonhisfirm'snormalfeestructure.AccordingtheStandardsofPracticeHandbook,bestcourseofactionwithregardmanagementofhisfamily'saccountwouldbeto:A.treattheaccountlikeotheremployeeaccountsoffirm.B.treattheaccountlikeotherclientaccounts.C.removehimselfdirectinvolvementbytransferringresponsibilityforaccountanotherinvestmentprofessionalinfirm.3.AlexanderNewton,CFA,isthechiefcomplianceofficerforMillsInvestmentLimited.Newtoninstitutesanewpolicyrequiringtheproratadistributionofnewsecurityissuesallestablisheddiscretionaryaccountsforwhichtheissuesappropriate.policyprovidesfortheexclusionofnewlyestablisheddiscretionaryaccountsfromdistributionuntiltheyhavereachedtheirone-monthanniversarydate.Thispolicyisdisclosedallexistingandpotentialclients.DidNewtonmostlikelyviolateanyCFAInstituteStandardsofProfessionalConduct?A.No,becausepolicyhasbeenadequatelydisclosedtoallexistingandpotentialclientsB.YesC.No,becauseallocationpolicyinequitableunderthestandards4.AccordingGIPSstandardsaverificationreportconfirmsalloffollowingexceptwhether:A.specificcompositepresentationsaccurate.B.processesandproceduresaredesignedtocalculatepresentcompliantperformanceresults.C.afirmhascompliedwithfirm-widecompositeconstructionrequirements.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.5.JustinBlake,CFA,aretiredportfoliomanager,owns20,000sharesofasmallpubliccompanythathewouldliketosellheisworriedaboutcompany'sprospects.Hemessagesonseveralinternetbulletinboards.Themessagesread,"Thisstockgoinguponcethependingpatentsreleased,soistimebuy.stockabuyatanythingbelow$3.Ihavedonesomeresearchontheseguys."AccordingtheStandardsofPracticeHandbook,BlakemostlikelyviolatedandStandardsassociatedwith:A.IntegrityofCapitalMarkets,butnotConflictsofInterest.B.neitherIntegrityofCapitalMarketsConflictsofInterest.C.IntegrityofCapitalMarkets,andConflictsofInterest.6.MirandaGrafton,CFA,purchasedalargeblockofstockatvaryingpricesduringtradingsession.Thestockrealizedasignificantgaininvaluebeforethecloseofthetradingday,Graftonreviewedpurchasepricesdeterminewhatshouldbeassignedeachspecificaccount.AccordingtheStandardsofPracticeHandbook,Grafton'sleastappropriateactionisallocatetheexecutionprices:A.acrosstheparticipatingclientaccountsatthesameexecutionprice.B.acrosstheparticipatingclientaccountsrataonthebasisofaccountsize.C.onafirst-in,first-outbasiswithconsiderationofbundlingordersforefficiency.7.WhichofthefollowingleastlikelyreflectstwoprimaryprinciplesofCFAInstituteRulesofProcedureforProfessionalConduct?A.FairprocessmemberandcandidateB.PublicdisclosureofdisciplinarysanctionsC.Confidentialityofproceedings8.Severalyearsago,LeoPeek,CFA,co-foundedaninvestmentclub.clubisinvestedbuthasnotactivelytradedaccountforleastayearanddoesplantoresumeactivetradingoftheaccount.Peek'semployerrequiresanannualdisclosureofemployeestockownership.Peekdisclosesallofhispersonaltradingaccountsbutdoesnotdisclosehisholdingsintheinvestmentclub.Peek'sactionsareleastlikelybeaviolationofwhichoftheCFAInstituteStandardsofProfessionalConduct?A.MisrepresentationofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.B.TransactionpriorityC.Conflictsofinterest9.MadelineSmith,CFA,recentlypromotedseniorportfoliomanager.Inhernewposition,Smithisrequiredsupervisethreeportfoliomanagers.Smithasksforacopyofherfirm'swrittensupervisorypoliciesandproceduresbutisadvisednopoliciesrequiredbyregulatorystandardsinthecountrywhereSmithworks.AccordingtoStandardsofPracticeHandbook,Smith'smostappropriatecourseofactionwouldbeto:A.requirehertoadoptCFAInstituteCodeofandStandardsofProfessionalConduct.B.declineacceptsupervisoryresponsibilityuntilheradoptsproceduresallowadequatelyexercisesuchresponsibility.C.requiretheemployeesshesupervisesadopttheInstituteCodeofEthicsStandardsofProfessionalConduct.10.WhenJeffersonPiedmont,CFA,joinedBranchInvesting,BranchbeganusingaquantitativestockselectionmodelPiedmonthaddevelopedonhisownpersonaltimepriorhisemploymentwithBranch.OneyearlaterwhenPiedmontleftBranchInvesting,hefoundtheoriginalcopythemodelhehaddevelopedinafilehisandpresentedittohisemployer,whichimmediatelybeganusingmodel.AccordingtheStandardsofPracticeHandbook,didPiedmontmostlikelyviolateanyCFAInstituteStandardsofProfessionalConduct?A.NoB.Yes,becausemisappropriatedpropertybelongingtoBranchC.Yes,becausefailedtoinformhisemployerthemodelwassameonebyhispreviousemployer11.ReikoKimisaki,CFA,isaninvestmentadviserforanationalsocialsecurityfundinafrontiermarketwithaverylimitedandilliquidcapitalmarket.Thelaborforceisyoungandhasinvestmenttimehorizonof25toyears.Kimisakibeenaskedsuggestwaysincreaseinvestmentreturnoftheoverallportfolio.Aftercarefulassessmentofthefund'spreviousinvestmenthistory,andavailableassetclasses,sheconsidersinvestmentprivateequity.WhatKimisaki'slowestpriorityavoidCodeandStandardsviolationspriormakingthisinvestmentrecommendation?A.Assessrisktoleranceofthefund.B.Analyzetheexpectedreturnsofprivateequityinthemarket.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.C.Determinewhethertheinvestmentstatementallowsforalternativeinvestments.12.RebeccaWongisenrolledtaketheLevelICFAexam.HerfriendWilliamLeungpurchasedLevelIstudymaterialsfromawell-knownCFAreviewprogrampreviousyear.Leungmadeaphotocopyofthepreviousyear'scopyrightedmaterialsandsoldWongherstudy.WhomostlikelyviolatedInstituteCodeofEthicsanyStandardsofProfessionalConduct?A.Neitherviolated.B.Bothviolated.C.OnlyLeungviolated.13.AccordingGlobalInvestmentPerformanceStandards(GIPS),firmsmustallofthefollowingexcept:A.provideinvestorswithacomprehensiveviewoftheirperformanceonlyintermsofreturns.B.adherecertaincalculationmethodologiesandmakespecificdisclosuresalongwiththeirperformance.C.complywithallrequirementsoftheGIPSstandards,asupdates,guidancestatements,andclarifications.14.ForfirmsclaimcompliancewiththeGIPSstandardstheymostlikelymust:A.increasetheconsistencyqualityofthefirm'scompliantpresentations.B.takeresponsibilityfortheirclaimofcomplianceandmaintainingthatcompliance.C.hireanindependentthirdpartytestasampleoftheircomposites.15.Whilewaitinginthebusinessclassloungebeforeboardinganairplane,BeccaMsafari,CFA,anequityanalyst,overhearsaconversationbyagroupofseniormanagers,includingmembersoftheboard,fromalargepubliclylistedbank.Themanagersdiscussstaffchangesnecessaryaccommodatetheirregionalexpansionplans.Msafarihearsseveralstaffnamesmentioned.UnderwhatcircumstancescouldMsafarimostlikelythisinformationwhenmakinganinvestmentrecommendationclients?cantheinformation:A.undernocircumstances.B.ifshedoesbreachtheconfidentialityofofthestaff.C.ifthediscussedchangesunlikelyaffectinvestorperceptionofthebank.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.16.FundamentalAssetManagersclaimscompliancewiththeCFAInstituteGlobalInvestmentPerformanceStandards(GIPS)andmanagesbothdiscretionaryandnon-discretionaryaccounts.WhenconstructingasinglecompositeforFundamental,JumaDzuyaincludesalldiscretionary,fee-payingaccountswithbothvalueandgrowthstrategies.DoesthecompositeconstructedDzuyamostlikelymeetcriteriaoftheGIPSstandards?A.No,becauseofnon-similarinvestmentstrategiesB.No,becausenon-discretionaryaccountsareincludedC.Yes17.CharlieMancini,CFA,istheManagingDirectorforBusinessDevelopmentatSVFinancial,(SVF),alargeU.S.