Deck 2: Financial Statements, Cash Flows, and Taxes

Question 1

All of the following are examples of current assets EXCEPT

A) cash.
B) accruals.
C) inventory.
D) accounts receivable.

Answer 1

accruals.

Question 2

Corporation X needs $1,000,000 and can raise this through debt at an annual rate of 10 percent, orpreferred stock at an annual cost of 7 percent. If the corporation has a 40 percent tax rate, theafter-tax cost of each is

A) debt: $60,000; preferred stock: $42,000.
B) debt: $60,000; preferred stock: $70,000.
C) debt: $100,000; preferred stock: $70,000.
D) debt: $100,000; preferred stock: $42,000.

Answer 2

debt: $60,000; preferred stock: $70,000.

Question 3

Under CCA, an asset which originally cost $100,000 is being depreciated using a 30% CCA rate.The depreciation expense in year 3 is___________ .

A) $21,000
B) $17,850
C) $12,030
D) $10,440

Answer 3

$17,850

Question 4

One of the most influential documents issued by a publicly held corporation is the

A) annual report.
B) income statement.
C) cash flow statement.
D) letter to stockholders.

Question 5

All of the following are uses of cash EXCEPT

A) an increase in inventory.
B) a decrease in cash.
C) a decrease in notes payable.
D) dividends.

Question 6

The stockholder's annual report must include

A) a balance sheet.
B) an income statement.
C) a statement of cash flows.
D) all of the above.

Question 7

The net value of fixed assets is also called their

A) book value.
B) par value.
C) price.
D) market value.

Question 8

RUFF 5ANDPAPER CO.
Balance Sheets
For the Years Ended 2002 and 2003

$\begin{array}{lrr}&2003&2002\\\hline\text { Assets }\text { Cash } & 800 & 600 \\\text { Marketable securities } & 200 & 200 \\\text { Accounts receivable } & 1,200 & 1,000 \\\text { Inventories } & 2,000 & 1,800 \\\text { Gross fixed asset } & 3,000 & 2,800\\\text { Less Accumulated amortization }&1,000&800\\\text { Net fixed assets }&2,000&2,000\\&---&---\\\text { Total assets }&6,200&5,600\\\\\text { Liabilities }\\\text { Accounts payable } & 200 & 100 \\\text { Notes payable } & 800 & 900 \\\text { Accruals } & 100 & 100 \\\text { Long-term debt } & 2,000 & 1,500\\\text { Stockholders' equity }\\\text { Common stock } & 2,500 & 2,500 \\\text { Retained eamings } & 600 & 500\\&---&----\\\text { Total liabilities and equity }&6,200&5,600\end{array}$

-The primary source of funds for the firm in 2003 is (See Figure 2.2)

A) an increase in inventory.
B) net income after taxes.
C) an increase in notes payable.
D) an increase in long-term debt.

Question 9

For the year ended December 31, 2003, a corporation had cash flow from operating activities of-$10,000, cash flow from investment activities of $4,000, and cash flow from financing activities of$9,000. The Statement of Cash Flows would show a

A) net increase of $5,000 in cash and marketable securities.
B) net increase of $3,000 in cash and marketable securities.
C) net decrease of $3,000 in cash and marketable securities.
D) net decrease of $5,000 in cash and marketable securities.

Question 10

The small business deduction for eligible Canadian-controlled private corporations is

A) 28%.
B) 7%.
C) 16%.
D) 44%.

Question 11

The rule-setting body, which authorizes generally accepted accounting principles is the

A) AcSB.
B) GAAP.
C) Government of Canada.
D) TSX.

Question 12

Total assets less net fixed assets equals

A) gross assets.
B) current assets.
C) liabilities and equity.
D) depreciation.

Question 13

Operating profits are defined as

A) earnings before depreciation and taxes.
B) gross profits minus operating expenses.
C) sales revenue minus depreciation expense.
D) sales revenue minus cost of goods sold.

Question 14

The dividend exemption for Canadian corporations receiving dividends from another Canadiancorporation has resulted in

A) a lower cost of equity for the corporation paying the dividend.
B) stock investments being relatively more attractive relative to bond investments made by one corporation in another corporation.
C) a higher relative cost of bond-financing for the corporation paying the dividend.
D) stock investments being relatively less attractive, relative to bond investments made by one corporation in another corporation.

