Exam 4: Analyzing Investing Activities

Which of the following is a benefit of securitization through the use of a properly structured SPE to a company? I. Remove receivables from the balance sheet II. Remove debt from the balance sheet III. Lower financing costs IV. Recognize gains on the sale of assets to the SPE

LIFO liquidation occurs when:

Which of the following steps is required to adjust LIFO to FIFO?

A firm has a current ratio greater than 1.0. During the course of the year the firm sells $60 million of accounts receivable with limited recourse. If it had not sold the receivables it would have taken out a short-term loan. The effect of selling the receivables is: A. higher lower B. higher higher C. lower lower D. lower higher

Which of the following is not considered an intangible asset?

If the write-off is occurring because of an industrywide downturn or market crash, it is useful to compare the percentages of the write-off with those taken by other companies in the industry.

LIFO provides a better match of current expenses to revenues on the income statement, while FIFO provides a better ending inventory figure by more closely reflecting current costs.

For Control Furniture Co., To restate Year 2006 LIFO inventories to a FIFO basis, we use the following analytical entry: LIFO reserve in Year 2006 \ 91 million LIFO reserve in Year 2005 \ 82 million Tax Rate is 35\% . A. Inventories 91 Deferred Tax Payable 31.85 Retained Earnings 59.15 B. Inventories 91 Deferred Tax Payable 35.65 Retained Earnings 55.35 C. Inventories 91 Deferred Tax Payable 38.96 Retained Earnings 52.04 D. Inventories 91 Deferred Tax Payable 32.85 Retained Earnings 58.15

Below is selected information taken from the balance sheet of Huy Corporation as of 12/31/06. Land \ 100,000 \ 100,000 Machines Gross property, plant, \& equipment 180,000 170,000 Accumulated depreciation Net property, plant, \& equipment Depreciation expense \ 5,000 -The average age of Huy's depreciable assets as of 2006 is:

Which of the following would not be classified as a current asset?

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Indicate which of the following items would be classified as assets on the balance sheets.

With respect to LIFO, which of the following is incorrect?

Below is selected information taken from the balance sheet of Huy Corporation as of 12/31/06. Land \ 100,000 \ 100,000 Machines Gross property, plant, \& equipment 180,000 170,000 Accumulated depreciation Net property, plant, \& equipment Depreciation expense \ 5,000 -During fiscal 2006, Huy sold fully depreciated assets that originally cost $20,000 for $4,000. In 2006, they purchased assets that cost:

Goodwill is:

A firm has a current ratio greater than 1.0. If the firm's ending inventory is understated by $3,000 and beginning inventory is overstated by $5,000, the firm's net income and current ratio will be: A. understated by \ 2,000 too low B. overstated by \ 2,000 too low C. understated by \ 8,000 too low D. understated by \ 8,000 too high

Which of the following is not a common characteristic of a company choosing to use LIFO rather than FIFO?

When the discounted amount of expected cash flows from an asset is greater than the asset's book value, the asset is deemed to be impaired.

Depreciation is a method for matching costs of long-lived assets to revenues generated from their use.

One advantage of LIFO over FIFO under normal conditions is that: