I85PREP
⌘ K
CDFA study materials
CDFA study resources

CDFA practice questions

One question at a time. Build your CDFA understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Exam content domain (not enumerated in official source)

A company's board declares a cash dividend on its common stock. On the declaration date, what is the immediate accounting effect?

  1. No entry is recorded until the payment date
  2. Retained earnings decrease and a current liability is recorded Correct answer.
  3. Cash decreases and a dividend expense is recorded
  4. A contra-equity account is created without affecting liabilities

Explanation

At declaration, the corporation incurs a legal obligation to shareholders, so retained earnings are debited and a dividends payable liability is credited. The cash outflow and reduction of the liability occur later on the payment date.

Question 2Exam content domain (not enumerated in official source)

A firm reports net income of $80,000, depreciation of $15,000, and an increase in accounts receivable of $10,000. Under the indirect method, what is cash flow from operating activities?

  1. $105,000
  2. $75,000
  3. $85,000 Correct answer.
  4. $95,000

Explanation

Start with net income of $80,000, add back non-cash depreciation of $15,000, and subtract the $10,000 increase in receivables because revenue collected in cash was less than revenue recognized. The result is $85,000.

Question 3Exam content domain (not enumerated in official source)

Which ratio best measures a firm's ability to meet short-term obligations using only its most liquid current assets?

  1. Quick ratio Correct answer.
  2. Debt-to-equity ratio
  3. Current ratio
  4. Inventory turnover

Explanation

The quick (acid-test) ratio excludes inventory and prepaid items, leaving cash, marketable securities, and receivables relative to current liabilities. The current ratio includes inventory, so it is less stringent.

Question 4Exam content domain (not enumerated in official source)

Under IFRS, which cost model is permitted for investment property in addition to the fair value model?

  1. Revaluation model under IAS 16 only
  2. Lower of cost or net realizable value
  3. Equity method
  4. Cost model with depreciation and impairment Correct answer.

Explanation

IAS 40 permits an entity to choose either the fair value model or the cost model for investment property, applying the choice consistently to a class. Under the cost model the property is depreciated and tested for impairment.

Question 5Exam content domain (not enumerated in official source)

A company issues $1,000,000 face value of 5-year bonds at a discount. Using the effective interest method, how does interest expense behave over the bond's life compared with the stated coupon?

  1. Interest expense exceeds the coupon and declines each period
  2. Interest expense exceeds the coupon and rises each period Correct answer.
  3. Interest expense is constant and equal to the coupon each period
  4. Interest expense is below the coupon and rises each period

Explanation

The carrying amount of a discounted bond accretes toward face value as the discount is amortized, so applying a constant effective rate to a growing carrying amount produces rising interest expense. Because the bond was issued at a discount, the effective rate exceeds the coupon rate.

Question 6Exam content domain (not enumerated in official source)

Which of the following best describes the purpose of the statement of cash flows?

  1. To explain changes in cash and cash equivalents during a period Correct answer.
  2. To present the financial position at a single date
  3. To show profitability from operations over a period
  4. To disclose changes in shareholders' equity

Explanation

The statement of cash flows reconciles beginning and ending cash by classifying inflows and outflows into operating, investing, and financing activities. It complements the income statement and balance sheet rather than replacing them.

Question 7Exam content domain (not enumerated in official source)

A company uses the allowance method and estimates uncollectible accounts as a percentage of credit sales. What is the effect of writing off a specific customer's account?

  1. The allowance is debited and accounts receivable is credited Correct answer.
  2. Bad debt expense is increased and cash is decreased
  3. Total assets decrease and net income decreases
  4. Retained earnings is debited and the allowance is credited

Explanation

A write-off under the allowance method debits the allowance for doubtful accounts and credits accounts receivable, so the net realizable value of receivables is unchanged. Expense was already recognized when the allowance was established.

Question 8Exam content domain (not enumerated in official source)

Which inventory cost flow method is prohibited under IFRS but permitted under US GAAP?

