Question 1

If market values of equity exceed book values of equity,then:

Accepted Answer

A)   equity has been depreciated too rapidly.
B)   the firm uses accrual-based accounting.
C)   profit potential is expected to be attractive.
D)   the firm is holding too much cash.E) B) and D)
F) A) and C)

Question 2

Which of the following statements correctly describes international accounting standards?

Accepted Answer

A)   The standards are becoming less similar over time.
B)   They are concerned only with assets and not liabilities.
C)   Compared with standards in the United States international standards involve less detailed rules .
D)   Balance sheets differ, but income statements are similar in all countries.E) A) and C)
F) B) and C)

Question 3

Accounting practices are currently standardized across all countries.

Accepted Answer

A) True 
 B)False

Question 4

The income statement resembles a snapshot of the firm at a specific time.

Accepted Answer

A) True 
 B)False

Question 5

Assets can be either tangible or intangible.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following could account for a firm that has a negative net income,yet has a positive amount of cash provided by operations?

Accepted Answer

A)   The net loss was greater than the amount of depreciation expense.
B)   Inventory increased significantly more than accounts payable.
C)   Accounts receivable decreased by significantly more than accounts payable.
D)   The cash balance increased significantly.E) All of the above
F) C) and D)

Question 7

Suppose Dee's just acquired the assets of Flo's Flowers.The book value of Flo's Flowers assets was $68,000 but Dee's paid a total of $75,000.The additional $7,000 paid by Dee's will be recorded on Dee's balance sheet as:

Accepted Answer

A)   accounts payable.
B)   goodwill.
C)   other current assets.
D)   property, plant, and equipment.E) B) and C)
F) A) and B)

Question 8

The principal reason for excluding many intangible assets from the balance sheet is that they are difficult to value.

Accepted Answer

A) True 
 B)False

Question 9

Which one of the following expense categories is subtracted from total revenues to help arrive at a firm's EBIT?

Accepted Answer

A)   Cash dividends
B)   Depreciation expense
C)   Interest expense
D)   Tax liabilityE) A) and C)
F) B) and C)

Question 10

Current period depreciation expense is listed:

Accepted Answer

A)   on the balance sheet.
B)   in the investment section of the cash flow statement.
C)   on the income statement.
D)   on neither the balance sheet nor the income statement; it is a noncash expense.E) All of the above
F) A) and D)

Question 11

What is the most likely conclusion for a firm whose statement of cash flows shows an increase in cash balances and has negative cash flows from both operations and financing?

Accepted Answer

A)   The firm has low depreciation expense.
B)   The firm did not pay any dividends.
C)   The firm sold more equipment than it purchased.
D)   The firm has a low interest rate on its debt.E) B) and C)
F) All of the above

Question 12

Accrual accounting,which attempts to match sales revenues and the expenses associated with the production of the goods,is conducted in an attempt to:

Accepted Answer

A)   reduce income-tax liability.
B)   reduce bias in reported profitability measures.
C)   speed up the receipt of accounts receivable.
D)   reduce the time necessary to depreciate assets.E) C) and D)
F) A) and B)

Question 13

To calculate free cash flow,you must deduct capital expenditures from the cash flow from operations.

Accepted Answer

A) True 
 B)False

Question 14

If a payment of principal is due in 13 months on a long-term liability,that payment will now appear on the balance sheet as:

Accepted Answer

A)   a current liability.
B)   long-term debt.
C)   cash.
D)   interest expense.E) A) and C)
F) B) and C)

Question 15

Retained earnings result from:

Accepted Answer

A)   the sale of additional shares of stock to investors.
B)   income not paid to shareholders.
C)   an excess of assets over liabilities.
D)   market values that exceed book values.E) B) and D)
F) None of the above

Question 16

Depreciation charge is a cash payment.

Accepted Answer

A) True 
 B)False

Question 17

Accrual accounting aims to provide a fairer measure of the firm's profitability.

Accepted Answer

A) True 
 B)False

Question 18

Which one of these will increase a firm's cash balance?

Accepted Answer

A)   An increase in inventory
B)   A decrease in accounts payable
C)   An issue of common stock
D)   Purchase of new equipmentE) All of the above
F) C) and D)

Question 19

Which one of the following statements is correct for a corporation with a negative net income in both the present and the last fiscal year?

Accepted Answer

A)   This year's loss can be carried back, but last year's loss cannot be used.
B)   Neither of the losses can be used to reduce taxes.
C)   Both losses can be carried forward but not backward.
D)   Both losses can be carried forward and backward, within certain time limits.E) B) and C)
F) A) and C)

Question 20

A company pays tax at a rate of 15% on its first $50,000 of income.If it has $60,000 of taxable income and an average tax rate of 18%,what is the marginal tax rate on its last $10,000 of income?

Accepted Answer

A)   15%
B)   33%
C)   18%
D)   25%E) A) and C)
F) All of the above

Exam 3: Accounting and Finance

Which one of these will increase a firm's cash balance?

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If a payment of principal is due in 13 months on a long-term liability,that payment will now appear on the balance sheet as:

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Accrual accounting,which attempts to match sales revenues and the expenses associated with the production of the goods,is conducted in an attempt to:

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Which of the following could account for a firm that has a negative net income,yet has a positive amount of cash provided by operations?

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Assets can be either tangible or intangible.

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The principal reason for excluding many intangible assets from the balance sheet is that they are difficult to value.

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Retained earnings result from:

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Accrual accounting aims to provide a fairer measure of the firm's profitability.

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The income statement resembles a snapshot of the firm at a specific time.

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To calculate free cash flow,you must deduct capital expenditures from the cash flow from operations.

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Accounting practices are currently standardized across all countries.

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Which one of the following expense categories is subtracted from total revenues to help arrive at a firm's EBIT?

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Which one of the following statements is correct for a corporation with a negative net income in both the present and the last fiscal year?

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Depreciation charge is a cash payment.

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If market values of equity exceed book values of equity,then:

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A company pays tax at a rate of 15% on its first $50,000 of income.If it has $60,000 of taxable income and an average tax rate of 18%,what is the marginal tax rate on its last $10,000 of income?

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Current period depreciation expense is listed:

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Suppose Dee's just acquired the assets of Flo's Flowers.The book value of Flo's Flowers assets was $68,000 but Dee's paid a total of $75,000.The additional $7,000 paid by Dee's will be recorded on Dee's balance sheet as:

Correct AnswerverifiedShow Answer

Which of the following statements correctly describes international accounting standards?

Correct AnswerverifiedShow Answer

What is the most likely conclusion for a firm whose statement of cash flows shows an increase in cash balances and has negative cash flows from both operations and financing?

Correct AnswerverifiedShow Answer

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