-basedmutualorganization.Mancinibeenunderpressurerecentlytoincreaserevenues.InorderbusinessafundmanagerbasedinAsia,Mancinirecentlyapprovedflexibletermsforthefund'sclientagreement.allowforzonedifferences,theagreementpermitsthehedgefundtradeinallofSVF'smutualfundssixhoursaftercloseofU.S.markets,whichisprohibitedbyU.S.regulators.DidManciniviolateanyCFAInstituteStandardsofProfessionalConduct?A.NoB.Yes,withregardFairDealingandMaterialNonpublicInformationC.Yes,withregardFairDealing18.InordertoachievecompliancewithGIPSStandards,itisrecommendedthatA.definethefirmbyincludingallgeographicalofficesoperatingunderthesamename.B.provideexistingclientsacompliantpresentationapplicabletheirportfolio,aminimumofabi-annualbasis.C.adoptthebroadest,mostmeaningfuldefinitionoffirm.19.Thediscrepancybetweenastatisticallysignificantresultandaneconomicallymeaningfulresultisleastlikelytheresultof:A.transactioncosts.B.samplingerrors.C.risktolerance.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.20.Asmall-capgrowthfund'smonthlyreturnsforthemonthshavebeenconsistentlyoutperformingitsbenchmark.Ananalystisdeterminingwhetherthestandarddeviationofmonthlyreturnsisgreaterthan6%.Whichoffollowingbestdescribesthehypothesistobetested?A.B.C.21.Whentestingahypothesis,thepowerofatestdescribedasthe:A.probabilityofrejectinganullhypothesis.B.probabilityofcorrectlyrejectingthenullhypothesis.C.sameaslevelofsignificancethetest.22.AcompanyhasanunsecuredlineofcreditandneedstomaintainEBIT-to-interestcoverageratiogreaterthan2.0.ItsEBITisestimatedtobebetween$36millionand$48million,withallvaluesequallylikely.Iftheforecastedinterestchargeforyearis$20million,probabilitythatEBIT/interestwillmore2.0isclosestto:A.33.3%.B.66.7%.C.61.5%.23.Ifthestatedannualinterestrateis9%andthefrequencyofcompoundingisdaily,theeffectiveannualrate(EAR)isclosestto:A.9.00%.B.9.86%.C.9.42%.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.24.Afinancialcontractofferspay€1,200permonthforfiveyearswiththefirstpaymentmadeimmediately.Assuminganannualdiscountrateof6.5%,compoundedmonthlypresentvaluethecontractisclosestto:A.€61,663.B.€61,330.C.€63,731.25.Usefollowingvaluesfromastudent'st-distributiontoestablisha95%confidenceintervalforthepopulationmeangivenasamplesizeof10,asamplemeanof6.25,andasamplestandarddeviationof12.Assumethepopulationfromwhichthesampleisdrawnisnormallydistributedandthepopulationvarianceisknown.DegreesFreedomp=0.10p=0.05p=0.025p=0.0191.3831.3721.3631.8331.8121.7962.2622.2282.2012.8212.7642.7181011The95%confidenceintervalisclosestA.lowerboundof–2.20andanupperboundof14.70.B.lowerboundof–2.33andanupperboundof14.83.C.lowerboundof–0.71andanupperboundof13.21.26.Investorsshouldbemostattractedreturndistributionsthatare:A.normal.B.negativelyskewed.C.positivelyskewed.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.27.Thefiguretherightshowsthehistogramfordistributionofweeklyreturnsonanindex.Themedianofthereturnsontheindex,ifcomparedthemean,mostlikelyA.smaller.B.greater.C.equal.28.Adiscreteuniformdistributionconsistsofthefollowing12values:–8.80.8–4.6–Onasinglefromthedistribution,probabilityofdrawingavaluebetween–2.0and2.0fromthedistributionclosestA.16.67%.B.27.59%.C.33.33%.29.Adescriptivemeasureofapopulationcharacteristicisbestdescribedasa:A.parameter.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.B.frequencydistribution.C.samplestatistic.30.Thearithmeticandgeometricmeanarecalculatedforthesamedata.Ifthereisvariabilityindata,comparedwiththearithmeticmean,thegeometricmeanwillmostlikelyA.smaller.B.greater.C.equal.31.Whichofthefollowingaccuratelydescribesadistributionthatismorepeakedthannormal?A.MesokurtoticB.PlatykurtoticC.Leptokurtotic32.Thenullhypothesisismostlikelyberejectedwhenthep-valueoftheteststatistic:A.fallsbelowaspecifiedlevelofsignificance.B.exceedsaspecifiedlevelofsignificance.C.isnegative.