  1. Specific identification
  2. Last-in, first-out Correct answer.
  3. First-in, first-out
  4. Weighted average cost

Explanation

IAS 2 does not permit the LIFO method, while US GAAP allows it. Specific identification, FIFO, and weighted average are permitted under both frameworks.

Question 9Exam content domain (not enumerated in official source)

A firm has fixed costs of $120,000, a unit selling price of $40, and variable cost per unit of $25. What is the break-even point in units?

  1. 3,000 units
  2. 9,600 units
  3. 4,800 units
  4. 8,000 units Correct answer.

Explanation

Contribution margin per unit is $40 minus $25, or $15. Dividing fixed costs of $120,000 by $15 gives a break-even volume of 8,000 units.

Question 10Exam content domain (not enumerated in official source)

A company's debt-to-equity ratio rises sharply while its interest coverage ratio falls. Which interpretation is most consistent with these trends?

  1. The firm has reduced leverage and improved its capacity to service debt
  2. The firm has taken on more debt while earnings available to cover interest have weakened Correct answer.
  3. The firm's liquidity has improved without affecting solvency
  4. The firm has increased equity issuance to repay debt

Explanation

A higher debt-to-equity ratio indicates greater reliance on debt financing, and a lower interest coverage ratio indicates that operating earnings cover interest less comfortably. Together they suggest rising financial risk.

Question 11Exam content domain (not enumerated in official source)

Which of the following is an example of a non-cash investing and financing activity that must be disclosed under the statement of cash flows?

  1. Sale of inventory for cash
  2. Purchase of equipment financed by issuing common stock Correct answer.
  3. Collection of accounts receivable
  4. Payment of cash dividends to shareholders

Explanation

Acquiring a long-term asset by issuing equity involves no cash, so it is excluded from the body of the statement but disclosed separately as a non-cash activity. The other items are ordinary cash flows.

Question 12Exam content domain (not enumerated in official source)

Under the fair value method, how does an investor account for dividends received on a small equity investment in another company?

  1. As a reduction of the investment carrying amount
  2. As an adjustment to retained earnings
  3. As other comprehensive income
  4. As dividend income in profit or loss Correct answer.

Explanation

Under the fair value method, dividends received are recognized as income because the investment is measured at fair value and changes flow through profit or loss. Reducing the carrying amount is the cost-method approach.

Question 13Exam content domain (not enumerated in official source)

A company changes from an accelerated depreciation method to straight-line for existing assets. How should this change generally be accounted for?

  1. As a correction of a prior period error
  2. By recognizing the entire effect in other comprehensive income
  3. Retrospectively, with prior periods restated
  4. Prospectively, as a change in accounting estimate Correct answer.

Explanation

A change in depreciation method is treated as a change in accounting estimate effected by a change in principle, so it is applied prospectively. Prior periods are not restated.

Question 14Exam content domain (not enumerated in official source)

Which of the following best describes the going concern assumption in financial reporting?

  1. Assets are measured at liquidation value
  2. Revenue is recognized only when cash is received
  3. The entity is expected to continue operating for the foreseeable future Correct answer.
  4. Financial statements are prepared for a single transaction

Explanation

The going concern assumption holds that the entity will continue in operation long enough to realize assets and settle liabilities in the normal course of business. This justifies measuring assets on a historical cost or fair value basis rather than at liquidation values.

Question 15Exam content domain (not enumerated in official source)

A company reports a current ratio of 2.0 and a quick ratio of 0.8. Which conclusion is most reasonable?

  1. The firm's accounts payable exceed its cash balance
  2. A large portion of current assets is tied up in inventory and prepaids Correct answer.
  3. The firm is insolvent because the quick ratio is below 1
  4. The firm has no liquidity risk because the current ratio exceeds 2

Explanation

The wide gap between the current ratio and the quick ratio indicates that inventory and prepaid items make up much of the current assets. Those items may be less readily convertible to cash, so liquidity is weaker than the current ratio alone suggests.

