Question 1

Current liabilities are defined as liabilities with a maturity of less than a year.

Accepted Answer

A) True 
 B)False  True

Question 2

A company purchases a new $10 million building,financed half with cash and half with a bank loan.How would this transaction affect the company's balance sheet?

Accepted Answer

A)  Net plant and equipment rises $10 million;cash falls $10 million;bank debt rises $5 million. 
B)  Net plant and equipment rises $5 million;cash falls $10 million;bank debt rises $5 million. 
C)  Net plant and equipment rises $5 million;cash falls $5 million;bank debt rises $5 million. 
D)  Net plant and equipment rises $10 million;cash falls $5 million;bank debt rises $5 million. 
A)  Net plant and equipment rises $10 million;cash falls $10 million;bank debt rises $5 million. 
B)  Net plant and equipment rises $5 million;cash falls $10 million;bank debt rises $5 million. 
C)  Net plant and equipment rises $5 million;cash falls $5 million;bank debt rises $5 million. 
D)  Net plant and equipment rises $10 million;cash falls $5 million;bank debt rises $5 million. D

Question 3

A company sells used equipment with a book value of $100,000 for $250,000 cash.How would this transaction affect the company's balance sheet?

Accepted Answer

A)  Equity rises $250,000;net plant and equipment falls $250,000. 
B)  Cash rises $250,000;net plant and equipment falls $100,000;equity rises $150,000. 
C)  Cash rises $250,000;accounts receivable falls $100,000;goodwill rises $150,000. 
D)  Cash rises $250,000;net plant and equipment falls $250,000. 
A)  Equity rises $250,000;net plant and equipment falls $250,000. 
B)  Cash rises $250,000;net plant and equipment falls $100,000;equity rises $150,000. 
C)  Cash rises $250,000;accounts receivable falls $100,000;goodwill rises $150,000. 
D)  Cash rises $250,000;net plant and equipment falls $250,000. B

Question 4

Suppose an acquiring firm pays $100 million for a target firm and the target's assets have a book value of $70 million and an estimated replacement value of $80 million.What amount would be allocated to the acquiring firm's goodwill account?

Accepted Answer

A)  $0 million 
B)  $20 million 
C)  $30 million 
D)  $70 million 
E)  $80 million 
A)  $0 million 
B)  $20 million 
C)  $30 million 
D)  $70 million 
E)  $80 million

Question 5

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Foodtek, Inc.
 $\quad $ $\quad $ $\quad $ $\quad $Selected financial information ($ millions)
$\begin{array}{lrr} 
&\underline{ 2013} &\underline{ 2014} \
 \text { Net sales } & \$ 296 & \$ 364 \
\text { Cost of goods sold } & 168 & 223 \
\text { Depreciation } & 51 & 65 \
\text { Net income } & 32 & 45 \
\text { Finished goods inventory } & 34 & 29 \
\text { Accounts receivable } & 47 & 87 \
\text { Accounts payable } & 39 & 44 \
\text { Net fixed assets } & 310 & 415 \
\text { Year-end cash balance } & \$ 186 & \$ 123 \
\hline
\end{array}$
-Please refer to the financial information for Foodtek,Inc.above.During 2014,how much cash (in $ millions)did Foodtek collect from sales?

Accepted Answer

A)  364 
B)  277 
C)  404 
D)  324 
E)  451 
A)  364 
B)  277 
C)  404 
D)  324 
E)  451

Question 6

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's price per share?

Accepted Answer

A)  $3.50 
B)  $5 
C)  $10 
D)  $25 
E)  $50 
A)  $3.50 
B)  $5 
C)  $10 
D)  $25 
E)  $50

Question 7

Which of the following is a reason why a company's market value of equity differs from its book value of equity?

Accepted Answer

A)  Shareholders are keenly aware of book values,but have little interest in market values. 
B)  Accountants' charges for the cost of equity are often higher than they should be. 
C)  Fair value accounting is becoming more widely used. 
D)  Values of assets on the balance sheet typically reflect historical cost,adjusted for appropriate depreciation. 
A)  Shareholders are keenly aware of book values,but have little interest in market values. 
B)  Accountants' charges for the cost of equity are often higher than they should be. 
C)  Fair value accounting is becoming more widely used. 
D)  Values of assets on the balance sheet typically reflect historical cost,adjusted for appropriate depreciation.

