Question 1

Listed below are the cash flow ratios, followed by a series of descriptive statements.
 a. Cash flow from operations to sales
b. Cash flow from operations to net income
c. Cash flow from operations per share
d. Cash flow from operations to maturing debt  Required:
Match the cash flow ratios to the appropriate descriptive statement by placing the appropriate letter in the space provided.

Accepted Answer

The answer of Listed below are the cash flow ratios,...

Question 2

Bistro Company incurred a permanent inventory loss of $80, 000 in April 2010 after the March 31, 2010 quarterly financial statements were issued.What amount of this loss should be reflected in the quarterly income statement for the three months ended June 30, 2010?

Accepted Answer

A) $ 0 
B) $20, 000 
C) $26, 667 
D) $80, 000

Question 3

The PCAOB and FASB are involved in establishing standards used in preparing a company's annual report.
Required:
 a. Which standards are established by the PCAOB? Why are these types of standards established?
b. Which standards are established by the FASB? Why are these types of standards est athishe of?

Accepted Answer

The answer of The PCAOB and FASB are involved in...

Question 4

Segment reporting results in disaggregated financial data.This can be important to the readers of financial statements because it defines the

Accepted Answer

A) risk of investing in this company. 
B) nature of the economies in which the company operates. 
C) major customers of the company. 
D) products sold by the company.

Question 5

Minimum disclosures are not required as part of interim reporting for

Accepted Answer

A) sales or gross revenues 
B) primary and fully diluted earnings per share 
C) contingent items 
D) segment information

Question 6

Exhibit 6-2 Given the following information for the Green Company:
$\begin{array}{ll}
\text { Net sales (all on account) } & \$ 5,200,000 \
\text { Interest expense } & 240,000 \
\text { Income tax expense } & 280,000 \
\text { Net income } & 420,000 \
\text { Income tax rate } & 40 \%\\text { Total assets: }\
&\text { January } 1,2010 & \$ 1,800,000 \
&\text { December } 31,2010 & 2,400,000\\text { Stockholders' equity: }\
&\text { January } 1,2010 & 1,500,000 \
&\text { December } 31,2010 & 1,600,000\\text { Current assets, December } 31,2010 & 700,000 \
\text { Quick assets, December } 31,2010 & 400,000 \
\text { Current liabilities, December 31, 2010 } & 300,000\
\text { Net accounts receivable: }\&\text { January } 1,2010 & 200,000 \
&\text { December } 31,2010 & 180,000
\end{array}$
-  Refer to Exhibit 6-2.Green's accounts receivable turnover for 2010 was

Accepted Answer

A) 2.2 times 
B) 26.0 times 
C) 27.4 times 
D) 28.9 times

Question 7

Given the following information: $\begin{array}{lr}
\text { Preferred dividends}&\$50\
\text {Income taxes }&\$200\
\text { Average number of sharess outstanding}&250\text { shares}\
\text {Market price per common share }&\$10\
\text { Net income}&\$600\
\end{array}$
 What is the price/earnings ratio?

Accepted Answer

A) 3.3 times 
B) 2.9 times 
C) 3.8 times 
D) 4.5 times

Question 8

The following information was obtained from the records of Trophy Company for 2010: $\begin{array}{ll}
\text { Net sales } & \$ 2,600,000 \
\text { Interest expense } & 80,000 \
\text { Income tax expense } & 40,000 \
\text { Net income } & 100,000
\end{array}$ How many times was interest earned in 2010?

Accepted Answer

A) 1.25 times 
B) 1.75 times 
C) 2.75 times 
D) 32.5 times

Question 9

Your firm recently completed a set of interim financial statements for one of your clients.Your client has just asked you if there are any differences in the procedures used in the preparation of interim reports as compared to annual reports.
Required:
Write an explanation of how the interim accounting procedures differ from those performed at year-end.

Accepted Answer

The answer of Your firm recently completed a set of...