Question 16Exam content domain (not enumerated in official source)

Which of the following costs should be capitalized as part of the cost of a self-constructed building?

  1. General administrative overhead unrelated to construction
  2. Interest on debt incurred during construction Correct answer.
  3. Advertising to promote the new facility
  4. Training costs for staff who will occupy the building

Explanation

Borrowing costs directly attributable to the acquisition or construction of a qualifying asset are capitalized under IAS 23. Training, advertising, and general overhead do not form part of the asset's cost.

Question 17Exam content domain (not enumerated in official source)

A company recognizes revenue from a long-term construction contract using the percentage-of-completion method. Which condition is essential for this method to be appropriate?

  1. The customer pays the full price in advance
  2. The outcome of the contract can be estimated reliably Correct answer.
  3. The contract price is collectible only at completion
  4. The project is expected to be completed within one year

Explanation

Percentage-of-completion requires reliable estimation of total contract revenue, costs, and progress toward completion. Without a reliable estimate, revenue recognition over time is not supportable.

Question 18Exam content domain (not enumerated in official source)

Which of the following items is reported in other comprehensive income rather than in profit or loss?

  1. Realized gain on the sale of trading securities
  2. Foreign currency translation differences on a foreign operation Correct answer.
  3. Interest expense on a bank loan
  4. Depreciation of manufacturing equipment

Explanation

Translation differences arising on translating a foreign operation's financial statements are recognized in OCI and accumulated in a separate component of equity. The other items are recognized in profit or loss.

Question 19Exam content domain (not enumerated in official source)

A company's inventory turnover ratio falls from 8.0 to 5.0 while sales remain constant. What is the most likely explanation?

  1. The company is holding larger inventory balances relative to its cost of goods sold Correct answer.
  2. The company has improved its ability to sell inventory quickly
  3. The company has increased its gross margin percentage
  4. The company has reduced its average inventory balance

Explanation

Inventory turnover equals cost of goods sold divided by average inventory. With sales constant, a falling ratio means average inventory has risen relative to cost of goods sold, suggesting slower movement or excess stock.

Question 20Exam content domain (not enumerated in official source)

Under the equity method, how does an investor record its share of an investee's net loss?

  1. As other comprehensive income
  2. As a reduction of the investment carrying amount and of income Correct answer.
  3. As an increase in the investment carrying amount
  4. As a contingent liability

Explanation

Under the equity method the investor recognizes its share of the investee's profit or loss, adjusting the investment carrying amount. A share of losses therefore reduces both the carrying amount and reported income.

Question 21Exam content domain (not enumerated in official source)

A firm's operating cash flow is positive, but its investing cash flow is largely negative and financing cash flow is positive. Which stage best fits this pattern?

  1. A mature firm returning capital to shareholders
  2. A declining firm liquidating assets
  3. A growth firm investing heavily and raising external funds Correct answer.
  4. A firm in steady state with no external financing

Explanation

Heavy investing outflows funded by financing inflows, alongside positive operating cash, is typical of a growing company expanding its asset base with borrowed or raised capital. Mature firms usually show the reverse financing pattern.

Question 22Exam content domain (not enumerated in official source)

Which of the following is the correct treatment of a contingent liability that is probable and can be reliably estimated?

  1. Recognize a provision and disclose it Correct answer.
  2. Recognize nothing because the outcome is uncertain
  3. Disclose only in the notes
  4. Recognize a contingent asset instead

Explanation

When an outflow is probable and the amount can be reliably estimated, a provision is recognized and disclosed. If the outflow is only possible, disclosure alone is appropriate.

Question 23Exam content domain (not enumerated in official source)

A company reports a gross profit margin of 40% and a net profit margin of 5%. Which factor most likely explains the difference?

