Exam 4: Analyzing Investing Activities

Gains and losses from the sale of property, plant, and equipment should be included in cost of goods sold as in reality they reflect the cost of producing goods for sale.

Changes in inventory levels have been shown to be useful in predicting future sales and earnings.

A corporation wants to increase its current ratio from its present level of 1.2 before it ends the fiscal year. The action having the desired effect is:

A write-down in asset value is:

The following information can be found in ABC Co.'s financial statements. Finished goods \ 251,690 \ 195,360 Work-in-process and purchased parts 245,123 186,432 Raw materials 136,568 106,789 Total FIFO value 633,381 488,581 Less excess of current cost over stated LIFO value Inventories \5 70,430 \4 17,395 Retained earnings \3 ,526,000 \3 ,159,000 Assume a tax rate of 35%. Inventories valued using the LIFO method represented approximately 80% of consolidated inventories. -What will be the retained earnings for 2006 if ABC used FIFO valuation?

Accounts receivable are usually not classified as a current asset.

Target Inc. has 30 million shares outstanding and trades at $50 per share. Target has net identifiable assets with a book value of $1,000 million and a fair value of $1,200 million. Acquirer Corporation purchases all of Target Inc. stock for $60 per share. How much will Acquirer records as goodwill upon acquiring Target?

All other things being equal, if a LIFO liquidation occurs during a period of rising prices, which of the following statements about the effects on a firm's financial statements is generally true? I. Cost of goods sold increases. II. Gross profit margin increases. III. Taxes decrease. IV. Net income increases.

If a company factors its accounts receivables, this will have the effect of making its cash cycle appear shorter.

The cost of software developed for internal use should be capitalized only after it has reached technological feasibility.

Which of the following is not an effect of capitalization?

If management underestimates the allowance for non-collectible accounts, this will cause net income for the period to be overstated.

The following information can be found in ABC Co.'s financial statements. Finished goods \ 251,690 \ 195,360 Work-in-process and purchased parts 245,123 186,432 Raw materials 136,568 106,789 Total FIFO value 633,381 488,581 Less excess of current cost over stated LIFO value Inventories \5 70,430 \4 17,395 Retained earnings \3 ,526,000 \3 ,159,000 Assume a tax rate of 35%. Inventories valued using the LIFO method represented approximately 80% of consolidated inventories. -What will be the retained earnings for 2005 if ABC used FIFO valuation?

Which of the following is incorrect with respect to recognized goodwill on the balance sheet?

All property, plant, and equipment must be depreciated over a period not to exceed forty years.

One advantage of FIFO over LIFO is that it minimizes the distortion caused by inflation on net income.

Forming a special purpose entity (SPE) is a common way companies securitize receivables.

Capitalization of interest costs results in higher reported net income in the period of capitalization and lower net income in future periods.

Financial Statements of ABC Corp. indicates that ending inventory levels in 2005 and 2006 were $200,000 and $350,000 respectively. Cost of goods sold for 2005 and 2006 were $1,900,000 and $2,200,000 respectively. Purchases in 2006 were:

In a period of rising prices, using FIFO would produce a lower cost of goods sold than using LIFO.