Question 10

Pratt, Inc.paid its executives a $320, 000 bonus based on profit results for the fiscal year ended December 31, 2010.Based on its master budgets for 2011, Pratt estimates its bonuses for the fiscal year ended December 31, 2011, will be $300, 000.What amount, if any, should Pratt recognize as an expense for bonuses in its quarterly income statement for the three months ended March 31, 2011?

Accepted Answer

A) $ 0 
B) $ 75, 000 
C) $100, 000 
D) $300, 000

Question 11

According to GAAP, the conceptual view of interim reporting is that interim reporting

Accepted Answer

A) should be viewed primarily as an integral part of an annual period 
B) should be viewed as if the interim report was an annual accounting period 
C) need not follow most generally accepted accounting principles 
D) is an optional form of disclosure for most companies

Question 12

Discuss how intracompany and intercompany comparisons help fulfill the qualitative characteristics of consistency and comparability.

Accepted Answer

The answer of Discuss how intracompany and intercompany comparisons help...

Question 13

Full disclosure is desirable for all of the following reasons except

Accepted Answer

A) it helps to prevent the inappropriate use of insider information 
B) it helps financial markets to operate more efficiently 
C) it helps financial markets to operate more cost effectively 
D) it eliminates the need for financial analysis

Question 14

A difficulty can arise in preparing an interim report because

Accepted Answer

A) there is insufficient time for the staff to prepare the report 
B) it is difficult to determine meaningful operating results for an interval of less than a year 
C) a fiscal year involves twelve months and the annual report must report monthly totals 
D) quarterly reporting is more valuable than an interim report

Question 15

Which of the following statements is true concerning interim financial reporting?

Accepted Answer

A) An extraordinary item is defined as being material based on the relationship of the item to the interim period results. 
B) The results of a disposal of a business segment may be considered material for the interim period but not for the annual period. 
C) No income tax effect will be recognized in an interim period that incurs a loss. 
D) The income tax rate to be used for an interim period is based on an estimated income tax rate on annual income.

Question 16

Given the following information regarding accounts receivable: $\begin{array}{ll}
\text { Accounts receivable, December } 31 & \$ 7,000 \
\text { Total current assets, Jamuary 1 } & 30,000 \
\text { Sales (25\% cash sales) } & 40,000 \
\text { Total current assets, December } 31 & 25,000 \
\text { Accountsreceivable, J anuary 1 } & 3,000
\end{array}$ What is the accounts receivable turnover?

Accepted Answer

A) 4 times 
B) 6 times 
C) 8 times 
D) 10 times

Question 17

A comparison of a company's performance with that of its own past results is known as

Accepted Answer

A) vertical analysis 
B) intercompany comparison 
C) horizontal analysis 
D) intracompany comparison

Question 18

An operating segment is a component of a company

Accepted Answer

A) that engages in business activities to earn revenues and incur expenses 
B) whose operating results are regularly reviewed by the company's chief operating officer for budgeting and evaluation purposes 
C) for which financial information is available 
D) all of these choices

Question 19

Given the following segment information: $\begin{array}{rrr}\text { Operating } & &\text { Operating }&\text { Segment } \
\text { Segment } & \text { Revenuess } & \text { Expenses }&\text { Asssets }\
V&\$ 500 & \$ 400 & \$ 4,000 \
W&400 & 290 & 3,000 \
X&300 & 180 & 2,000 \
Y&100 & 70 & 1,000 \
Z&100 & 90 & 2,000
\end{array}$ Which of the above operating segments are considered reportable segments?

Accepted Answer

A) V, W, and X 
B) V, W, X, and Y 
C) V, W, X, Y, and Z 
D) V, W, X, and Z

Question 20

The group that has oversight over the financial reporting process of a company is called the

Accepted Answer

A) Audit Committee 
B) Financial Oversight Committee 
C) Financial Reporting Committee 
D) Financial Accounting Standards Board

Exam 6: Additional Aspects of Financial Reporting and Financial Analysis