  1. A high dividend payout ratio
  2. A low inventory turnover ratio
  3. Large operating expenses, interest, and taxes Correct answer.
  4. High cost of goods sold relative to sales

Explanation

Gross margin reflects the spread between sales and cost of goods sold, while net margin also deducts operating expenses, interest, and taxes. A wide gap therefore points to substantial non-production costs.

Question 24Exam content domain (not enumerated in official source)

Under IFRS 15, when should an entity recognize revenue from a performance obligation satisfied over time?

  1. When the contract is signed
  2. When the goods are physically produced
  3. Only when the customer makes final payment
  4. As progress is made toward complete satisfaction of the obligation Correct answer.

Explanation

IFRS 15 requires revenue to be recognized as control of the promised goods or services transfers to the customer. For an obligation satisfied over time, that means recognizing revenue based on progress toward completion.

Question 25Exam content domain (not enumerated in official source)

A firm has total assets of $500,000, total liabilities of $300,000, and net income of $40,000. What is its return on equity?

  1. 20% Correct answer.
  2. 13.3%
  3. 40%
  4. 8%

Explanation

Equity equals assets of $500,000 minus liabilities of $300,000, or $200,000. Dividing net income of $40,000 by equity of $200,000 gives a return on equity of 20%.

Question 26Exam content domain (not enumerated in official source)

Under the CDFA framework, which document typically summarizes the certified divorce financial analyst's scope of engagement, fee structure, and assumptions used in the analysis?

  1. The engagement letter or retainer agreement Correct answer.
  2. The qualified domestic relations order
  3. The property settlement tax return
  4. The marital settlement agreement

Explanation

The engagement letter defines the analyst's role, fees, and the assumptions or limiting conditions of the engagement, and it is signed before work begins. Settlement agreements and court orders are legal documents drafted by attorneys, not the analyst's scope document.

Question 27Exam content domain (not enumerated in official source)

In divorce financial analysis, the term "separate property" most accurately refers to:

  1. Assets acquired by either spouse before the marriage or received by gift or inheritance during it Correct answer.
  2. Assets held in a joint brokerage account titled to both spouses
  3. Assets earned by the higher-income spouse during the marriage
  4. Assets purchased with joint funds during the marriage regardless of title

Explanation

Separate property generally consists of assets owned before marriage and assets acquired during marriage by gift or inheritance, though commingling can change the characterization. Property acquired during the marriage with marital effort or funds is typically marital or community property.

Question 28Exam content domain (not enumerated in official source)

A spouse receives a $60,000 inheritance during the marriage and deposits it into a joint checking account used for household expenses. Under the most common tracing rules, this commingling most likely:

  1. Converts the inherited funds into marital or community property unless the separate portion can be traced Correct answer.
  2. Creates a taxable gift to the other spouse equal to half the deposit
  3. Automatically makes the entire joint account the separate property of the recipient
  4. Leaves the inheritance fully separate because inheritances are always immune from division

Explanation

Depositing separate funds into a joint account used for marital purposes generally creates a presumption of a gift to the marital estate. The recipient can rebut that presumption only by tracing the separate funds with clear records.

Question 29Exam content domain (not enumerated in official source)

In a community property state, income earned by one spouse from personal services during the marriage is generally characterized as:

  1. Separate property of the non-earning spouse
  2. Separate property of the earning spouse
  3. Community property owned equally by both spouses Correct answer.
  4. Property held in tenancy by the entirety

Explanation

Community property systems treat wages and salary earned during marriage as community property belonging equally to both spouses. This differs from title-based separate property rules for premarital assets.

Question 30Exam content domain (not enumerated in official source)

An analyst is projecting post-divorce cash flow for a spouse who will receive $3,000 per month in spousal support for five years. Which treatment best reflects sound divorce financial analysis?