Question 15

The depreciable life of an asset is of concern to the financial manager, and

A) a longer depreciable life is preferred, because management can postpone purchasing new assets, since the old assets still have a useful life.
B) a shorter depreciable life is preferred, because it will result in a faster receipt of cash flows.
C) a longer depreciable life is preferred, because it will result in a faster receipt of cash flows.
D) a shorter depreciable life is preferred, because management can then purchase new assets, as the old assets are written off.

Question 16

A firm has just ended the calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. One possible problem this firm may face is

A) low profitability.
B) inability to receive credit.
C) insolvency.
D) high leverage.

Question 17

Net income after taxes are defined as

A) sales revenue minus cost of goods sold.
B) EBIT minus interest and taxes.
C) gross profits minus operating expenses.
D) EBIT minus interest.

Question 18

All of the following are financing cash flows EXCEPT

A) sale of stock.
B) increasing debt.
C) repurchasing stock.
D) payment of stock dividends.

Question 19

Capital gains are taxed at___________of the investor's marginal tax rate.

A) 100 percent
B) 25 percent
C) 50 percent
D) 66.67 percent

Question 20

Gross profits are defined as

A) sales revenue minus cost of goods sold.
B) operating profits minus cost of goods sold.
C) operating profits minus depreciation.
D) sales revenue minus operating expenses.

Question 21

RUFF 5ANDPAPER CO.
Balance Sheets
For the Years Ended 2002 and 2003

$\begin{array}{lrr}&2003&2002\\\hline\text { Assets }\text { Cash } & 800 & 600 \\\text { Marketable securities } & 200 & 200 \\\text { Accounts receivable } & 1,200 & 1,000 \\\text { Inventories } & 2,000 & 1,800 \\\text { Gross fixed asset } & 3,000 & 2,800\\\text { Less Accumulated amortization }&1,000&800\\\text { Net fixed assets }&2,000&2,000\\&---&---\\\text { Total assets }&6,200&5,600\\\\\text { Liabilities }\\\text { Accounts payable } & 200 & 100 \\\text { Notes payable } & 800 & 900 \\\text { Accruals } & 100 & 100 \\\text { Long-term debt } & 2,000 & 1,500\\\text { Stockholders' equity }\\\text { Common stock } & 2,500 & 2,500 \\\text { Retained eamings } & 600 & 500\\&---&----\\\text { Total liabilities and equity }&6,200&5,600\end{array}$

-The smallest use of funds for the firm in 2003 is

A) a decrease in long-term debts.
B) a decrease in notes payable.
C) dividends.
D) an increase in inventory.

Question 22

Corporate taxes are paid through

A) lower returns to the investor.
B) higher prices to the consumer.
C) lower wages to workers.
D) all of the above.

Question 23

A capital gain occurs when an asset has been held for

A) more than six months.
B) less than six months.
C) any length of time.
D) more than one year.

Question 24

A corporation has year end 2001 and 2002 retained earnings balances of $320,000 and $400,000,respectively. The firm reported net income after taxes of $100,000 in 2002. The firm paid dividendsin 2002 of___________ .

A) $0
B) $20,000
C) $100,000
D) $80,000

Question 25

The___________ provides a financial summary of the firm's operating results during a specified period.

A) statement of cash flows
B) balance sheet
C) income statement
D) statement of retained earnings

Question 26

Capital budgeting is

A) necessary whenever an executive wants to determine how to report earnings on the financial statements.
B) the methods used to determine a firm's hurdle rate for new projects.
C) the methods used to value a real project.
D) not related to finance, but rather a marketing term.

Question 27

The cost of capital

A) measures the riskiness of a project or firm.
B) depends on the type of assets being invested in.
C) provides a hurdle for management in making capital budgeting decisions.
D) all of the above

Question 28

The statement of cash flows may also be called the

A) funds statement.
B) sources and uses statement.
C) statement of retained earnings.
D) bank statement.

