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Primco is a mall developer. On 1 Jan 2010, Primco obtained a bank loan of $100 million to build a mall. The mall was completed on 31 Dec 2012, and Primco fully repaid the loan on 31 Dec 2014. For each year of the loan, Primco paid an interest of $5 million.
How much of the interest cost can Primco capitalise?
LuxHotels owns a number of hotels in Brazil. The company has traditionally expensed all renovation costs. This year, the management decided to capitalise certain renovation costs that are deemed as facility upgrades.
What is the most likely effect on the company’s cash flow statement for this year, as compared to the case where the costs are expensed?
LuxHotels owns a number of hotels in Brazil. The company has traditionally expensed all renovation costs. This year, the management decided to capitalise certain renovation costs that are deemed as facility upgrades.
Going forward, what is the most likely effect on the company’s operating income if the company continues this practise of capitalising certain renovation costs.
Sly Corp’s CEO would like to book less income taxes for the current financial year. The company has just bought a machine at $50 million. Which of the following will LEAST likely help achieve the CEO’s goal?
An industrial washing machine that costs $32,000 can perform an estimated 10,000 washes in its lifetime, after which, it can be scrapped for $2,000.
In the first year of use, the machine performed 800 washes. In the second year, the machine performed 1,400 washes.
What is the carrying value of the machine after the first 2 years of use, assuming that the units-of-production depreciation method was used.
An asset was purchased for $40,000 one year ago. At the point of purchase, the useful life was estimated to be 4 years, with a residual value of $5,000. For the past year, the asset was depreciated using the double declining balance method.
Going forward, the company decided to raise its residual value to $15,000.
Calculate the depreciation expense for the second year, using the double declining balance method.
IndieSoft has been developing a new AI-based spreadsheet software for years, incurring costs of $400,000 in the process. The software has just passed initial testing, and is being prepared to be publicly tested. It is expected to have a useful life of 10 years, with no salvage value. The company has decided that the software is to be amortised yearly using the straight line method. The company reports under IFRS.
What is the most likely carrying value of the software 1 year from now?
BERRY acquired RaspBerry for $1 million at the beginning of the year. The fair value of RaspBerry’s tangible assets was $500,000, and a trademark that has 10 years to expiry was valued at $300,000.
What is the amortisation expense that BERRY expects to book from this acquisition at the end of the year, using the straight line method?
An asset classified as PP&E was bought for $50,000 on 1 Jan 2014.
The fair value of the asset dropped to $30,000 on 1 Jan 2015, but rose to $60,000 on 1 Jan 2016.
Assuming no depreciation, and that the revaluation model is used, what is the most likely carrying value of the asset on 1 Jan 2016, and what is recognised in the income statement?
An asset classified as PP&E was bought for $50,000 on 1 Jan 2014.
The fair value of the asset dropped to $30,000 on 1 Jan 2015, but rose to $60,000 on 1 Jan 2016.
Assuming no depreciation and that there was a writedown of $20,000 on 1 Jan 2015, and that the cost model is used under US GAAP, what is the most likely carrying value of the asset on 1 Jan 2016, and what is recognised in the income statement?
An asset was acquired 3 years ago for $50,000. At that point of time, the useful life of the asset was deemed as 3 years, and a residual value of $20,000. The asset was depreciated using the straight line method.
After the 3 years, the asset was sold for $15,000. What is the effect of the sale on the income statement and statement of cash flow?
The newly appointed CEO of a company wishes to manipulate earnings such that the current period’s look bad compared to the subsequent periods after his appointment.
Which of the following is most likely to achieve his purpose?
Why is the language of the Learning Outcome Statements (LOS) different from the curriculum?
The LOS are protected under the CFA Institute's copyright, and we don't have permission to duplicate them verbatim. Therefore, we've rephrased the LOS and included alphabetical labels (a, b, c, …) to simplify cross-referencing with the original LOS in the curriculum when needed.
Now available for all Level I topics! Try it now!
Enter a search term (e.g. ‘LIFO reserve’), or bookmark the glossary page!
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Are you a CFA Level I candidate, or someone who is exploring taking the CFA exam? Four years ago, I was in your shoes. I am a Computer Engineering graduate and have been working as an engineer all my life. Having developed a keen interest in finance, I decided on a career switch to the finance field and enrolled into the CFA program at the same time.
Adjusting to the drastic career change was tough. I naturally neglected the preparation for my Level I exam in June 2014. It was not until the middle of March 2014 that I realized I only had a little more than 2 months to the exam. To compound my problems, I basically did not have a preparation strategy. Having no background in finance at all, I tried very hard to read the curriculum from cover to cover, but eventually that fell flat. I can still recall the number of times I dozed off while studying, or just going back and forth trying to understand even the simplest concept. My mind simply could not keep up after a hard day at work.