  1. Model support as a finite inflow ending in year five and stress-test the budget for the income drop Correct answer.
  2. Assume the support will automatically increase with inflation each year
  3. Treat the support as permanent income continuing indefinitely
  4. Ignore the support because it is not earned income

Explanation

Support with a defined term is a temporary inflow, so the projection should show it ending and should test whether the spouse can adjust spending afterward. Treating it as permanent or ignoring it misstates both near-term and long-term cash flow.

Question 31Exam content domain (not enumerated in official source)

When building a post-divorce budget, which expense category is most often underestimated because it is paid irregularly rather than monthly?

  1. Home maintenance and major repairs Correct answer.
  2. Monthly rent payments
  3. Monthly utility bills
  4. Monthly grocery spending

Explanation

Irregular costs such as roof replacement, appliance failure, and car repairs are easy to omit from a monthly budget even though they recur over time. Averaging them into an annual reserve gives a more realistic picture.

Question 32Exam content domain (not enumerated in official source)

A 42-year-old spouse with a 20-year work history and no college degree seeks support. Which factor is most relevant to a CDFA's analysis of earning capacity?

  1. The number of years the couple was married alone
  2. The value of the couple's art collection
  3. The spouse's current credit score
  4. The spouse's education, recent work experience, and local wage data for available jobs Correct answer.

Explanation

Earning capacity analysis weighs education, skills, work history, age, and local labor-market wages to estimate realistic income. Credit scores and personal property values do not measure the ability to earn.

Question 33Exam content domain (not enumerated in official source)

Which of the following best describes the role of a vocational expert compared with a CDFA in a divorce case?

  1. The vocational expert determines custody, while the CDFA sets support amounts
  2. The vocational expert assesses employability and wage potential, while the CDFA integrates those findings into the overall financial picture Correct answer.
  3. The vocational expert prepares the tax returns, while the CDFA negotiates the settlement
  4. The vocational expert values the marital residence, while the CDFA drafts the QDRO

Explanation

Vocational experts focus on a spouse's ability to work and likely earnings, and the CDFA uses that input alongside assets, debts, and budgets. Each professional stays within a defined scope.

Question 34Exam content domain (not enumerated in official source)

A defined benefit pension will pay a joint-and-survivor annuity, and the parties want the non-employee spouse to receive a share of each monthly payment. Which mechanism implements that division?

  1. A beneficiary designation filed with the employer
  2. A qualified domestic relations order accepted by the plan administrator Correct answer.
  3. A change to the employee's W-4 withholding
  4. A rollover of the entire pension to the non-employee spouse's IRA

Explanation

A QDRO is the court order that assigns a portion of plan benefits to an alternate payee and must satisfy the plan's and ERISA's requirements. A beneficiary designation affects death benefits only and does not divide a living participant's benefit.

Question 35Exam content domain (not enumerated in official source)

Which statement correctly distinguishes a 401(k) from a traditional defined benefit plan in divorce analysis?

  1. A 401(k) always pays a lifetime annuity, while a defined benefit plan pays a lump sum
  2. A 401(k) balance is an individual account value, while a defined benefit plan promises a future monthly benefit whose present value must be estimated Correct answer.
  3. A 401(k) is funded solely by the employer, while a defined benefit plan is funded solely by the employee
  4. A 401(k) is exempt from QDROs, while a defined benefit plan requires one

Explanation

Account-balance plans such as 401(k)s are valued from statements, whereas defined benefit plans require actuarial assumptions to convert a promised benefit into a present value. Both types can be divided by QDRO.

Question 36Exam content domain (not enumerated in official source)

When valuing a pension benefit for property division, which assumption has the greatest effect on the computed present value?

  1. The number of dependents claimed on the tax return
  2. The discount rate used to convert future payments to today's dollars Correct answer.
  3. The employee's commuting distance to work
  4. The color of the plan's annual statement

Explanation

Present value is highly sensitive to the discount rate because it determines how heavily future payments are reduced. Small changes in the rate can shift the valuation substantially, so the choice must be documented and defensible.

