Question 1

Disregarding cash flows with owners, over sufficiently long periods of time, net income equals:

Accepted Answer

A)  revenues minus dividends and expenses 
B)  assets minus liabilities 
C)  stockholders' equity 
D)  cash inflows minus cash outflows 
A)  revenues minus dividends and expenses 
B)  assets minus liabilities 
C)  stockholders' equity 
D)  cash inflows minus cash outflows

Question 2

A change in the _________________________ or _________________________ will not change a preset series of cash flows, however it will change the present value of those cash flows.

Accepted Answer

interest rate, disco

Question 3

The application of GAAP requires firms to write down assets whose fair values decrease below their book values, but does not allow firms to revalue upward the values of assets whose fair values have increased. This asymmetric treatment rests on the ________________________________________.

Accepted Answer

conservati

Question 4

Reporting financial assets and liabilities at fair values also is referred to as:

Accepted Answer

A)  historical cost. 
B)  acquisition cost. 
C)  mark-to-market. 
D)  mortgage-backed cost 
A)  historical cost. 
B)  acquisition cost. 
C)  mark-to-market. 
D)  mortgage-backed cost

Question 5

Current replacement cost represents

Accepted Answer

A)  the amount a firm would have to pay currently to acquire an asset it now holds 
B)  the amount a firm would have to pay currently to acquire an asset it does not now hold 
C)  the amount a firm would have to pay in the future to acquire an asset it now holds 
D)  the amount a firm would have to pay to purchase a comparably depreciated version of the asset it now holds 
A)  the amount a firm would have to pay currently to acquire an asset it now holds 
B)  the amount a firm would have to pay currently to acquire an asset it does not now hold 
C)  the amount a firm would have to pay in the future to acquire an asset it now holds 
D)  the amount a firm would have to pay to purchase a comparably depreciated version of the asset it now holds

Question 6

Discuss the two principal reasons income before taxes for financial reporting differs from taxable income.

Accepted Answer

The answer of Discuss the two principal reasons income before...

Question 7

Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its equipment, which has a useful life of four years. Tax legislation requires the company to depreciate its equipment using the following schedule: year 1- 50%, year 2 - 30%, year 3 - 15% and year 4 - 5%. In 2010 Plaxo purchases a piece of equipment with a four year life and an original cost of $100,000. What amount will Plaxo record as a deferred tax asset or liability in 2010?

Accepted Answer

A)  Deferred tax asset of $25,000. 
B)  Deferred tax liability of $25,000. 
C)  Deferred tax asset of $8,750. 
D)  Deferred tax liability of $8,750. 
A)  Deferred tax asset of $25,000. 
B)  Deferred tax liability of $25,000. 
C)  Deferred tax asset of $8,750. 
D)  Deferred tax liability of $8,750.

Question 8

Balance Sheet Equation
 $\begin{array}{llllll}
\text { Cash }+ \text { Non-Cash } =\text { Liabilities }+ \text { Contributed }+\text { AccunulatedOther }+\text {Retained}\
\quad \quad\quad\quad\text { Assets }\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Capital } \quad\quad\quad\text { Comprehensive }\quad\quad\quad\text {Earning:}\
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Income}
\end{array}$
 Refer to Balance Sheet Equation. The payment of dividends by a firm reduces cash and ______________________________.

Accepted Answer

The answer of Balance Sheet Equation
 \(\begin{array}{llllll}
\text { Cash }+...

Question 9

If a portfolio manager had to estimate the fair value of privately placed bond issues, which of the following would he/she most likely identify as the level of inputs to determine this?

Accepted Answer

A)  Level 1. 
B)  Level 2. 
C)  Level 3. 
D)  None of these. 
A)  Level 1. 
B)  Level 2. 
C)  Level 3. 
D)  None of these.

Question 10

On December 31, 2009, Loran Corporation reported a deferred tax liability totaling $12,000, resulting from depreciation timing differences pertaining to a depreciable asset purchased during 2009. Loran uses straight-line depreciation over four years for GAAP (book) purposes; for tax purposes, the depreciation deduction is 40% of cost during 2009, 30% of cost during 2010, 20% of cost during 2011, and 10% of cost during 2012. During 2010, Loran expensed $75,000 of warranty costs that will be deducted for tax purposes in future years. Loran also accrued revenue totaling $150,000 which is taxable in 2011. Loran's GAAP (book) income before taxes during 2010 totaled $397,700. The marginal income tax rate is 40% for all years.
Required:
(1) What is the taxable income?
(2) Prepare the journal entry to record income tax expense for the year ended December 31, 2010.

