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CFA Institute Exam CFA-Level-I Topic 3 Question 10 Discussion

Actual exam question for CFA Institute's CFA-Level-I exam
Question #: 10
Topic #: 3
[All CFA-Level-I Questions]

A firm has entered into a long-term purchase obligation. This will allow the firm to obtain raw materials for operations at a known price over the next 6 years. This obligation must be reflected on the balance sheet as:

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Suggested Answer: C
by Iluminada at Dec 07, 2024, 04:25 AM

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Rhea
2 months ago
Wait, does this mean the firm is 'locked in' to these raw materials? I hope they don't end up with a 'raw' deal!
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Yolando
26 days ago
Exactly, it helps them plan and budget more effectively.
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Nobuko
28 days ago
That makes sense, it provides stability for the firm's operations.
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Corrina
30 days ago
It's a way to hedge against price fluctuations in the future.
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Shonda
1 months ago
Yes, the firm is locked in to purchasing the raw materials at a known price for the next 6 years.
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Sue
2 months ago
Liability all the way, baby! The firm's gotta pay for those raw materials, no matter what. Might as well make it official on the balance sheet.
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Shaunna
30 days ago
Agreed, it's a necessary part of financial reporting for the firm.
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Yuki
1 months ago
Yeah, it's important to show that obligation on the balance sheet.
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Yuette
1 months ago
It's definitely a liability, no doubt about it.
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Magnolia
3 months ago
Ooh, I bet this is a tricky one. Is it a contingent liability or something else? I need to think this through.
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Kathrine
1 months ago
I think it's classified as a non-current liability because it's not due within the next year.
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Kristeen
1 months ago
That makes sense. It's important to accurately reflect obligations on the balance sheet.
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Velda
2 months ago
Yes, it's considered a long-term debt since it's a commitment to pay in the future.
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Alpha
2 months ago
Yes, it's considered a long-term debt since it's a commitment to pay in the future.
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Sharita
2 months ago
It should be recorded as a long-term liability on the balance sheet.
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Dana
2 months ago
It should be recorded as a long-term liability on the balance sheet.
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Cherri
3 months ago
Definitely a liability! Can't hide that obligation from the accountants, it's gotta be on the books.
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Diane
3 months ago
Hmm, this sounds like a long-term contract. I'd say it should be reported as a liability on the balance sheet, right?
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Gilma
30 days ago
Agreed, transparency in reporting is key for investors and stakeholders.
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Reynalda
1 months ago
Exactly, it helps provide a clear picture of the firm's financial health and obligations.
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Sabra
1 months ago
That makes sense. It's important to accurately reflect long-term obligations in financial statements.
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Aliza
2 months ago
Yes, you're correct. It should be reported as a long-term liability on the balance sheet.
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Lovetta
3 months ago
But what if the purchase obligation is cancelable? Should it still be classified as a liability?
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Wei
3 months ago
I agree with Keneth. It makes sense to show it as a long-term liability since it's a commitment that will last for several years.
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Keneth
4 months ago
I think the obligation should be recorded as a liability on the balance sheet.
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