Question 37Exam content domain (not enumerated in official source)

A business owned by one spouse is being valued in the divorce. Which approach estimates value by capitalizing the business's expected future earnings?

  1. The income approach Correct answer.
  2. The asset-based approach
  3. The replacement cost approach
  4. The market approach

Explanation

The income approach converts expected future cash flows or earnings into a present value using a capitalization or discount rate. The market approach uses comparable transactions, and the asset-based approach values net assets.

Question 38Exam content domain (not enumerated in official source)

In a divorce business valuation, the analyst applies a discount for lack of marketability. What does this discount reflect?

  1. The tax that would be owed on a sale of the business
  2. The cost of hiring a valuation expert
  3. The risk that the business will lose a major customer
  4. The difficulty of selling an ownership interest in a closely held business quickly at full value Correct answer.

Explanation

A lack-of-marketability discount reflects the absence of a ready public market for closely held interests, which reduces the price a buyer would pay. It is distinct from discounts for lack of control and from tax or transaction costs.

Question 39Exam content domain (not enumerated in official source)

Which of the following is generally treated as a marital debt rather than a separate debt?

  1. A credit card balance incurred during the marriage for household purchases Correct answer.
  2. A mortgage on a home owned before the marriage and kept titled to one spouse
  3. A student loan taken before the marriage and never refinanced
  4. A debt incurred after the date of separation for personal expenses

Explanation

Debts incurred during the marriage for family or household purposes are usually marital or community debts. Premarital debts and post-separation personal debts generally remain the responsibility of the spouse who incurred them.

Question 40Exam content domain (not enumerated in official source)

A couple has $200,000 in joint credit card debt and $250,000 in home equity. The analyst recommends which approach to present the debt picture clearly?

  1. Ignore the debt because assets exceed liabilities
  2. List only the total debt without allocating responsibility
  3. Allocate each debt to a spouse based on who will pay it and show the offsetting asset or payment source Correct answer.
  4. Assign all debt to the spouse with the higher income

Explanation

Effective analysis ties each obligation to the spouse who will service it and identifies the asset or income stream that funds it. This reveals the true net position each spouse will carry after divorce.

Question 41Exam content domain (not enumerated in official source)

A custodial parent receives $1,500 per month in child support. For federal income tax purposes, how is that support generally treated?

  1. It is not taxable income to the recipient and not deductible by the payer Correct answer.
  2. It is taxable income to the recipient but not deductible by the payer
  3. It is taxable income to the recipient and deductible by the payer
  4. It is deductible by the payer but not taxable to the recipient

Explanation

Child support is neither deductible by the payer nor includible in the recipient's income under federal tax rules. This contrasts with the pre-2019 treatment of certain alimony, which has since changed.

Question 42Exam content domain (not enumerated in official source)

For divorce or separation instruments executed after December 31, 2018, how is alimony (spousal support) generally treated for federal income tax purposes?

  1. It is neither deductible by the payer nor includible in the recipient's gross income Correct answer.
  2. It is deductible by the payer but excluded from the recipient's income
  3. It is not deductible but is taxable to the recipient
  4. It is deductible by the payer and includible in the recipient's income

Explanation

The Tax Cuts and Jobs Act repealed the alimony deduction and inclusion rule for instruments executed after 2018. Payments under those instruments are therefore tax-neutral at the federal level, though state rules may differ.

Question 43Exam content domain (not enumerated in official source)

A spouse wants to claim the dependency exemption for a child under a divorce decree. Which statement reflects current federal rules the analyst should apply?

  1. The child tax credit and dependency rules follow the custodial-parent tests, though a release may allow the noncustodial parent to claim the credit Correct answer.
  2. The noncustodial parent always claims the child regardless of custody
  3. The dependency exemption is automatically split evenly between both parents
  4. The exemption is claimed by whichever parent earns more

Explanation

After the suspension of personal exemptions, the child tax credit became the key benefit, and it generally follows the custodial parent unless a valid written release allows the noncustodial parent to claim it. The analyst should confirm the current statutory tests and any IRS form required.