Question 29

RUFF 5ANDPAPER CO.
Balance Sheets
For the Years Ended 2002 and 2003

$\begin{array}{lrr}&2003&2002\\\hline\text { Assets }\text { Cash } & 800 & 600 \\\text { Marketable securities } & 200 & 200 \\\text { Accounts receivable } & 1,200 & 1,000 \\\text { Inventories } & 2,000 & 1,800 \\\text { Gross fixed asset } & 3,000 & 2,800\\\text { Less Accumulated amortization }&1,000&800\\\text { Net fixed assets }&2,000&2,000\\&---&---\\\text { Total assets }&6,200&5,600\\\\\text { Liabilities }\\\text { Accounts payable } & 200 & 100 \\\text { Notes payable } & 800 & 900 \\\text { Accruals } & 100 & 100 \\\text { Long-term debt } & 2,000 & 1,500\\\text { Stockholders' equity }\\\text { Common stock } & 2,500 & 2,500 \\\text { Retained eamings } & 600 & 500\\&---&----\\\text { Total liabilities and equity }&6,200&5,600\end{array}$

-The firm may have increased long-term debts to finance

A) a decrease in notes payable.
B) an increase in current assets.
C) an increase in current assets, an increase in gross fixed assets, and a decrease in notes payable.
D) an increase in gross fixed assets.

Question 30

RUFF 5ANDPAPER CO.
Balance Sheets
For the Years Ended 2002 and 2003

$\begin{array}{lrr}&2003&2002\\\hline\text { Assets }\text { Cash } & 800 & 600 \\\text { Marketable securities } & 200 & 200 \\\text { Accounts receivable } & 1,200 & 1,000 \\\text { Inventories } & 2,000 & 1,800 \\\text { Gross fixed asset } & 3,000 & 2,800\\\text { Less Accumulated amortization }&1,000&800\\\text { Net fixed assets }&2,000&2,000\\&---&---\\\text { Total assets }&6,200&5,600\\\\\text { Liabilities }\\\text { Accounts payable } & 200 & 100 \\\text { Notes payable } & 800 & 900 \\\text { Accruals } & 100 & 100 \\\text { Long-term debt } & 2,000 & 1,500\\\text { Stockholders' equity }\\\text { Common stock } & 2,500 & 2,500 \\\text { Retained eamings } & 600 & 500\\&---&----\\\text { Total liabilities and equity }&6,200&5,600\end{array}$

-Use of funds for 2003 totaled ____________

A) $950
B) $700
C) $800
D) $600

Question 31

Under CCA, an asset which originally cost $100,000, incurred installation costs of $10,000, and hasan estimated salvage value of $25,000, is being depreciated using a 30% CCA rate. What is thedepreciation expense in year 1?

A) $16,500
B) $11,250
C) $15,000
D) $12,750

Question 32

All of the following are examples of current liabilities EXCEPT

A) accounts receivable.
B) notes payable.
C) accounts payable.
D) accruals.

Question 33

The capital cost allowance (CCA) system is the depreciation method used for___________purposes.

A) financial reporting
B) managerial
C) cost accounting
D) tax

Question 34

All of the following are noncash charges EXCEPT

A) depletion.
B) amortization.
C) accruals.
D) depreciation.

Question 35

The___________ represents a summary statement of the firm's financial position at a given point in time.

A) income statement
B) statement of retained earnings
C) balance sheet
D) statement of cash flows

Question 36

RUFF 5ANDPAPER CO.
Balance Sheets
For the Years Ended 2002 and 2003

$\begin{array}{lrr}&2003&2002\\\hline\text { Assets }\text { Cash } & 800 & 600 \\\text { Marketable securities } & 200 & 200 \\\text { Accounts receivable } & 1,200 & 1,000 \\\text { Inventories } & 2,000 & 1,800 \\\text { Gross fixed asset } & 3,000 & 2,800\\\text { Less Accumulated amortization }&1,000&800\\\text { Net fixed assets }&2,000&2,000\\&---&---\\\text { Total assets }&6,200&5,600\\\\\text { Liabilities }\\\text { Accounts payable } & 200 & 100 \\\text { Notes payable } & 800 & 900 \\\text { Accruals } & 100 & 100 \\\text { Long-term debt } & 2,000 & 1,500\\\text { Stockholders' equity }\\\text { Common stock } & 2,500 & 2,500 \\\text { Retained eamings } & 600 & 500\\&---&----\\\text { Total liabilities and equity }&6,200&5,600\end{array}$

-The firm_________fixed assets worth___________

A) purchased; $200
B) sold; $0
C) sold; $200
D) purchased; $0

Question 37

All of the following are examples of fixed assets EXCEPT

A) equipment.
B) buildings.
C) marketable securities.
D) automobiles.

