Question 1

If net income is positive, then cash flow from operations is positive also for that period.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is true for a corporation with $1 million market value of equity, $2 million market value of assets, and 1,000 shares of outstanding stock?

Accepted Answer

A)  Market value of liabilities exceeds book value of liabilities
B)  Market value of liabilities equals $1 million
C)  Market value per share equals $1,000
D)  Market value per share equals $2,000E) A) and D)
F) A) and C)

Question 3

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

Accepted Answer

A)  Current liability
B)  Long-term debt
C)  Cash
D)  Interest expenseE) A) and B)
F) A) and C)

Question 4

Which of the following statements about net working capital (NWC)  is correct?

Accepted Answer

A)  NWC is positive for all firms
B)  As NWC decreases, potential liquidity increases
C)  NWC excludes inventory, which is deemed illiquid
D)  Decreases in NWC can increase the firm's riskE) A) and B)
F) None of the above

Question 5

What occurs when the value of a firm's debt exceeds the value of shareholders' equity?

Accepted Answer

A)  The firm is bankrupt
B)  The firm is very risky
C)  A high rate of interest is being paid on the debt
D)  The firm is financed more through debt than through equityE) A) and C)
F) B) and D)

Question 6

When an accountant does not report all of the potentially relevant financial information on the firm's financial statements, the accountant is most likely:

Accepted Answer

A)  Hiding transactions from the shareholders
B)  Using the discretion that is built into GAAP
C)  Not following GAAP
D)  Not licensed to practice accountingE) A) and D)
F) A) and C)

Question 7

What balancing entry is most likely to be called for if previously excluded intangible assets were added to a firm's balance sheet?

Accepted Answer

A)  Increase accumulated depreciation
B)  Decrease long-term debt
C)  Increase shareholders' equity
D)  Decrease current assetsE) None of the above
F) All of the above

Question 8

If a firm's net income is positive and its non-cash expenses are positive, which of the following could account for a negative amount of cash provided by operations?

Accepted Answer

A)  Current assets decrease more than current liabilities decrease
B)  Current assets increase more than current liabilities increase
C)  Current assets decrease more than current liabilities increase
D)  A large addition is made to plant and equipmentE) A) and B)
F) C) and D)

Question 9

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 assetsE) B) and C)
F) A) and B)

Question 10

Why does accounting of income differ from cash flow?

Accepted Answer

Income is not the same as cash flow.Ther...

Question 11

Market-value balance sheets differ from book-value balance sheets in that market values:

Accepted Answer

A)  Are higher than book values
B)  Are lower than book values
C)  Conform more to GAAP accounting
D)  Conform to investors' expectationsE) None of the above
F) B) and D)

Question 12

Which of the firm's financial statements most clearly recognizes the payment for new equipment?

Accepted Answer

A)  Balance Sheet
B)  Income Statement
C)  Statement of Cash Flows
D)  Statement of ConditionE) A) and B)
F) All of the above

Question 13

Which of the following forms of income can individuals defer from taxation?

Accepted Answer

A)  Dividends
B)  Interest
C)  Realized capital gains
D)  Unrealized capital gainsE) B) and D)
F) B) and C)

Question 14

An increase in the accounts receivable balance provides an increase in cash flow.

Accepted Answer

A) True 
 B)False

Question 15

In general, what is changing as you read down the left hand side of a balance sheet?

Accepted Answer

A)  The assets are more fully depreciated
B)  The assets are growing in value
C)  The assets are increasing in maturity
D)  The assets are becoming less liquidE) B) and C)
F) All of the above

Question 16

Calculate the cash inflows (outflows)  from investing activities if total cash decreased by $40,000; cash inflows from operating activities were $14,000 and cash outflows from financing activities were $60,000.

Accepted Answer

A)  Inflow of $5,000
B)  Inflow of $6,000
C)  Outflow of $5,000
D)  Outflow of $6,000E) All of the above
F) None of the above

Question 17

An increase in inventories uses cash, reducing the firm's net cash balance.

Accepted Answer

A) True 
 B)False

Question 18

Accounting practices are not standardized across countries.

Accepted Answer

A) True 
 B)False

Question 19

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 debtE) A) and B)
F) All of the above

Question 20

What is the tax liability for an individual with $52,000 of income, which includes $2,000 of dividends, if the tax rate is 15 percent on income up to $25,350 and 28 percent on income over $25,350?

Accepted Answer

A)  $11,704.50
B)  $11,264.50
C)  $14,000.00
D)  $14,560.00E) A) and C)
F) B) and C)

Exam 3: Accounting and Finance

What is the tax liability for an individual with $52,000 of income, which includes $2,000 of dividends, if the tax rate is 15 percent on income up to $25,350 and 28 percent on income over $25,350?

Correct AnswerverifiedShow Answer

Accounting practices are not standardized across countries.

Correct AnswerverifiedShow Answer

An increase in the accounts receivable balance provides an increase in cash flow.

Correct AnswerverifiedShow Answer

Which of the firm's financial statements most clearly recognizes the payment for new equipment?

Correct AnswerverifiedShow Answer

What balancing entry is most likely to be called for if previously excluded intangible assets were added to a firm's balance sheet?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Calculate the cash inflows (outflows) from investing activities if total cash decreased by $40,000; cash inflows from operating activities were $14,000 and cash outflows from financing activities were $60,000.

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

What occurs when the value of a firm's debt exceeds the value of shareholders' equity?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If net income is positive, then cash flow from operations is positive also for that period.

Correct AnswerverifiedShow Answer

If a firm's net income is positive and its non-cash expenses are positive, which of the following could account for a negative amount of cash provided by operations?

Correct AnswerverifiedShow Answer

Which of the following statements is true for a corporation with $1 million market value of equity, $2 million market value of assets, and 1,000 shares of outstanding stock?

Correct AnswerverifiedShow Answer

In general, what is changing as you read down the left hand side of a balance sheet?

Correct AnswerverifiedShow Answer

Market-value balance sheets differ from book-value balance sheets in that market values:

Correct AnswerverifiedShow Answer

When an accountant does not report all of the potentially relevant financial information on the firm's financial statements, the accountant is most likely:

Correct AnswerverifiedShow Answer

Which of the following forms of income can individuals defer from taxation?

Correct AnswerverifiedShow Answer

An increase in inventories uses cash, reducing the firm's net cash balance.

Correct AnswerverifiedShow Answer

Why does accounting of income differ from cash flow?

Correct AnswerverifiedIncome is not the same as cash flow.Ther...View AnswerShow Answer

Which of the following statements about net working capital (NWC) is correct?

Correct AnswerverifiedShow Answer

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Income is not the same as cash flow.Ther...
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Correct Answer
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