Question 44Exam content domain (not enumerated in official source)

An analyst is evaluating whether a spouse can afford to keep the marital home after divorce. Which cost is most often overlooked in that analysis?

  1. The monthly principal and interest payment
  2. Property tax escrow payments
  3. Deferred maintenance and capital repairs Correct answer.
  4. Homeowner's insurance premiums

Explanation

Buyers and analysts routinely include mortgage, insurance, and taxes but forget that roofs, HVAC systems, and appliances fail on a schedule. Reserving for deferred maintenance prevents an unrealistic budget.

Question 45Exam content domain (not enumerated in official source)

Which method is most appropriate for valuing a closely held business when reliable comparable company data are unavailable?

  1. The book value of the company's equipment alone
  2. The owner's original purchase price adjusted for inflation
  3. A price-to-earnings multiple taken from a single public competitor
  4. A capitalized cash flow analysis supported by normalized earnings Correct answer.

Explanation

When market comparables are scarce, the income approach using normalized earnings and a supportable capitalization rate provides a defensible value. Normalization removes owner-specific perks and nonrecurring items.

Question 46Exam content domain (not enumerated in official source)

A CDFA prepares a net worth statement for settlement negotiations. Which presentation practice best supports credibility?

  1. Use the highest possible value for every asset
  2. Exclude retirement accounts to simplify the statement
  3. Combine all assets into one total without supporting detail
  4. Label each asset with its owner, date of value, and valuation source Correct answer.

Explanation

Documenting ownership, valuation date, and source lets the other side and the court verify each figure. Transparency reduces disputes and strengthens the analyst's credibility.

Question 47Exam content domain (not enumerated in official source)

In a divorce, one spouse has an unvested stock option grant from an employer. Which factor most affects how the option is characterized and divided?

  1. Whether the grant was earned during the marriage and the dates of vesting relative to the marriage and separation Correct answer.
  2. The spouse's current job title
  3. The number of shares outstanding in the company
  4. The employer's stock ticker symbol

Explanation

Unvested options are analyzed by determining what portion of the compensation was earned during the marriage, often using a time-based or grant-to-vest allocation. The characterization drives whether and how the value is shared.

Question 48Exam content domain (not enumerated in official source)

An analyst is asked to evaluate a proposed settlement that trades the home for a larger share of a pension. Which analytical step is most important?

  1. Select the option that requires the least paperwork
  2. Compare the after-tax, present-value cash flows and risks of each option over the spouse's expected lifetime Correct answer.
  3. Rely on the attorney's opinion without independent modeling
  4. Choose the option with the larger face amount on paper

Explanation

A meaningful comparison converts each option to after-tax present value and considers longevity, liquidity, and risk. Face amounts alone can mislead because a pension and a house carry very different risk and tax profiles.

Question 49Exam content domain (not enumerated in official source)

Which of the following is the best example of an add-back when normalizing a business owner's income for support analysis?

  1. Interest paid on a business loan
  2. Depreciation of equipment used in operations
  3. Rent paid for the business premises
  4. Personal travel and meals run through the business that benefit the owner Correct answer.

Explanation

Add-backs restore personal expenses paid by the business to the owner's true income and remove nonrecurring items. Ordinary operating costs such as depreciation, interest, and rent are legitimate business expenses and are not added back.

Question 50Exam content domain (not enumerated in official source)

A spouse's business pays for a company car used mostly for personal errands and family travel. In support analysis, the analyst should most likely:

  1. Assume the car has no value to the owner
  2. Deduct the full car cost again from personal income
  3. Ignore the car because it is titled to the business
  4. Treat the personal-use value as an add-back to the owner's income Correct answer.

Explanation

Personal use of business assets is a benefit that substitutes for personal spending and should be added back to income. Failing to do so understates the owner's true ability to pay support.