Question 1

Based on generally accepted accounting principles,assets are recorded on the balance at their current market value.

Accepted Answer

A) True 
 B)False

Question 2

If a payment of principal is due in 13 months on a long-term liability,that payment will now appear on the balance sheet as:

Accepted Answer

A)  a current liability. 
B)  long-term debt. 
C)  cash. 
D)  interest expense.

Question 3

Professor Diehard found an effective antibiotic for the DEPRESS bacteria,and patented the drug.He believes that he can sell the patent for $20 million.He then formed a corporation and invested $400,000 in setting up a production plant.There are 2 million shares of stock outstanding.If the professor's belief is correct,what would be the price per share and the book value per share?

Accepted Answer

A)  $10.20; $.20 
B)  $10.00; $.20 
C)  $9.80; $.40 
D)  $9.80; $.20

Question 4

Which of the following values would most likely interest a shareholder?

Accepted Answer

A)  book value of equity 
B)  market value of equity 
C)  retained earnings 
D)  net working capital

Question 5

If a firm pays taxes,which one of these will reduce net income but increase cash flow?

Accepted Answer

A)  depreciation expense 
B)  income taxes 
C)  cash sales 
D)  interest expense

Question 6

Book values are "forward-looking" measures of value.

Accepted Answer

A) True 
 B)False

Question 7

What is the change in cash for a firm with the following: $10,000 cash flow from operations,$1,600 cash used for new investment,a reduction in the level of debt of $2,000,$1,000 in cash dividends,and $200 in depreciation expense?

Accepted Answer

A)  $5,600 
B)  $9,600 
C)  $9,400 
D)  $5,400

Question 8

Depreciation charge is a cash payment.

Accepted Answer

A) True 
 B)False

Question 9

The payment of interest expense is considered a cash flow by a financing activity on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 10

Depreciation expense is used to:

Accepted Answer

A)  allocate costs to all departments of the firm. 
B)  determine when an asset is fully paid off. 
C)  allocate historical cost over the life of an asset. 
D)  equate the historical cost and market values of an asset.

Question 11

If the market value of assets is high,then the market value of liabilities must be high also.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following statements correctly compares international accounting standards?

Accepted Answer

A)  the standards are becoming less similar over time. 
B)  the standards are typically more lenient in the United States. 
C)  the standards are stricter in the United States in some regards. 
D)  balance sheets differ, but income statements are similar in all countries.

Question 13

The balance sheet presents a snapshot of the firm's assets and liabilities at one particular moment.

Accepted Answer

A) True 
 B)False

Question 14

An asset's liquidity is determined by how readily the asset can be converted to an appropriate amount of cash.

Accepted Answer

A) True 
 B)False

Question 15

What is the highest marginal rate at which corporate income is taxed?

Accepted Answer

A)  15% 
B)  34% 
C)  35% 
D)  39%

Question 16

What is the overall change in cash resulting from: $300 increase in inventories,$150 increase in accounts payable,$120 decrease in accounts receivable,$60 decrease in other current assets,$150 decrease in other current liabilities?

Accepted Answer

A)  -$120 
B)  -$240 
C)  $180 
D)  $120

Question 17

When subtracting an asset's accumulated depreciation from its historic cost,the resulting value is termed the:

Accepted Answer

A)  book value of the asset. 
B)  market value of the asset. 
C)  depreciation expense. 
D)  current asset value.

Question 18

If a firm's statement of cash flows shows that cash was used for investments,which of the following would seem most likely?

Accepted Answer

A)  the inventory balance increased. 
B)  common stock was repurchased. 
C)  new machines were acquired. 
D)  cash dividends were paid.

Question 19

If market interest rates have increased since a company last borrowed long-term funds,the market value of these already borrowed long-term funds will likely be:

Accepted Answer

A)  greater than their book value. 
B)  less than their book value. 
C)  equal to their book value. 
D)  unknown without knowing the maturity of the debt.

Question 20

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)  decrease in NWC can increase the firm's risk of bankruptcy.

Exam 3: Accounting and Finance

Based on generally accepted accounting principles,assets are recorded on the balance at their current market value.

If a payment of principal is due in 13 months on a long-term liability,that payment will now appear on the balance sheet as:

Which of the following values would most likely interest a shareholder?

If a firm pays taxes,which one of these will reduce net income but increase cash flow?

Book values are "forward-looking" measures of value.

What is the change in cash for a firm with the following: $10,000 cash flow from operations,$1,600 cash used for new investment,a reduction in the level of debt of $2,000,$1,000 in cash dividends,and $200 in depreciation expense?

Depreciation charge is a cash payment.

The payment of interest expense is considered a cash flow by a financing activity on the statement of cash flows.

Depreciation expense is used to:

If the market value of assets is high,then the market value of liabilities must be high also.

Which of the following statements correctly compares international accounting standards?

The balance sheet presents a snapshot of the firm's assets and liabilities at one particular moment.

An asset's liquidity is determined by how readily the asset can be converted to an appropriate amount of cash.

What is the highest marginal rate at which corporate income is taxed?

What is the overall change in cash resulting from: $300 increase in inventories,$150 increase in accounts payable,$120 decrease in accounts receivable,$60 decrease in other current assets,$150 decrease in other current liabilities?

When subtracting an asset's accumulated depreciation from its historic cost,the resulting value is termed the:

If a firm's statement of cash flows shows that cash was used for investments,which of the following would seem most likely?

If market interest rates have increased since a company last borrowed long-term funds,the market value of these already borrowed long-term funds will likely be:

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