Archive for September 2017

Which statement is true:

Add Comment

Which statement is true:



a. A low ratio indicates that inventory does not remain in warehouses or on shelves, but rather turns over rapidly into sales.
b. A high ratio indicates that inventory does not remain in warehouses or on shelves, but rather turns over rapidly into sales.
c. A high ratio indicates that inventory does not remain in warehouses or on shelves, but rather turns over rapidly into cash.
d. A low ratio indicates that inventory does not remain in warehouses or on shelves, but rather turns over rapidly into cash.



Answer: B

Financial statement analysis helps identify:

Add Comment

Financial statement analysis helps identify:




a. a firm's strengths
b. a firm's weaknesses
c. management can take advantage of a firm's strengths and make plans to counter weaknesses of the firm
d. all of these





Answer: D

Financial statements are summaries of the:

Add Comment

Financial statements are summaries of the:




a. operating, payment, and investment activities of a firm
b. operating, financing, and liquidity of a firm
c. operating, financing, and profitability of a firm
d. operating, financing, and investment activities of a firm


Answer: D

Profitability Ratios - Return on Equity (ROE):

Add Comment

Profitability Ratios - Return on Equity (ROE):



a. Measures the relationship between profits and the investment of fixed assets
b. Measures the relationship between profits and the investment of the owners.
c. Measures the relationship between profits and the investment total assets
d. Measures the relationship between profits and the initial investment of the owners.




Answer: B

Which of the following is true? The choice of LIFO versus FIFO will:

Add Comment

Which of the following is true? The choice of LIFO versus FIFO will: 




a. not affect net income or cash flow from operations
b. not affect net income but will affect cash flow from operations
c. affect both net income and cash flow from operations
d. affect net income but will not affect cash flow from operations



Answer: D

Which of the following is true?

Add Comment

Which of the following is true? 



a. Depreciation: is recorded so that net book value represents fair value of assets
b. Depreciation: does not affect the amount of cash realized from operations as it is a non-cash flow
c. Depreciation: is added back to net income to calculate cash from operations under the direct method
d. Depreciation: represents a fund from which to purchase future assets



Answer: B

What impact does depreciation have on the cash account?

Add Comment

What impact does depreciation have on the cash account?



a. Depreciation only impacts the cash account if inflation has occurred.
b. Depreciation results in an increase to cash.
c. Depreciation has no impact on the cash account.
d. Depreciation results in an decrease to cash.




Answer: C

Which of the following items would be classified as financing activities below?

Add Comment

Which of the following items would be classified as financing activities below?




a. Loans to others, returns from loans to others, acquisition of land.
B. Payments for inventory, payments to lenders, payments for taxes.
c. Proceeds from borrowing, payment of dividends, repayment of debt.
d. Sales of goods, repayment of debt, loans to others.





Answer: C

Which statement is true:

Add Comment

Which statement is true:



a. Financial analysis is the use of financial statements to analyze a company's financial position and performance.
b. Financial analysis is the use of balance sheet to analyze a company's financial position and performance, and to assess future performance.
c. Financial analysis is the use of income statement and balance sheet to analyze a company's financial position and performance, and to assess future performance.
d. Financial analysis is the use of financial statements to analyze a company's financial position and performance, and to assess future performance.



Answer: D

In indirect method, the net income figure from the income statement is used to calculate the amount of net cash flow from operating activities because:

Add Comment

In indirect method, the net income figure from the income statement is used to calculate the amount of net cash flow from operating activities because:




a. the income statement is prepared on accrual basis in which revenue is recognized when earned and not when received
b. the income statement is prepared on cash basis in which revenue is recognized when earned and not when received
c. the cash flow statement is prepared on accrual basis in which revenue is recognized when earned and not when received
d. the cash flow statement is prepared on cash basis in which revenue is recognized when earned and not when received




Answer: A

Which statement is true:

Add Comment

Which statement is true:



a. Liquidity refers to the ability of a company to meets its long-term (and current) obligations.
b. Profitability refers to the ability of a company to meets its long-term (and current) obligations.
c. Efficiency refers to the ability of a company to meets its long-term (and current) obligations.
d. Solvency refers to the ability of a company to meets its long-term (and current) obligations.