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.33.Thefollowinginformationappliestoastart-upcompanysolelyownedbyanentrepreneur.ValueTotalunitsproducedAveragerevenue3,550$1,110Averagevariablecost$750Totalfixedcost$300,000$1,550,00012.5%TotalinvestmentRequiredrateofreturnOpportunitycostofowner’slaborThecompany'seconomicprofitisclosestto:$125,000A.$659,250.B.$784,250.C.$318,750.34.WhichofthefollowingstatementsconcerningtheHerfindahl–HirschmanIndexismostaccurate?A.TheHHIisausefulmeasureofpotentialbarriersentry.B.TheHHIisusuallyunaffectedbymergersamongthetopmarketincumbents.C.AnHHIof0.05wouldbeanalogoustohavingmarketsharedequally20firms.35.Ifthequantitydemandedpearsfallsby4%whenthepriceofapplesdecreasesby3%,thenapplesandpearsbestdescribedA.substitutes.B.inferiorgoods.C.complements.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.36.Inacountrywithahighlevelofincome,asdomesticincomerises,itismostthatanincreasewilloccurin:A.privatesavingandinvestment.B.thefiscalbalance.C.thetradebalance.37.Assumingotherfactorsremainunchanged,whichfollowingchangeswouldmostlikelycauseasimultaneousincreaseparticipationratioadecreaseintheunemploymentrate?A.Anincreaseinthenumberofincludedinlaborforce.B.Adecreaseinthetotalpopulationofworkingagepeople.C.Adecreaseintheofunemployedpeople.38.Threefirmsoperateunderperfectcompetition,producing900unitsoftheproductbutusingdifferentproductiontechnologies.Eachcompany'scoststructureisindicatedintable:CompanyXYZTotalVariableCostsTotalFixedCostsTotalCosts$2,7002,700$5,400$3,6001,800$5,400$4,500900$5,400Whichofthefollowingstatementsismostaccurate?IftheunitsellingpriceA.$4.50,allfirmsshouldcontinuetooperateintherun,butexitmarketthelongruniftheseconditionsexpectedpersist.B.$3.00,XshouldcontinuetooperateintheshortbutFirmsYandZshouldshutdownproduction.C.$6.00,allfirmsshouldexitthemarketinlongrun.39.Whichofthefollowingstatementsismostaccurateconcerningthesum-of-value-addedmethodusedtodetermineGDPbasedonexpenditures?A.ThemethodshowsalargerGDPvaluecomparedwiththevalue-of-final-outputmethod.B.Themethodisbasedonpricesconsumerspayfortheproductsandservices.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.C.Themethodinvolvessummingtheincomecreatedeachstageoftheproductionanddistributionprocess.40.ANewZealandtravelerreturnedfromSingaporewithSGD7,500(Singaporedollars).Aforeignexchangedealerprovidedtravelerwiththefollowingquotes:RatioRates1.2600USD/SGDNZD/USDUSD:USdollar0.7670NZD:ZealanddollarTheamountofNewZealanddollars(NZD)thattravelerwouldreceiveforhisSingaporedollarsisclosestto:A.NZD7,248.B.NZD7,761.C.NZD4,565.41.WhichofthefollowingstatementswithrespecttoGiffenandVeblengoodsisleastaccurate?A.Giffengoods"inferior,"whereasVeblengoodsare"high-status"goods.B.Bothtypesofgoodsdemonstratethepossibilityofapositivelyslopingdemandcurve.C.Bothtypesofgoodsviolatethefundamentalaxiomsdemandtheory.42.Ifastrengtheningeconomyleadsdiscouragedworkerstoreturntoactiveemploymentsearch,initially,numberunemployedpeoplewouldmostlikely:A.increase.B.decrease.C.remainunchanged.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.43.Amemberlaborforcequitherjoblastwillbeginanewjobnextweek.thisinterimforpurposescalculatingunemploymentstatistics,personmostlikelyclassifiedas:A.frictionallyunemployed.B.hiddenunemployed.C.voluntarilyunemployed.44.Themonthlydemandforplayingtennisataparticularclubisgivenbythefollowingequation:PTennisMatch=9–0.20×QTennisMatch.Theclubcurrentlychargesmembers$4.00amatchbutisconsideringaddingamembershipfee.Iftheclubcontinuestochargetheplaycharge,mostitwillbeablechargeasamembershipisclosestto:A.