Question 38

When preparing a statement of cash flows, retained earnings adjustments are required so that which of the following are separated on the statement?

A) net income and dividends
B) revenue and cost
C) amortization and purchases
D) assets and liabilities

Question 39

RUFF 5ANDPAPER CO.
Balance Sheets
For the Years Ended 2002 and 2003

$\begin{array}{lrr}&2003&2002\\\hline\text { Assets }\text { Cash } & 800 & 600 \\\text { Marketable securities } & 200 & 200 \\\text { Accounts receivable } & 1,200 & 1,000 \\\text { Inventories } & 2,000 & 1,800 \\\text { Gross fixed asset } & 3,000 & 2,800\\\text { Less Accumulated amortization }&1,000&800\\\text { Net fixed assets }&2,000&2,000\\&---&---\\\text { Total assets }&6,200&5,600\\\\\text { Liabilities }\\\text { Accounts payable } & 200 & 100 \\\text { Notes payable } & 800 & 900 \\\text { Accruals } & 100 & 100 \\\text { Long-term debt } & 2,000 & 1,500\\\text { Stockholders' equity }\\\text { Common stock } & 2,500 & 2,500 \\\text { Retained eamings } & 600 & 500\\&---&----\\\text { Total liabilities and equity }&6,200&5,600\end{array}$

-The firm's cash flow from operations is___________

A) $150
B) $950
C) $350
D) $300

Question 40

Which of the following is a noncash expense added back to net income in determining cash flowfrom operating activities?

A) amortization
B) interest
C) administration
D) selling

Question 41

Allocation of the historic costs of fixed assets against the annual revenue they generate is called

A) net profits.
B) variable costing.
C) gross profits.
D) amortization.

Question 42

Cash flows directly related to production and sale of the firm's products and services are called

A) financing flows.
B) operating flows.
C) investment flows.
D) none of the above.

Question 43

Under CCA, an asset which originally cost $100,000 is being depreciated using a 4% CCA rate. Thedepreciation expense in year 1 is___________ .

A) $4,000
B) $6,000
C) $2,000
D) $0

Question 44

The tax deductibility of expenses___________their after-tax cost.

A) has no effect on
B) increases
C) has an undetermined effect on
D) reduces

Question 45

Corporations experiencing operating losses are allowed to

A) carryback the losses for 2 years and carryforward for 2 years.
B) only carryforward the losses 20 years.
C) carryback the losses for 5 years and carryforward for 2 years.
D) carryback the losses for 3 years and carryforward for 7 years.

Question 46

A firm has year end 2001 and 2002 retained earnings balances of $670,000 and $560,000,respectively. The firm paid $10,000 in dividends in 2002. The firm's net income after taxes in 2002is ___________.

A) $100,000
B) $110,000
C) -$100,000
D) -$110,000

Question 47

Earnings available to common shareholders are defined as net income

A) after taxes minus preferred dividends.
B) before taxes.
C) after taxes minus common dividends.
D) after taxes.

Question 48

All of the following are operating cash flows EXCEPT

A) an increase or decrease in current liabilities.
B) net income after taxes.
C) amortization expense.
D) an increase or decrease in fixed assets.

Question 49

Johnson, Inc. has just ended the calendar year making a sale in the amount of $10,000 of merchandise purchased during the year at a total cost of $7,000. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The net profit and cash flow for the year are

A) $3,000 and $10,000 respectively.
B) $7,000 and -$3,000 respectively.
C) $3,000 and -$7,000 respectively.
D) $3,000 and $7,000 respectively.

Question 50

Candy Corporation has pretax profits of $1.2 million, an average tax rate of 34 percent, and it pays preferred dividends of $50,000. There are 100,000 shares outstanding and no interest expenses. What is Candy Corporation's earnings per share?