Accepted Answer

(1)
 @#IMG-DLM& (2)
 @#IMG-DLM& * Warranty expense timing di

Question 11

Which of the following valuation methods reflects current values?

Accepted Answer

A)  acquisition cost 
B)  present value of cash flows using historical interest rates 
C)  net realizable value 
D)  adjusted acquisition cost 
A)  acquisition cost 
B)  present value of cash flows using historical interest rates 
C)  net realizable value 
D)  adjusted acquisition cost

Question 12

The analytical framework used to evaluate transactions is reproduced below:
 $\begin{array}{llllll}
\text { Cash }+ \text { Non-Cash } =\text { Liabilities }+ \text { Contributed }+\text { AccunulatedOther }+\text {Retained}\
\quad \quad\quad\quad\text { Assets }\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Capital } \quad\quad\quad\text { Comprehensive }\quad\quad\quad\text {Earning:}\
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Income}
\end{array}$
 Using this analytical framework indicate the effect of each of the following transactions for TX Corporation:
1.	TX Corporation purchased marketable securities for $150,000 for cash.
2.	At the end of the period TX Corporation revalued the securities to $125,000.
3.	During the next period TX Corporation sells the securities for $165,000.

Accepted Answer

The answer of The analytical framework used to evaluate transactions...

Question 13

Fellsmere Company's income tax return shows income taxes for 2010 of $35,000. The firm reports deferred tax assets before any valuation allowance of $32,600 at the beginning of 2010 and $35,200 at the end of 2010. It reports deferred tax liabilities of $26,900 at the beginning of 2010 and $24,300 at the end of 2010.
Required:
a. Assume for this part that the valuation allowance on the deferred tax assets totaled
$14,400 at the beginning of 2010 and $15,100 at the end of 2010. Compute the amount
of income tax expense for 2010.
b. Assume for this part that the valuation allowance on the deferred tax assets totaled
$14,400 at the beginning of 2010 and $12,700 at the end of 2010. Compute the amount
of income tax expense for 2010.

Accepted Answer

The answer of Fellsmere Company's income tax return shows income...

Question 14

Balance Sheet Equation
 $\begin{array}{llllll}
\text { Cash }+ \text { Non-Cash } =\text { Liabilities }+ \text { Contributed }+\text { AccunulatedOther }+\text {Retained}\
\quad \quad\quad\quad\text { Assets }\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Capital } \quad\quad\quad\text { Comprehensive }\quad\quad\quad\text {Earning:}\
\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Income}
\end{array}$
 Refer to Balance Sheet Equation. ORP Corporation sells land with a book value of $12,000 for $9,000. This transaction results in ORP recording an increase in cash of $9,000, a decrease in non-cash assets of $12,000 and a decrease in ______________________________ of $3,000.

Accepted Answer

The answer of Balance Sheet Equation
 \(\begin{array}{llllll}
\text { Cash }+...

Question 15

The difference between income tax payable and income tax expense is reported on the balance sheet as either ___________________________________ or a ___________________________________.

Accepted Answer

def erred tax asset,

Question 16

When income tax expense differs from income taxes currently payable on taxable income companies recognize deferred tax assets and deferred tax liabilities. What type of event would create a deferred tax asset and deferred tax liability?

Accepted Answer

Deferred tax assets arise when taxable i

Question 17

Stockholders' equity can be expanded into the following three accounts: contributed capital, retained earnings and _________________________________________________________________.

Accepted Answer

accumulate

Question 18

Firms recognize the reduction in service potential of assets such as building and equipment using the process of ____________________.

Accepted Answer

The answer of Firms recognize the reduction in service potential...

Question 19

When income tax expense for a period is greater than income tax payable the difference will be reported how and on which financial statement?