Question 8

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.If the company repurchases 20 percent of its shares in the stock market and there are no taxes or transactions costs and all else remains the same,what should the market value of the firm be after the repurchase?

Accepted Answer

A)  $1,000,000 
B)  $1,750,000 
C)  $3,250,000 
D)  $4,000,000 
E)  $5,000,000 
A)  $1,000,000 
B)  $1,750,000 
C)  $3,250,000 
D)  $4,000,000 
E)  $5,000,000

Question 9

ZZZ Corporation's income statement shows a provision for income taxes of $65 million in 2014.At the end of 2013,ZZZ's balance sheet reported income taxes payable of $12 million and deferred taxes of $18 million.At the end of 2014 their balance sheet shows income taxes payable of $15 million and deferred taxes of $17 million.What were ZZZ's taxes paid in 2014?

Accepted Answer

A)  $61 million 
B)  $63 million 
C)  $65 million 
D)  $67 million 
E)  $69 million 
A)  $61 million 
B)  $63 million 
C)  $65 million 
D)  $67 million 
E)  $69 million

Question 10

A balance sheet reports the value of a firm's assets,liabilities,and equity:

Accepted Answer

A)  over an annual period. 
B)  over any period of time. 
C)  at any point in time. 
D)  at the end of the year. 
A)  over an annual period. 
B)  over any period of time. 
C)  at any point in time. 
D)  at the end of the year.

Question 11

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  cash flow statement 
D)  sources and uses statement 
E)  market value statement 
A)  income statement 
B)  balance sheet 
C)  cash flow statement 
D)  sources and uses statement 
E)  market value statement

Question 12

The book value of a firm is:

Accepted Answer

A)  equivalent to the firm's market value provided that the firm has some fixed assets. 
B)  based on historical cost. 
C)  generally greater than the market value when fixed assets are included. 
D)  more of a financial than an accounting valuation. 
E)  adjusted to the market value whenever the market value exceeds the stated book valuE. 
A)  equivalent to the firm's market value provided that the firm has some fixed assets. 
B)  based on historical cost. 
C)  generally greater than the market value when fixed assets are included. 
D)  more of a financial than an accounting valuation. 
E)  adjusted to the market value whenever the market value exceeds the stated book valuE.

Question 13

The accrual principle requires that revenue not be recognized until payment from a sale is received.

Accepted Answer

A) True 
 B)False

Question 14

Which one of the following is the financial statement that summarizes changes in the company's cash balance over a period of time?

Accepted Answer

A)  income statement 
B)  balance sheet 
C)  cash flow statement 
D)  shareholders' equity statement 
E)  market value statement 
A)  income statement 
B)  balance sheet 
C)  cash flow statement 
D)  shareholders' equity statement 
E)  market value statement

Question 15

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's book value per share?

Accepted Answer

A)  $3.50 
B)  $5 
C)  $10 
D)  $25 
E)  $50 
A)  $3.50 
B)  $5 
C)  $10 
D)  $25 
E)  $50

Question 16

$\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Foodtek, Inc.
 $\quad $ $\quad $ $\quad $ $\quad $Selected financial information ($ millions)
$\begin{array}{lrr} 
&\underline{ 2013} &\underline{ 2014} \
 \text { Net sales } & \$ 296 & \$ 364 \
\text { Cost of goods sold } & 168 & 223 \
\text { Depreciation } & 51 & 65 \
\text { Net income } & 32 & 45 \
\text { Finished goods inventory } & 34 & 29 \
\text { Accounts receivable } & 47 & 87 \
\text { Accounts payable } & 39 & 44 \
\text { Net fixed assets } & 310 & 415 \
\text { Year-end cash balance } & \$ 186 & \$ 123 \
\hline
\end{array}$
-Please refer to the financial information for Foodtek,Inc.above.Assuming the company neither sold nor salvaged any assets during the year,what were Foodtek's capital expenditures (in $ millions)during 2014?

Accepted Answer

A)  415 
B)  105 
C)  310 
D)  40 
E)  170 
A)  415 
B)  105 
C)  310 
D)  40 
E)  170

Question 17

Which of the following is NOT a major category on the cash flow statement?

