单选题Question The following
information has been gathered regarding a firm that uses straight line
depreciation. Gross plant and equipment
$1250000 Depreciation
expense
$ 235000 Accumulated depreciation
$ 725000
单选题
The average depreciable life of plant and equipment is:
A. 3.09 years.
B. 5.32 years.
C. 2.23 years.
【正确答案】
B
【答案解析】The average depreciable life = Gross PPE/Depreciation expense
5.32 = $1250000/$ 235000
单选题
Average remaining useful life of the plant and equipment is:
【答案解析】The average age = accumulated depreciation/depreciation expense
3.09 = $ 725000/$ 235000.
单选题
Interest expense is reported on the income statement as a function of:
A. the unamortized bond discount.
B. the coupon payment.
C. the market rate.
【正确答案】
C
【答案解析】Interest expense is always equal to the book value of the bond at the beginning of the period multiplied by the market rate at issuance.
单选题
For purposes of financial analysis, an analyst should:
A. always consider deferred tax liabilities as a liability.
B. always consider deferred tax liabilities as stockholder' s equity.
C. determine the treatment of deferred tax liabilities on a case-by-case
basis.
【正确答案】
C
【答案解析】For financial analysis, an analyst must decide on the appropriate treatment of deferred taxes on a case-by-case basis. These can be classified as liabilities or stockholder' s equity, depending on various factors. Sometimes, deferred taxes are just ignored altogether.
单选题
Which of the following is NOT part of the basic inventory equation?
A. Beginning inventory + purchases = ending inventory + cost of goods
sold.
B. Purchases - ending inventory + beginning inventory = cost of goods
sold.
C. Beginning inventory - ending inventory - cost of goods sold =
purchases.
【正确答案】
C
【答案解析】To solve for purchases the basic inventory equation would then be: ending inventory + COGS- beginning inventory = purchases.
单选题
While attending a local college, music major Anjolie Webster accepts a
temporary position with a small manufacturing firm. Currently, the firm uses
LIFO to account for inventory, but the owner is "just curious"
about how the financial results would look if the company used FIFO. Before the
owner leaves for her voice lesson, she hands Webster a photocopy of the
inventory data for the current period (summarized below).
Beginning inventory of 1000 units at $ 30 cost. Ending
inventory of 800 units. Sales of 1100 units.
Three inventory purchases (listed from earliest purchase to latest purchase):
400 units at $ 27 each, 300 units at $ 25 each, and an unreadable number of
units at $ 22 each. (Unfortunately, when the owner copied the original
document, she left a yellow sticky note covering some of the inventory
information. ) Current assets (less inventory) of
$75000. Current liabilities of $ 65000. Using
the information provided, determine which of the following statements is least
accurate? All else equal, compared to LIFO, using FIFO would result in:
A. cost of goods sold of $ 32700.
B. a lower ending inventory balance.
C. a current ratio of approximately 1.60.
【正确答案】
C
【答案解析】To calculate the current ratio (which includes the ending inventory balance) using FIFO, we first need to determine how many units were purchased in the third illegible purchase order (calculations follow).
Ending inventory = beginning inventory + purchases - sales, so, purchases = sales + ending in-ventory-beginning inventory = 1100 + 800 - 1000 = 900. Third purchase units = 900 -400 - 300 = 200
FIFO ending inventory = [(300 × 27 ) + (300 × 25 ) + (200 × 22) ] = $ 20000
FIFO current ratio (all else equal) = (75000 + 20000)/65000 = approximately 1.46
单选题
Given the following data during periods of rising prices and stable or
increasing inventory quantities : LIFO Inventory = $
80000 FIFO Inventory = $ 90000 Retained
Earnings = $125000 When adjusting the balance sheet from (LIFO)
to (FIFO), approximately what is the percent-age change in retained earnings?
A. 8.00%.
B. -12.50%.
C. 12.50%.
【正确答案】
A
【答案解析】The difference between the two inventory methods results in a cost of goods sold of $10000 less using FIFO since the cost of the inventory sold is cheaper than using LIFO during rising prices. The percentage change in retained earnings = (10000/125000) × 100 = 8.00%.
