» CFA 1 – 10 questions

Mathew Chambers manages individual accounts, including his father’s, at Harvey Securities. During a Sunday lunch at a restaurant with his friend Neil Rojas, Chambers noticed the directors of Navarro Motors sitting at the adjacent table. Rojas stated, “I believe Navarro has hired a new CEO as the firm is undertaking many positive amendments in its production process”. On Monday Chambers noticed a $1 increase in Navarro’s share price and purchased 500 shares for his father’s account. Chambers least likely violated:

Standard V-A ‘Diligence and Reasonable Basis’.

Standard II-A ‘Material Non-public Information’.

Standard VI-B ‘Priority of Transactions’.

Gloria Inc. ships 5 machines to a customer at $5,550 per machine. The total cost for Gloria Inc. is $26,250 and payment is due in 60 days. No cash changes hands at delivery. The accounting treatment related to this transaction at the time of shipment most likely includes:

accounts receivable and revenue increased by $27,750 and inventory and cost of goods sold decreased by $26,250.

revenue increased by $5,550, cost of goods sold decreased by $26,250 and cash remains unchanged.

accounts receivable and revenue increased by $27,750 and inventory decreased by $26,250.

Regarding business segments, companies are not required to provide:

full financial statements for segments.

disclose segment information under both IFRS and U.S, GAAP.

factors used to identify reportable segments.

To deal with short-run stabilization, as compared to monetary policy, fiscal policy is most likely:

less effective as it is very time consuming.

equally effective as both policies work well in combination.

more effective as it is easy to implement.

A company recorded a depreciation expense of $5,000,000 for tax purposes and $3,500,000 for accounting purposes. Which of the following is the correct accounting treatment if the tax rate is 30%?

The firm should a deferred tax asset of $450,000.

The firm reverse of a deferred tax liability of $450,000.

The firm should create a deferred tax liability of $450,000.

Which of the following is least accurately considered a firm's factor of production?

Materials

Customers

Land

An investor wanting to purchase 100 shares of a publicly traded stock would most likely seek out:

An investment bank

A block broker

A standard broker

After 5-years of service with Jacob Securities as a financial planner, Shane Alvarado planned to start his own practice in his hometown. He informed his employer through email three days before starting his independent practice. The employer was on a business trip for a week and on his return he accepted his resignation. Alvarado always maintained his personal records related to training programs that he conducted at Jacob Securities, and he used that material in his new project. Alvarado:

violated the standards by using records but is in compliance with standards in notifying his employer regarding his independent practice.

is in compliance with standards regarding timely notification and using his own personal records.

violated the standards by rendering services without receiving consent from his employer and by using records.

Bill Hardwick, CFA, is a bond specialist and a fixed-income portfolio manager for a large pension fund. Hardwick is considering inclusion of highly structured mortgage securities in the pension fund. However, his team has analyzed these products and has come to the conclusion that it is difficult to distinguish between good and bad investment options due to the complexity and layers of the securities. Rather than sort it all out, Hardwick opts to just simply avoid this sector entirely and invest instead in simpler securities that can be more easily analyzed and understood. Has Hardwick most likely violated the Standards?

Yes, with respect to misrepresentation.

No

Yes, with respect to diligence and reasonable basis

Under IFRS the definitional criteria for identifiable intangible assets most likely includes:

it is probable that the expected future economic benefits of the asset will flow to the company.

the asset must be identifiable, under the control of company and expected to generate future economic benefits.

the cost of the asset can be reliably measured.

CFA 1 - 10 Questions