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Thread: Free CFA Level 1 Practice Questions for December 2012 exam

  1. #51
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    Quote Originally Posted by Jason Suares View Post
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  2. #52
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    Ans is A :$15Mn revenue and Profit $6 Mn

  3. #53
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    Hi Prabir,

    I will create video solutions and update all the links.

    Thanks
    Ratan

    Quote Originally Posted by Prabir Bansal View Post
    I guess Ans is C.

    Sir, request you to kindly provide videos for the solutions. It's really very helpful.

    Regards,

  4. #54
    Mentor, Knowledge Varsity ratankv's Avatar
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    Solution to Question #14

    Q14 Answer is B

    Text Solution for Question #14 is below
    If the firm is following cost recovery method, then it will not recognize any profit till its cost is recovered.
    The below table shows the revenue, cost and profit for all the three years. (values in millions)
    =========1st yr ====== 2nd yr ===== 3rd yr
    Revenue===$25==========$15=======$10
    Cost=====$25===========$5=========$0
    Profit=====$0======= ====$10=========$10

    Thanks
    Ratan

    Quote Originally Posted by ratankv View Post
    Today's Question (Questions and answers provided by Knowledge Varsity)
    ================================================== ==================================================
    Q14. Nagarjuna construction has sold its land to another developer Purvankara for a consideration of $50 million. The cost of the land was $30 million. Purvankara will pay in installment, which has the following breakup
    1st year = $25 million; 2nd year = $15 million; 3rd year = $10 million
    How much revenue and profit, Nagarjuna construction should report in its 2nd year, if it is following Cost recovery method?
    ==== Revenue ===== Profit
    ====A. $15 Mn ===== $5 Mn
    ====B. $15 Mn ===== $10 Mn
    ====C. $10 Mn ===== $10 Mn

  5. #55
    Mentor, Knowledge Varsity ratankv's Avatar
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    Solution to Question #15

    Q15 Answer is A


    Text Solution for Question #15 is below
    If the firm is following installment sales method, we need to find out the proportion of revenue each year.

    First Approach
    For Second year: cash received = $15 million, Total revenue = $50 million
    Revenue is equal to the cash received
    Proportion of revenue received in the second year = 15/50 = 30%
    So, the firm should recognize, 30% of the total cost in the 2nd year,
    => Cost = 30% *Total cost = 30% * $30 million = $9 million
    => Profit = $15 million - $9 million = $6 million

    Second approach
    Total profit = Sales - Cost = $50 - $30 = $20 million
    => profit margin = 20/50 = 40%
    Apply, this profit margin to the revenue of each year.
    Since the cash received is equal to the revenue.
    For Second year: cash received = $15 million
    => Profit = profit margin * revenue = 40% * $15 million = $6 million

    Thanks
    Ratan

    Quote Originally Posted by ratankv View Post
    Today's Question (Questions and answers provided by Knowledge Varsity)
    ================================================== ==================================================
    Question #15
    Similar to question #14, but this time we are solving for the installment sales method.
    Nagarjuna construction has sold its land to another developer Purvankara for a consideration of $50 million. The cost of the land was $30 million. Purvankara will pay in installment, which has the following breakup
    1st year = $25 million; 2nd year = $15 million; 3rd year = $10 million
    How much revenue and profit, Nagarjuna construction should report in its 2nd year, if it is following Installment sales method?
    ==== Revenue ===== Profit
    ====A. $15 Mn ===== $6 Mn
    ====B. $15 Mn ===== $9 Mn
    ====C. $10 Mn ===== $4 Mn

  6. #56
    Mentor, Knowledge Varsity ratankv's Avatar
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    Question #16

    Today's Question (Questions and answers provided by Knowledge Varsity)
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    Q16. During the past year a company had the following changes in the capital structure
    Jan 1: Share outstanding: 10,000
    Apr 1: Share issued: 4,000
    Jul 1: 10% stock dividend
    Sep 1: Shares repurchased: 1,000
    The weighted average no of common stock in the last year is most likely (take January to December as the financial year)
    A. 13,600
    B. 13,967
    C. 14,400

  7. #57
    Mentor, Knowledge Varsity ratankv's Avatar
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    Question #17

    Today's Question (Questions and answers provided by Knowledge Varsity)
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    Q17. A firm had 10,000 options outstanding exercisable at $20 last year.
    If the average market price of the firm’s share was $30, find the increase in the number of shares for diluted EPS calculation attributed to the options.
    A. 10,000
    B. 6,667
    C. 3,333

  8. #58
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    Answer 16

    Total stock = ((10000+1000)*12 + (4000+400)*9 + (-1000)*4) /12
    =((11000*12 ) + (4400*9) -(1000*4))/12
    = ((132000) + (39600)-(4000))/12= 13967 (but no option according to my solution) , Is anything i am missing here, Ratan sir?

  9. #59
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    Ans 17 : 20*10000/30=6667
    the firm buy the share and net increase in the no of share = 10000-6667=3333 Ans is C

  10. #60
    Mentor, Knowledge Varsity ratankv's Avatar
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    Thanks a lot for pointing.
    The option B was incorrectly mentioned as 13,367 it should have been 13,967. I have corrected it now.

    Thanks
    Ratan

    Quote Originally Posted by bimupa View Post
    Answer 16

    Total stock = ((10000+1000)*12 + (4000+400)*9 + (-1000)*4) /12
    =((11000*12 ) + (4400*9) -(1000*4))/12
    = ((132000) + (39600)-(4000))/12= 13967 (but no option according to my solution) , Is anything i am missing here, Ratan sir?

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