Accepted Answer

A)  Deferred tax asset and Statement of Cash Flows 
B)  Deferred tax asset and Balance Sheet 
C)  Deferred tax liability and Statement of Cash Flows 
D)  Deferred tax liability and Balance Sheet 
A)  Deferred tax asset and Statement of Cash Flows 
B)  Deferred tax asset and Balance Sheet 
C)  Deferred tax liability and Statement of Cash Flows 
D)  Deferred tax liability and Balance Sheet

Question 20

Permanent tax differences are revenues and expenses

Accepted Answer

A)  that firms include in income tax returns, but do not appear in the income statement. 
B)  that are included in both the tax return and income statement, but in different accounting periods. 
C)  that firms include in the income statement, but do not appear in income tax returns. 
D)  that are not included in either the tax return or the income statement. 
A)  that firms include in income tax returns, but do not appear in the income statement. 
B)  that are included in both the tax return and income statement, but in different accounting periods. 
C)  that firms include in the income statement, but do not appear in income tax returns. 
D)  that are not included in either the tax return or the income statement.

Disregarding cash flows with owners, over sufficiently long periods of time, net income equals:

A change in the _ or _ will not change a preset series of cash flows, however it will change the present value of those cash flows.

The application of GAAP requires firms to write down assets whose fair values decrease below their book values, but does not allow firms to revalue upward the values of assets whose fair values have increased. This asymmetric treatment rests on the ________________________________________.

Reporting financial assets and liabilities at fair values also is referred to as:

Current replacement cost represents

Discuss the two principal reasons income before taxes for financial reporting differs from taxable income.

Balance Sheet Equation Cash + Non-Cash = Liabilities + Contributed + AccunulatedOther + Retained Assets Capital Comprehensive Earning: Income Refer to Balance Sheet Equation. The payment of dividends by a firm reduces cash and ______________________________.

If a portfolio manager had to estimate the fair value of privately placed bond issues, which of the following would he/she most likely identify as the level of inputs to determine this?

Which of the following valuation methods reflects current values?

The difference between income tax payable and income tax expense is reported on the balance sheet as either _ or a _.

When income tax expense differs from income taxes currently payable on taxable income companies recognize deferred tax assets and deferred tax liabilities. What type of event would create a deferred tax asset and deferred tax liability?

Stockholders' equity can be expanded into the following three accounts: contributed capital, retained earnings and _________________________________________________________________.

Firms recognize the reduction in service potential of assets such as building and equipment using the process of ____________________.

When income tax expense for a period is greater than income tax payable the difference will be reported how and on which financial statement?

Permanent tax differences are revenues and expenses

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

Exam 2: Asset and Liability Valuation and Income Measurement

Disregarding cash flows with owners, over sufficiently long periods of time, net income equals:

A change in the _________________________ or _________________________ will not change a preset series of cash flows, however it will change the present value of those cash flows.

The application of GAAP requires firms to write down assets whose fair values decrease below their book values, but does not allow firms to revalue upward the values of assets whose fair values have increased. This asymmetric treatment rests on the ________________________________________.

Reporting financial assets and liabilities at fair values also is referred to as:

Current replacement cost represents

Discuss the two principal reasons income before taxes for financial reporting differs from taxable income.

Balance Sheet Equation Cash + Non-Cash = Liabilities + Contributed + AccunulatedOther + Retained Assets Capital Comprehensive Earning: Income Refer to Balance Sheet Equation. The payment of dividends by a firm reduces cash and ______________________________.

If a portfolio manager had to estimate the fair value of privately placed bond issues, which of the following would he/she most likely identify as the level of inputs to determine this?

Which of the following valuation methods reflects current values?

The difference between income tax payable and income tax expense is reported on the balance sheet as either ___________________________________ or a ___________________________________.

When income tax expense differs from income taxes currently payable on taxable income companies recognize deferred tax assets and deferred tax liabilities. What type of event would create a deferred tax asset and deferred tax liability?

Stockholders' equity can be expanded into the following three accounts: contributed capital, retained earnings and _________________________________________________________________.

Firms recognize the reduction in service potential of assets such as building and equipment using the process of ____________________.

When income tax expense for a period is greater than income tax payable the difference will be reported how and on which financial statement?

Permanent tax differences are revenues and expenses

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Profitability Analysis

Risk Analysis

Financing Activities

Investing Activities

Operating Activities

Accounting Quality

Forecasting Financial Statements

Risk-Adjusted Expected Rates of Return and the Dividends Valuation Approach

Valuation: Cash-Flow-Based Approaches

Valuation: Earnings-Based Approaches

Valuation: Market-Based Approaches

Filters

A change in the _ or _ will not change a preset series of cash flows, however it will change the present value of those cash flows.

The difference between income tax payable and income tax expense is reported on the balance sheet as either _ or a _.