Answer: D

Major current assets include:

Add Comment

Major current assets include:


a. cash and cash equivalents
b. marketable securities
c. all of these
d. derivative financial instruments



Answer: C

Which statement is true:

Add Comment

Which statement is true:



a. Gains are cash inflows that arise from the company's ongoing business activities.
b. Gains are cash outflows that arise from the company's ongoing business activities.
c. Losses are cash outflows that arise from the company's ongoing business activities.
d. None of these



Answer: D

Which statement is true:

Add Comment

Which statement is true:




a. Economic income and accounting income are always the same.
b. The matching principle in accounting prescribes that costs must be recognized in the same period when the related revenues are recognized.
c. Gains are cash inflows that arise from the company's ongoing business activities.
d. Losses are cash outflows that arise from the company's ongoing business activities.


Answer: B

The classification of marketable equity securities as trading or available-for-sale is determined by:

Add Comment

The classification of marketable equity securities as trading or available-for-sale is determined by: 


a. management's intent regarding the disposition of the securities
b. when the securities mature
c. whether the current assets are greater or less than the current liabilities
d. whether management wants to mark them to market or not




Answer: A

Trading Marketable Securities:

Add Comment

Trading Marketable Securities: 




a. are considered current assets.
b. are considered current liability
c. are considered non-current liability
d. are considered non-current assets.




Answer: D

Which statement is true:

Add Comment

Which statement is true:



a. Total liabilities to total assets ratio <50 percent indicates that a firm is relying more on borrowed money than owners' equity.
b. Total liabilities to total assets ratio > 60 percent indicates that a firm is relying more on borrowed money than owners' equity.
c. Total liabilities to total assets ratio <60 percent indicates that a firm is relying more on borrowed money than owners' equity.
d. Total liabilities to total assets ratio > 50 percent indicates that a firm is relying more on borrowed money than owners' equity.




Answer: D

Operating leases is listed on:

Add Comment

Operating leases is listed on:




a. off-balance sheet financing
b. balance sheet
c. income statement
d. statement of cash flow



Answer: A

Which of the following is not an extraordinary item?

Add Comment

Which of the following is not an extraordinary item? 



I. Loss on abandonment of property
II. Gain on disposal of a business segment
III. Effect of a strike against a key supplier
IV. Write-down of deferred research and development costs


A. I and III
B. II and IV
C. I, II and III
D. I, II, III and IV





Answer: D

Which of the following statements is incorrect? Employee stock options

Add Comment

Which of the following statements is incorrect? Employee stock options 




A. are not recorded as an expense when granted if they are at or out-of-the money under the intrinsic value method.
B. will not affect the share price of the company when exercised.
C. may reduce agency costs by more closely aligning interests of stockholders and managers.
D. may increase the risk propensity of managers.




Answer: B

Which of the following items is not included in the calculation of net income but is included in the calculation of comprehensive income?

Add Comment

Which of the following items is not included in the calculation of net income but is included in the calculation of comprehensive income? 





A. Unrealized holding gain on available-for-sale marketable securities.
B. Unrealized holding gain on trading marketable securities.
C. Gain from early extinguishments of bonds.
D. Gain arising from sale of available-for-sale marketable securities


Answer: A

Which of the following would be considered an extraordinary item?

Add Comment

Which of the following would be considered an extraordinary item? 




I. Write-down of receivables
II. Gains on disposal of a business segment
III. Loss of inventory resulting from a fire
IV. Loss resulting from a strike


A. I and IV
B. I, III and IV
C. III only
D. I, II and III




Answer: C

Which of the following is true with respect to extraordinary items?

Add Comment

Which of the following is true with respect to extraordinary items? 



