CFA Level 1-FSA Test III Question 1

vishnu.ftw
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CFA Level 1-FSA Test III Question 1

Postby vishnu.ftw » Mon Apr 15, 2013 2:21 pm

Accounting rules differentiate research and development activities from activities not considered research and development. Which one of the following is not considered a research and development activity?
Choose one answer.
a. Periodic design changes to existing products.
b. Testing in search of product processing alternatives.
c. Laboratory research intended for the discovery of a new product.
The correct answer is Laboratory research intended for the discovery of a new product.

R&D costs must be expensed as incurred. Research is planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service or process or in bringing a significant improvement in an existing product or process. Development is the translation of research findings into a plan or design. Seasonal or other periodic design changes in existing products do not meet either of these definitions.


How is this right? The question asks for which is NOT an R&D activity, and answer c is clearly an R&D activity. Please provide the correct answer

vishnu.ftw
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Posts: 22
Joined: Wed Apr 03, 2013 5:01 pm

CFA Level 1-FSA Test III Question 1

Postby vishnu.ftw » Mon Apr 15, 2013 2:22 pm

Question 3:

Cash received from the sale of fixed assets is an example of:
Choose one answer.
a. Cash flows from investing activities
b. Cash flows from operating activities
c. Cash flows from financing activities
The correct answer is Cash flows from operating activities.

Investing activities usually involve activities that affect long-term assets.
Incorrect
Marks for this submission: 0/1.

Again, how is this a cash flow from operating activity?

lokesh1
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Posts: 17
Joined: Tue Apr 09, 2013 10:22 am

Postby lokesh1 » Wed Apr 17, 2013 10:57 am

Hey vishnu
You are absolutely correct.

For FSA Test III Ques.1: The question should not use the word NOT. That means the question should read as: Which one of the following is considered a research and development activity? Option C is an R&D activity and not other options.

For FSA Test III Ques.3: The correct answer should be option A. Cash received from the sale of fixed assets is an example of investing activities. It is NOT an operating activity.

Hope this helps !!!!


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