CFA Level 1-FSA Test VI Questions

vishnu.ftw
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CFA Level 1-FSA Test VI Questions

Postby vishnu.ftw » Mon Apr 15, 2013 4:56 pm

Could someone explain how to go about solving questions 5 and 18? Thanks

lokesh1
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CFA Level 1-FSA Test VI Questions

Postby lokesh1 » Wed Apr 17, 2013 11:16 am

Reply for FSA Test VI Question 5:

In the question, we have to calculate the impact of inventory purchase on the cash flow statement using LIFO. Cash flow does not depend on the inventory cost flow method used. Cash flow means how much actual cash you paid for your purchases. It is independent of LIFO or FIFO. During the year, the firm purchased inventory 20 units @ $50 and 10 units @ $53. So, in total the firm paid $1000 + $530 = $1530 for the purchases.
Hence option A is the correct answer.

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

Postby lokesh1 » Wed Apr 17, 2013 11:25 am

Reply for FSA Test VI Question 18:

In the question, we have to find the discount amortization for the issued bond. We know that discount amortization is equal to the difference between the interest and the coupon payment. In case of bonds, interest for the year is calculated on the book value of the bonds at the beginning of the year ($92,976.39) at the market rate at issue (7%). Hence, interest = $6508.35. Now this is $508.35 in excess of the ($6000) coupon payment for the year. So, the discount amortization is equal to $508.35

Hope this answers your doubt!!!!


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