Does all these sound familiar to you? Well, take heart. No matter how bleak it seems, at least sit for the exam and treat it as a learning experience. That was basically my attitude as I burrowed through my exam prep with toil and stress. By God’s grace, I did pass my Level I exam in June 2014. It was an experience I would not want to revisit though.
For the Level II exam, I endeavoured not to repeat the mistakes I made. Based on the Pareto 80/20 principle, I learnt to extract the most essential bits from the curriculum enough to give me that 80% result to pass. Being a visual learner, I took notes and summaries in pictorial form. Instead of reserving huge segments of time to study, I carved out pockets of time to learn and practise – accommodating to my full-time job. I managed to pass my Level II and Level III exams consecutively with considerably less effort and stress than when I did my level I.
I love the CFA Program and truly value the skills and ethics that are imparted to make me a better finance professional. My desire is to help candidates who are keen to pursue this path to do so in the most effective and painless process as possible – based on the lessons that I learnt as a candidate. I have set up PrepNuggets with the vision to revolutionise learning by using technology, catering to the short attention span that we can afford. If this makes sense to you, join the PrepNuggets community by signing up for your free student account. I am confident that the materials that we have laboriously crafted will bring you closer to that dream pass with just that 20% effort. Let us do the hard work for you.
Regards,
Keith Tan, CFA
Founder and Chief Instructor
PrepNuggets
Keith is the founder and chief instructor of PrepNuggets. He has a wide range of interests in all things related to tech, from web development to e-learning, gadgets to apps. Keith loves exploring different cultures and the untouched gems around the world. He currently lives in Singapore but frequently travels to share his knowledge and expertise with others.
Have you ever gotten stuck in your study because you can’t remember a formula, or what a specific term means? Now, say goodbye to scanning through all the videos and ploughing through pages and pages just to find what you are looking for. All the important formulas, definitions and diagrams you need for the exam are now at your fingertips at prepnuggets.com/glossary.
What’s more, these quick references are deeply integrated in our lessons, so you get a good idea of what the lesson covers even before watching the video. The references also point you to specific video lessons where it is covered, so you can quickly access the corresponding video to learn more about the term.
Available now for all Level I topics, this service is exclusive for our Premium and Pro members only. We will progressively add the rest of the topic areas over the next few months.
We think this is a game-changer for your CFA success!
Thank you for purchasing one of our courses on Udemy! Now that you have experienced the PrepNuggets way of learning, are you ready to take your exam prep to the next level with us?
We have an irresistible offer for you to upgrade to our Level I Premium Membership, where you will gain full access to ALL 10 topical courses under the CFA Level I curriculum.
Simply log in to any of our courses on Udemy, and head to the last lecture titled ‘BONUS: Continue Your Exam Prep With Us!‘. You will find the exclusive link to sign up for this offer!
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On the 1st of March 2018, we took a bold step of faith to put our Financial Reporting and Analysis (FRA) course on Udemy.
For those of you who are new to Udemy, it is the world’s largest marketplace for online courses. Think of it like the EBay of online courses.
So imagine our trepidation in pitting our course in this highly competitive platform, against the many CFA prep providers already entrenched on the platform.
Overwhelming.
Yes, that’s the word that aptly describes the response to our course from the Udemy community.
The “Best Seller” tag from Udemy is attached to only one best selling course in its category. In just 1 month, our FRA course became the best selling CFA course on the platform. If you do a search for ‘CFA Level 1’, our course comes out on top in the search rankings.
Since the launch on 1 March, we have had more than 250 paid enrolments. While we are heartened by this figure, nothing beats knowing that our course has reached 50 countries around the world! It was simply heartwarming to receive messages from students from countries we barely know about, telling us how much they love the course and their wish that we would produce more of such courses. This certainly spurs us on to produce more materials to ease the burden of CFA candidates worldwide.
As of today, our course has a high average rating of 4.8 out of 5.0. 74% of the reviewers gave us 5 stars! We take this as endorsement that we are doing things right, and will continue in using the Pareto principle approach for our course materials. There are, of course, constructive feedback as well, and we aim to incorporate some of the feedback in producing the upcoming courses.
We are working hard to bring more of our courses to Udemy! We realise some candidates prefer to purchase courses as they need individually, so we endeavour to give more options to our potential students. Check out our Udemy Courses Page to find out which of our courses are available on Udemy for your purchase.
If you have purchased our course on Udemy and would like to continue with the PrepNuggets study approach for other topics, we have an awesome upgrade offer to Premium membership for you!
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