I. Extraordinary items are recorded net of tax in income statement.
II. Extraordinary items, by definition, are probable and unusual in nature.
III. By definition, gains and losses from strikes are always extraordinary.
IV. By definition, gains and losses from sale of plant, property and equipment are never extraordinary.



A. I and IV
B. I, III and IV
C. II and IV
D. I, II and III



Answer: A

A company changes its depreciation method from an accelerated system to straight line. Which of the following would normally be true?

Add Comment

A company changes its depreciation method from an accelerated system to straight line. Which of the following would normally be true? 



I. The change would be discussed in the auditor's letter.
II. The cumulative effect of the change would appear net of tax on the income statement.
III. The change would appear in cash flow from operations as a cash inflow.
IV. The change would be mentioned in the footnotes.



A. I, II, III and IV
B. I, II and III
C. II and IV
D. I, II and IV



Answer: D

Which of the following will cause the reported effective tax rate to differ from the federal statutory tax rate?

Add Comment

Which of the following will cause the reported effective tax rate to differ from the federal statutory tax rate? 



I. Foreign tax rates that are lower than federal statutory tax rate.
II. Tax-exempt income.
III. Different depreciation methods for tax and financial reporting purposes.
IV. Foreign tax rates that are higher than federal statutory tax rate.


A. I, II, and IV
B. I, II and III
C. I and II
D. III only




Answer: A

Which of the following statements are correct?

Add Comment

Which of the following statements are correct? 



I. Tax loss carrybacks result in deferred tax assets.
II. Tax loss carryforwards result in deferred tax assets.
III. The tax valuation account is used to adjust deferred tax liabilities if it is "more likely than not" that they will not result in increased future taxes.


A. I only
B. II only
C. III only
D. I and II




Answer: B

Exoil recorded an expense and corresponding liability to recognize potential losses relating to an oil spill in 2006 of $10 million. Its net income for the year was $200 million. It was not able to take a deduction for tax purposes until later years when it actually paid cash out in relation to this event. In 2006, with respect to this, Exoil would have:

Add Comment

Exoil recorded an expense and corresponding liability to recognize potential losses relating to an oil spill in 2006 of $10 million. Its net income for the year was $200 million. It was not able to take a deduction for tax purposes until later years when it actually paid cash out in relation to this event. In 2006, with respect to this, Exoil would have: 




A. recognized a deferred tax liability.
B. recognized a tax loss carryforward.
C. recognized a deferred tax asset.
D. recognized a deferred equity loss.



Answer: C

The capitalization of interest cost during construction:

Add Comment

The capitalization of interest cost during construction: 




A. increases future net income.
B. decreases future depreciation expense.
C. increases net income during construction phase.
D. decreases assets during construction phase.




Answer: C

Two growing firms are identical except that one firm capitalizes whereas the other firm expenses costs for long-lived resources over time. For these two firms, which of the following statements is generally true?

Add Comment

Two growing firms are identical except that one firm capitalizes whereas the other firm expenses costs for long-lived resources over time. For these two firms, which of the following statements is generally true? 



I. The expensing firm will show a more volatile pattern of reported income than capitalizing firm.
II. The expensing firm will show a less volatile pattern of return on assets than the capitalizing firm.
III. The expensing firm will show lower cash flows from operations than the capitalizing firm.


A. I only
B. II only
C. I and III only
D. II and III only




Answer: C

If a company that normally expenses advertising costs was to capitalize and amortize these costs over 3 years instead:

Add Comment

If a company that normally expenses advertising costs was to capitalize and amortize these costs over 3 years instead: 




A. after the third year net income would always be higher if it is capitalized.
B. after the third year net income would always be lower if it is capitalized.
C. after the third year net income would be higher (if it is capitalized) only if advertising costs were increasing.
D. after the third year net income would be lower (if it is capitalized) only if advertising costs were increasing.



Answer: C

Which of the following statements concerning deferred taxes is correct?