$162.50.B.$40.00.C.$62.50.45.AccordingInternationalFinancialReportingStandards(IFRS),whichofthefollowingconditionsshouldbesatisfiedtoreportrevenuefromthesaleofgoodsontheincomestatement?A.Goodshavebeendeliveredtothecustomer.B.Paymenthasbeenreceived.C.Costscanbereliablymeasured.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.46.AtthestartoftheyearacompanythatU.S.enteredacontractandbuildabridgewithfollowingterms:Contractlength3yearsFixedcontractpriceEstimatedcontract$40million$32millionCostsincurredinyear$12millionThecompanyinitiallyquitecertainaboutitscostestimatesandintendedtorecognizerevenuebasedonthem.However,unexpectedproblemsduringthefirstyearhaveengineerstosuggestthatamoreexpensivedesignmayrequired,costinguptomillionmore.Ifappropriatedesigncannotbedeterminedbeforecompany'sfinancialstatementsareissued,thedifferenceintheamountrevenuecompanyrecognizeisclosestto:A.$15million.B.$0.C.$3million.47.Previously,amanufacturerofhigh-qualityindustrialelectricalgeneratorsonlysolditsunitscustomers,butithasjustintroducedaleasingprogram.Thegeneratorshaveexpectedusefullivesofaboutyears,andthecompanyanticipatesthatleaseswillhaveaofyearsormore.companyreportsunderInternationalFinancialReportingStandards.Whichofthefollowingstatementsabouttheyearoftheleasingprogramismostaccurate?A.Iftheleaseisclassifiedasoperatinglease,thecompany'sprofitsshouldbehigherforagivenleasedassetthantheywouldbeunderafinancelease.B.Regardlessofthecompanyclassifiesthelease,itstotalcashC.Iftheleaseisclassifiedasafinancelease,willdecreasethecompany'sliquiditypositioncomparedwithwhenthecompanywasonlysellingitsgenerators.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.48.InearlyJanuary2015,ananalystseesanewsreleasethatacompanyfollows(whichreportsunderUSGAAP)willforcedreduceoutputfromoneofmajorproductlinesathighlyspecializedceramicsplantresponseatechnologyintroducedbyitsmajorcompetitor.Thetablesummarizesinformationandestimatesthattheanalysthasgatheredfromvarioussourcesabouttheplantanditsfutureprospects.SelectedInformationRelatedtotheCeramicsProductionPlantEndof2014($thousands)Carryingamountofplant1,6041,350UndiscountedexpectedfuturenetcashflowsPresentvalueofexpectedfuturenetcashflowsFairvalueofplant1,0501,225RevisedestimateofusefulDepreciationmethod4yearsStraightline$200RevisedestimateofvalueIftheaboveinformationestimatesproveaccurate,thedepreciationexpensethatshouldreportedfor2015relatedtheplantwillbeclosestto:A.$213thousand.B.$306thousand.C.$256thousand.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.49.Acompanyincursthefollowingcostsrelatedtoitsinventoryduringtheyear:Cost￥millions100,0005,000PurchaseTradediscountsImportduties20,00010,00050,0008,000ShippingofrawmaterialsmanufacturingfacilityManufacturingconversioncostsAbnormalcostsasaresultofwastematerialStoragecostoffinishedpriorshippingtocustomers2,000Theamountchargedinventorycost(inmillions)isclosestto:A.￥177,000.B.￥185,000.C.