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Thread: Free CFA Level 1 practice question bank for June 2011 exam

  1. #101
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    Ans 48 is A

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    Q 48 Ans A:

    Since the option strike price is less than the average share price, option should be considered while calculating diluted EPS. Now we have to follow treasury stock method

    No of options excercised : 10,000
    Amount collected: 30 * 10,000

    Assume that the firm buys out the share from the current at this price.
    No of shares to be purchased = (30 * 10,000 )/60 = 5,000
    So, the correct no is 5000 shares

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    Today's Question (Questions and answers provided by Knowledge Varsity)


    Q 49 A firm receives a contract that will pay it a total of $16 million over years. The total expected expense of the contract will be $12 million. The expenses incurred, and payments received by the firm are as follows ($ millions):

    Transaction--------------- Year 1---------------Year 2 ----------Year 3----------------Year 4

    Payments Received-----------------6---------------------4-----------------------3--------------------------3
    Expenses----------------------------2---------------------2-----------------------4--------------------------4


    If the firm follows the percentage of completion then the revenues for Year 3 will be:

    A. 3
    B. 4
    C. 5.33

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  3. #103
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    Q.49 c

  4. #104
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    Q 49 Ans C :

    Revenues = (4/12) * 16 = fraction of expense for the year * total payments = 5.33

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    Today's Question (Questions and answers provided by Knowledge Varsity)

    Q 50 During 2009, DLF limited sold land for $10 million to Unitech for development. Unitech paid $3 million and will pay remaining amount in 2010. DLF had purchased the land at $2 million in 2001. Using the cost recovery method, how much profit will DLF report for 2009?

    A. Zero
    B. $2 million
    C. $1 million

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  5. #105
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    Q.50 b

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    Q50 Ans C:

    Under the cost recovery method, profit will not be recognized till the cost is recovered, here the cost is $2 mn and since the payment is $3 mn, the profit will be recognized as $1 mn.


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    Today's Question (Questions and answers provided by Knowledge Varsity)

    Q51. A firm believes that all the accounts receivable will be collected by them and does not reduce the amount which may be uncollectible? What impact this will have on the balance sheet of the company and Income statement of the firm?

    .............Asset......Net Income
    A.......Understate......Understate
    B.......Understate......Overstate
    C.......Overstate.......Overstate

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  7. #107
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    51. Ans is C

  8. #108
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    Q51 Ans C:

    Assets will be overstated because the account receivable amount will be more. Also in the income statement bad debt will not be expensed which will result in overstated profit.


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    Today's Question (Questions and answers provided by Knowledge Varsity)

    Q52. A firms

  9. #109
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    Ans 52: B

  10. #110
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    Q52 Ans B:

    Change in equity = 114

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