Add Comment

Which of the following statements concerning deferred taxes is correct? 







A. Deferred taxes will not be found in asset section of the balance sheet.
B. Deferred taxes arise from permanent differences in GAAP and tax accounting.
C. Deferred taxes will only decrease when a cash payment is made.
D. Deferred taxes arising from the depreciation of a specific asset will ultimately reduce to zero as the item is depreciated.


Answer: D

Which of the following are correct?

Add Comment

Which of the following are correct? 

I. If a company uses straight-line depreciation for financial reporting purposes, it is very likely they have a deferred tax liability with respect to its depreciable assets.
II. Straight line depreciation yields an increasing rate of return on book value over the life of asset.
III. Straight line depreciation results in lower tax payments than accelerated depreciation methods over the life of an asset.
IV. If a company revises its estimate of the useful life of an asset upwards this will decrease annual depreciation expense.


A. I, II, III and IV
B. I, II and IV
C. I, II and III
D. I and IV




Answer: B

According to FASB, initial franchise fees should be recognized as income when:

Add Comment

According to FASB, initial franchise fees should be recognized as income when: 





A. the franchiser has substantially performed or satisfied all material services and conditions.
B. the franchiser has collected the majority of fee in cash.
C. the franchisee shows the ability to pay the fee.
D. the franchiser bills the franchisee.



Answer: A

If a company applies overhead to jobs on the basis of a predetermined overhead rate, a credit balance in the Manufacturing Overhead account at the end of any period means that:

Add Comment

If a company applies overhead to jobs on the basis of a predetermined overhead rate, a credit balance in the Manufacturing Overhead account at the end of any period means that: 



A. more overhead cost has been charged to jobs than has been incurred during the period.
B. more overhead cost has been incurred during the period than has been charged to jobs.
C. the amount of overhead cost charged to jobs is greater than the estimated cost for the period.
D. the amount of overhead cost charged to jobs is less than the estimated overhead cost for the period.




Answer: A

In a job-order costing system, the amount of overhead cost that has been applied to a job that remains incomplete at the end of a period:

Add Comment

In a job-order costing system, the amount of overhead cost that has been applied to a job that remains incomplete at the end of a period: 




A. is deducted on the Income Statement as overapplied overhead.
B. is closed to Cost of Goods Sold.
C. is transferred to Finished Goods at the end of the period.
D. is part of the ending balance of the Work in Process inventory account.




Answer: D

When applying manufacturing overhead to jobs, the formula to calculate the amount is as follows:

Add Comment

When applying manufacturing overhead to jobs, the formula to calculate the amount is as follows: 




A. Predetermined overhead rate divided by the actual manufacturing overhead incurred on the particular job.
B. Predetermined overhead rate times the actual manufacturing overhead incurred on the particular job.
C. Predetermined overhead rate divided by the actual units of allocation base charged to the particular job.
D. Predetermined overhead rate times the actual units of allocation base charged to the particular job.




Answer: D

Choice of allocation base should be made based on:

Add Comment

Choice of allocation base should be made based on: 



A. the relative size of the base.
B. the base's relation to direct labor.
C. the base's activity.
D. whether the base actually drives the cost being allocated.



Answer: D

Which of the following documents is used to specify the type and quantity of materials drawn from the storeroom, and identifies the job to which the costs of the materials are to be charged?

Add Comment

Which of the following documents is used to specify the type and quantity of materials drawn from the storeroom, and identifies the job to which the costs of the materials are to be charged? 



A. Job Cost Sheet
B. Bill of Materials
C. Material Requisition Form
D. Purchase Order




Answer: C

In job-order costing, all of the following statements are correct with respect to labor time and cost except:

Add Comment

In job-order costing, all of the following statements are correct with respect to labor time and cost except: 



A. time tickets are kept by employees showing the amount of work on specific jobs.
B. the job cost sheet for a job will contain all direct labor charges to that particular job.
C. labor cost that can be traced to a job only with a great deal of effort is treated as part of manufacturing overhead.
D. a machine operator performing routine annual maintenance work on a piece of equipment would charge the maintenance time to a specific job.