单选题
Three firms in the same industry show the following ratios for the
most recent year after all proper adjustments have been made for dilutive
securities and differences in financial reporting standards :
Earnings per Share
Sales per Share
Operating Cash Flow per Share
Company X
$ 1.50
$ 2.50
$ 1.00
Company Y
$ 3.50
$ 1.00
$ 2.00
Company Z
$ 2.00
$1.50
$ 3.00
Based on
this information, the best financial performer among these three firms:
A. is Company X because it has the greatest sales per share.
B. is Company Y because it has the highest earnings per share.
C. cannot be deten'nined because per-share ratios are not
comparable.
【正确答案】
C
【答案解析】When stated on a per-share basis, different companies' financial data cannot be compared meaningfully because these ratios depend on the number of shares outstanding, which is unrelated to the companies' operating performance or profitability. A company with a $ 200 share price should have much higher valuation measures than a company with a $ 2 share price.
单选题
A company purchased a new pizza oven directly from Italy for $ 12675.
It will work for 5 years and has no salvage value. The tax rate is 41
percent, and annual revenues are constant at $ 7192. For financial reporting,
the straight-line depreciation method is used, but for tax purposes depreciation
is accelerated to 35 percent in years 1 and 2, and 30 percent in year 3. For
purposes of this exercise ignore all expenses other than depreciation. Assume
the tax rate for years 4 and 5 changed from 41 percent to 31 percent. What will
be the deferred tax liability as of the end of year 3 and the resulting
adjustment to net income in year 3 for financial reporting purposes due to the
change in the tax rate? Deferred Tax
Liability Net Income ①A.
$1572 $ 507 ②B.
$1572 $ 747 ③C.
$1039 $ 5O7
A. ①
B. ②
C. ③
【正确答案】
A
【答案解析】Straight-line depreciation is $12675/5 = $ 2535. Financial statement income is $7192 - $ 2535 = $ 4657. Accelerated depreciation is $12675 (0.35) = $ 4436 in years 1 and 2 and $ 12675(0.3) = $3803 in year 3. Taxable income is $7192 - $4436 = $2756 in years 1 and2 and $7192- $3803= $3389 in year 3.
At the old tax rate of 41% :
Deferred Tax liability for year 1 = $ 779.41 [ ( $ 4657 - $ 2756 ) × 0.41 ]
Deferred Tax liability for year 2 = $779.41 [ ( $4657 - $2756) ×0.41]
Deferred Tax liability for year 3 = $519.88 [ ( $4657- $ 3389) ×0.41 ]
Deferred tax liability at the end of year 3, before the change in tax rate, is $2079 = ( $779.41 + $779.41 + $519.88)
At the new tax rate of 31% : Deferred Tax liability for year 1 = $ 589. 31 [( $ 4657 - $ 2756) ×0.31]
Deferred Tax liability for year 2 = $ 589.31 [ ( $ 4657 - $ 2756 ) × 0.31 ]
Deferred Tax liability for year 3 = $ 393.08 [ ( $4657 - $ 3389) ×0.31 ]
Deferred tax liability at the end of year 3, after the change in tax rate, will be $1572 = ( $589.31+ $589.31+ $393.08)
The deferred tax liability will decrease by $ 507 = ( $ 2079 - $1572) due to the new lower tax rate. An adjustment of $ 507 in tax expense will result in increase in net income by the same amount $ 507.
单选题
Assuming all else equal, if the coupon rate offered on a bond is less
than the corresponding market rate of interest, the bond will be issued at:
A. par.
B. a premium.
C. a discount.
【正确答案】
C
【答案解析】If the coupon rate is less than the market rate, the bond must be sold at a discount so the effective rate on the bond equals the market rate.
单选题
Which of the following statements regarding depreciation methods is
TRUE?
A. Straight-line depreciation results in an increasing rate of return over
the life of an asset.
B. Straight-line depreciation causes an increase in reported income over
time.
C. Sinking fund depreciation is based on the theory that an asset generates
an increasing rate of return over time.
【正确答案】
A
【答案解析】Straight-line depreciation applies a constant amount of depreciation to each period over the life of the asset; this method yields an increasing rate of return over the life of this asset.