Under an inflationary environment with stable inventories, a firm may change to FIFO from LIFO due to which of the following reason(s)?
I. To allow earnings manipulation.
II. To improve the reported working capital.
III. To reduce tax drain on cash.
IV.
Show a more accurate representation of reported assets than LIFO.
A.
II and IV
B.
III only
C.
I and IV
D.
I and III
In a common-size balance-sheet statement, a firm's current assets are reported at 37% and the long- term liabilities are at 12%. The equity is shown to be 64%. The firm's current ratio equals ________.
A. 1.12
B. 1.54
C. 0.65
D. 1.37
Which of the following is NOT an objective of the conceptual framework devised by FASB?
A. Establish a logical and coherent system of accounting thought.
B. Establish objectives of financial reporting by businesses.
C. Identify the characteristics of accounting information that make its disclosure useful.
D. Enforce a single standard of accounting disclosures across the various industries.
The accounting equation reads:
A. Revenue minus expenses equals profit
B. Assets equal Liabilities plus Stockholders' Equity
C. Assets plus Liabilities is equal to Stockholders' Equity
D. None of these answers is correct
On January 1, 1992, Carter Inc. purchased equipment having an estimated salvage value equal to 20% of its original cost at the end of a 10 year life. The equipment was sold December 31, 1996 for 50% of itsoriginal cost. If the equipment's disposition resulted in a reported loss, which of the following depreciation methods did Carter use?
A. Straight-line.
B. Double-declining-balance.
C. Composite.
D. Sum-of-the-years'-digits
E. Accelerated.
Quasar, Inc., currently shows assets worth 5,000 and a debt of 1,500. During the year, it capitalized interest expense worth 300, of which 60 was amortized. Quasar's tax rate is 50%. If it had expensed the interest paid, which of the following would be true?
A. Its operating cash flow would be lower by 150.
B. Its tax expense would be lower by 150.
C. Its equity would be higher by 300.
D. Its operating cash flow would be lower by 300.
Which of the following is an essential characteristic of a liability?
A. The identity of the recipient entity must be known to the obligated entity before the time of settlement.
B. Liabilities represent an obligation that has arisen as the result of a previous transaction.
C. None of these answers.
D. Liabilities must be legally enforceable.
E. Liabilities must require the obligated enterprise to pay cash to a recipient entity.
Employers' income tax expense consists of the following obligations except:
A. Medicare tax
B. Social Security tax
C. Federal income tax
D. State unemployment tax
A firm has purchased heavy machinery with a useful life of 7 years. It cost $28,000 and its salvage value is estimated at $4,000. If the firm uses double declining method, what's the depreciation expense recognized in Year 1?
A. $3,429
B. $8,000
C. $6,857
D. $4,000
GAAP requires that:
A. cash flows from interest related inflows and outflows on debt be considered investing cash flows.
B. cash flows from dividend receipts be considered investing cash flows.
C. all of these answers.
D. none of these answers.
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