Answer: D

For which situation(s) below would an organization be more likely to use a job-order costing system of accumulating product costs rather than a process costing system?

Add Comment

For which situation(s) below would an organization be more likely to use a job-order costing system of accumulating product costs rather than a process costing system? 



A. a steel factory that processes iron ore into steel bars
B. a factory that processes sugar and other ingredients into black licorice
C. a costume maker that makes specialty costumes for figure skaters
D. all of the above



Answer: C

A company's net income is $100,000, and its weighted-average shares outstanding are 20,000. During the year, the company issues 5,000 ESOs at an exercise price of $20.

Add Comment

A company's net income is $100,000, and its weighted-average shares outstanding are 20,000. During the year, the company issues 5,000 ESOs at an exercise price of $20.


What will be the basic EPS if average stock price during the year is $35 and treasury shares that can be purchased are 1000?


A. $3
B. $6
C. $5
D. $4.17


Answer: C


What will be the diluted EPS if average stock price during the year is $15 and treasury shares that can be purchased are 6000?


A. $3
B. $5
C. $6
D. $4.17


Answer: B


What will be the diluted EPS if average stock price during the year is $35 and treasury shares that can be purchased are 1000?

A. $3
B. $5
C. $6
D. $4.17


Answer: D

Tecktroniks Company reported in its annual report software refinement expenses of $12M, 15M and 18M for fiscal years 2005, 2006 and 2007, respectively. At the end of fiscal 2007, it had total assets of 140M. Net income was 20M for fiscal 2007, and it had a marginal tax rate of 35%.

Add Comment

Tecktroniks Company reported in its annual report software refinement expenses of $12M, 15M and 18M for fiscal years 2005, 2006 and 2007, respectively. At the end of fiscal 2007, it had total assets of 140M. Net income was 20M for fiscal 2007, and it had a marginal tax rate of 35%.



If software refinement had been capitalized each year and amortized over a three year period beginning in the year the cost was incurred, net income for fiscal 2007 would have been:


A. $31.7M
B. $29.75M
C. $21.95M
D. $14.95M

Answer: C


If the software refinement had been capitalized and amortized over a three year period beginning in the year the cost was incurred, but was expensed for tax purposes, the deferred tax position at the end of fiscal 2005 would have been:


A. A deferred tax credit of $2.8M
B. A deferred tax credit of $3.5M
C. A deferred tax credit of $5.2M
D. A deferred tax debit of $4M


Answer: A

If software refinement had been capitalized each year and amortized over a three-year period beginning in the year the cost was incurred, total assets at the end of fiscal 2007 would have been:

Add Comment

If software refinement had been capitalized each year and amortized over a three-year period beginning in the year the cost was incurred, total assets at the end of fiscal 2007 would have been: 




A. $185M
B. $172M
C. $158M
D. $157Me using capitalization.
C. will be constant using expensing.
D. will initially be higher under expensing.



Answer: D

According to the Financial Accounting Standards Board (FASB), which of the following is a cash flow from a "financing" activity?

Add Comment

According to the Financial Accounting Standards Board (FASB), which of the following is a cash flow from a "financing" activity?



a. cash outflow to the government for taxes.
b. cash outflow to shareholders as dividends.
c. cash outflow to lenders as interest.
d. cash outflow to purchase bonds issued by another company.



Answer: B

Which of the following statements is correct?

Add Comment

Which of the following statements is correct? 



a. Net operating profit margin divided by net operating asset turnover equals return on net operating assets
b. Return on net operating assets can be disaggregated into net operating profit margin and leverage
c. Return on equity equals return on net operating assets less interest, net of tax
d. Return on equity can be disaggregated into net operating profit margin, net operating asset turnover and leverage




Answer: D
Subscribe to: Posts (Atom)