￥175,000.50.Thefollowingisselectedbalancesheetdataforacompanyalongwithinformationaboutitsfinancialandoperatingleaseobligations.Asof31December2014(€millions)Long-term1,347Totalshareholder’sequity11,268Totalassets20,097ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.Note18.FinancialandOperatingLeasesA.FinancialLeasesTheimplicitinterestratefinanceleasesfor2014was6.0%.B.OperatingLeaseCommitmentsasof31December2014€Millions)Due1January201513013013013080Due1January2016Due1January2017Due1January2018Due1January2019Totaloffutureleasepaymentsthereafter*Totalcommitments240840*After2019,allleasepaymentsareassumedthesameasin2019.Ifthecompanywerecapitalizeitslong-termleases,itsadjustedlong-termdebt-to-assetsratioasoftheendofDecember2014wouldclosestA.9.9%.B.10.2%.C.10.4%.51.WhichofthefollowingislikelytobeageneralunderlyingthepreparationoffinancialstatementswithintheInternationalFinancialReportingStandards(IFRS)ConceptualFramework?A.MatchingB.MaterialityC.Accrualbasis52.Atthebeginningoftheacompanypurchasedafixedassetfor$500,000withnoexpectedresidualvalue.Thecompanydepreciatessimilarassetsonastraightlinebasisover10years,whereasthetaxauthoritiesallowdecliningbalancedepreciationattherateof15%peryear.Inbothcases,thecompanytakesafullyear'sdepreciationinthefirstyearandrateis40%.Whichofthefollowingstatementsconcerningthisassetattheendoftheyearismostaccurate?A.Thedeferredassetis$10,000.B.Thetemporarydifference$25,000.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.C.Thebaseis$500,000.53.Theleastlikelyreasonthatasecurityanalystneedsunderstandtheaccountingprocessisto:A.aidintheassessmentofmanagement'sjudgmentinaccrualsandvaluations.B.preventearningsmanipulationbymanagement.C.makeadjustmentsreflectitemsreportedinthefinancialstatements.54.UnderInternationalFinancialReportingStandards(IFRS),whichoffollowingismostlikelyoneofthegeneralfeaturesunderlyingthepreparationoffinancialstatements?A.TimelinessB.ConsistencyC.Understandability55.AfirmthatpreparesfinancialstatementsaccordingtoUSGAAPandusesaperiodicinventorysystemhadthefollowingtransactionsduringtheyear:TonsDateActivityBeginninginventoryPurchase(thousands)$perTon15234600650700680750FebruaryMaySaleAugustPurchaseNovemberSaleThecostofsales(inthousands)isclosestto:A.$5,890usingweightedaverage.B.$4,080usingLIFO.C.$3,850usingFIFO.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.56.TheInternationalFinancialReportingStandards(IFRS)ConceptualFrameworkidentifiesfundamentalqualitativecharacteristicsmakefinancialinformationuseful.Whichoffollowingisleastlikelyofthesecharacteristics?A.RelevanceB.MaterialityC.Faithfulrepresentation57.Atthestartoftheyear,acompanyacquiredequipmentacostof€50,000,estimatedhaveathree-yearlifeandaresidualvalueof€5,000.Ifthecompanydepreciatesassetusingthedoubledecliningbalancemethod,thedepreciationexpensethatthecompanyreportforthethirdyearisclosestA.€3,328.B.€3,705.C.€555.58.Duringtheyear,aretailerpurchases1,000unitsofinventoryat￡20.20perunit.Inaddition,thefollowingitemsrelateinventoryacquisitionandduringtheyear.Itemdescription￡’000s404VolumerebatereceivedImportandsalestaxes2,970325TransportandtransportinsurancecostsStoragecostsoffinishedWarehouseadministrativecosts1,2503,300Thetotalcosts(inthousands)thatwillbeincludedininventoryareclosestto:A.￡23,091.B.￡22,766.C.￡24,341.ofisCFAexamforpreparationareinorbythantoanyand/orfor?CopyrightedbyInstitute.Allrightsreserved.59.TheconvergenceofglobalaccountingstandardshasadvancedadegreethatSecurities&ExchangeCommissioninUnitedmandatesforeignprivateuseIFRSmayreportunder:A.U.S.GAAPorunderIFRS.B.U.S.GAAPwithvoluntarysupplementalreportingunderIFRS.C.U.S.GAAPorunderIFRSwithareconciliationU.S.GAAP.60.Ananalysthascompiledfollowinginformationonacompany:￡thousandsBeginningtheyearvSharecapital2,0008,850RetainedearningsDuringtheyearRevenues12,00010,150500TotalexpensesProceedsfromsharesEndyearvaluesTotalcurrentassetsTotalnon-currentassetsInvestments9,20012,750350Totalliabilities9,400Theamountofdividendsdeclaredthousands)theyearisclosestto:A.300.B.150.C.650.ofisCFAexamforpreparationar