Accepted Answer

A)  Cash flows from selling activities 
B)  Cash flows from operating activities 
C)  Cash flows from financing activities 
D)  Cash flows from investing activities 
A)  Cash flows from selling activities 
B)  Cash flows from operating activities 
C)  Cash flows from financing activities 
D)  Cash flows from investing activities

Question 18

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.If the company repurchases 20 percent of its shares in the stock market,what will be the book value of equity if all else remains the same?

Accepted Answer

A)  $750,000 
B)  $1,250,000 
C)  $1,000,000 
D)  $1,400,000 
E)  $4,000,000 
A)  $750,000 
B)  $1,250,000 
C)  $1,000,000 
D)  $1,400,000 
E)  $4,000,000

Question 19

When reporting financial performance for tax purposes,U.S.companies prefer to use accelerated depreciation methods over the straight-line method.

Accepted Answer

A) True 
 B)False

Question 20

Depreciation expense:

Accepted Answer

A)  reduces both taxes and net income. 
B)  increases net fixed assets as shown on the balance sheet. 
C)  is a noncash item that increases net income. 
D)  decreases current assets,net income,and operating cash flows. 
A)  reduces both taxes and net income. 
B)  increases net fixed assets as shown on the balance sheet. 
C)  is a noncash item that increases net income. 
D)  decreases current assets,net income,and operating cash flows.

Current liabilities are defined as liabilities with a maturity of less than a year.

A company purchases a new $10 million building,financed half with cash and half with a bank loan.How would this transaction affect the company's balance sheet?

A company sells used equipment with a book value of $100,000 for $250,000 cash.How would this transaction affect the company's balance sheet?

Suppose an acquiring firm pays $100 million for a target firm and the target's assets have a book value of $70 million and an estimated replacement value of $80 million.What amount would be allocated to the acquiring firm's goodwill account?

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's price per share?

Which of the following is a reason why a company's market value of equity differs from its book value of equity?

A balance sheet reports the value of a firm's assets,liabilities,and equity:

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

The book value of a firm is:

The accrual principle requires that revenue not be recognized until payment from a sale is received.

Which one of the following is the financial statement that summarizes changes in the company's cash balance over a period of time?

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's book value per share?

Which of the following is NOT a major category on the cash flow statement?

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.If the company repurchases 20 percent of its shares in the stock market,what will be the book value of equity if all else remains the same?

When reporting financial performance for tax purposes,U.S.companies prefer to use accelerated depreciation methods over the straight-line method.

Depreciation expense:

Evaluating Financial Performance

Financial Forecasting

Managing Growth

Financial Instruments and Markets

The Financing Decision

Discounted Cash Flow Techniques

Risk Analysis in Investment Decisions

Business Valuation and Corporate Restructuring

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Exam 1: Interpreting Financial Statements

Current liabilities are defined as liabilities with a maturity of less than a year.

A company purchases a new $10 million building,financed half with cash and half with a bank loan.How would this transaction affect the company's balance sheet?

A company sells used equipment with a book value of $100,000 for $250,000 cash.How would this transaction affect the company's balance sheet?

Suppose an acquiring firm pays $100 million for a target firm and the target's assets have a book value of $70 million and an estimated replacement value of $80 million.What amount would be allocated to the acquiring firm's goodwill account?

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's price per share?

Which of the following is a reason why a company's market value of equity differs from its book value of equity?

A balance sheet reports the value of a firm's assets,liabilities,and equity:

Which one of the following is the financial statement that summarizes a firm's revenue and expenses over a period of time?

The book value of a firm is:

The accrual principle requires that revenue not be recognized until payment from a sale is received.

Which one of the following is the financial statement that summarizes changes in the company's cash balance over a period of time?

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.What is JM Case's book value per share?

Which of the following is NOT a major category on the cash flow statement?

JM Case Inc.has a market value of $5 million with 500,000 shares outstanding.The book value of its equity is $1,750,000.If the company repurchases 20 percent of its shares in the stock market,what will be the book value of equity if all else remains the same?

When reporting financial performance for tax purposes,U.S.companies prefer to use accelerated depreciation methods over the straight-line method.

Depreciation expense:

Evaluating Financial Performance

Financial Forecasting

Managing Growth

Financial Instruments and Markets

The Financing Decision

Discounted Cash Flow Techniques

Risk Analysis in Investment Decisions

Business Valuation and Corporate Restructuring

Filters