A) $4.52
B) $7.59
C) $7.42
D) $3.91

Question 51

For the year ended December 31, 2003, a corporation had cash flow from operating activities of$12,000, cash flow from investment activities of -$10,000, and cash flow from financing activities of$4,000. The Statement of Cash Flows would show a

A) net increase of $6,000 in cash and marketable securities.
B) net increase of $2,000 in cash and marketable securities.
C) net decrease of $18,000 in cash and marketable securities.
D) net decrease of $6,000 in cash and marketable securities.

Question 52

A corporation had an operating loss in 2002. All prior years had positive earnings. In utilizing thetax laws on carrybacks and carryforwards on operating losses a corporation

A) has the option of selecting whether to carryforward or carryback the loss.
B) must carryback the operating loss for at least one year before it can carryforward.
C) must first carryback the loss to 2001, then to 2000 and 1999.
D) must first carryback the loss to 1999, then to 2000 and 2001.

Question 53

The cash flows from operating activities of the firm include

A) interest expense.
B) stock repurchases.
C) dividends paid.
D) cost of raw materials.

Question 54

RUFF 5ANDPAPER CO.
Balance Sheets
For the Years Ended 2002 and 2003

$\begin{array}{lrr}&2003&2002\\\hline\text { Assets }\text { Cash } & 800 & 600 \\\text { Marketable securities } & 200 & 200 \\\text { Accounts receivable } & 1,200 & 1,000 \\\text { Inventories } & 2,000 & 1,800 \\\text { Gross fixed asset } & 3,000 & 2,800\\\text { Less Accumulated amortization }&1,000&800\\\text { Net fixed assets }&2,000&2,000\\&---&---\\\text { Total assets }&6,200&5,600\\\\\text { Liabilities }\\\text { Accounts payable } & 200 & 100 \\\text { Notes payable } & 800 & 900 \\\text { Accruals } & 100 & 100 \\\text { Long-term debt } & 2,000 & 1,500\\\text { Stockholders' equity }\\\text { Common stock } & 2,500 & 2,500 \\\text { Retained eamings } & 600 & 500\\&---&----\\\text { Total liabilities and equity }&6,200&5,600\end{array}$

-The amortization expense for 2003 is___________

A) $1,000
B) $50
C) $0
D) $200

Question 55

Parliament allows Canadian corporations to exclude from taxes 100 percent of dividends receivedfrom other Canadian corporations. Parliament did this to

A) encourage corporations to invest in each other.
B) lower the cost of equity financing for corporations.
C) avoid triple taxation on dividends.
D) avoid double taxation on dividends.

Question 56

All of the following are true EXCEPT

A) Corporations may pay taxes on only 30 percent of the dividends received from other corporations, depending on their percentage of ownership.
B) Corporations pay taxes on all dividends received from other corporations, regardless of their share of ownership.
C) Capital gains is taxed as ordinary income.
D) Interest income received by a corporation is taxed as ordinary income.

Question 57

The cash flows from operating activities of the firm include

A) taxes paid.
B) dividends paid.
C) labor expense.
D) interest expense.

Question 58

Jennings, Inc. has a tax liability of $170,000 on pretax income of $500,000. What is the average taxrate for Jennings, Inc.?

A) 34 percent
B) 40 percent
C) 25 percent
D) 46 percent

Question 59

In Canada, the Board of Directors are generally

A) Aboriginal leaders and elders.
B) women.
C) politicians or an appointee.
D) selected from a small group of inter-related people.

Question 60

Cash flows that result from debt and equity financing transactions, including incurrence andrepayment of debt, cash inflows from the sale of stock, and cash outflows to pay cash dividends orrepurchase stock are called

A) investment flows.
B) financing flows.
C) operating flows.
D) none of the above.

Question 61

Under CCA, an asset which originally cost $10,000 is being depreciated using a 20% CCA rate.What is the depreciation expense in year 2?

A) $2,100
B) $1,500
C) $1,200
D) $1,800

Question 62

When preparing a statement of cash flows, retained earnings adjustments are required so thatwhich of the following are separated on the statement?

A) depreciation and purchases
B) net profits and dividends
C) assets and liabilities
D) revenue and cost

Question 63

The portion of the annual report where management provides analysis and explains the financialresults is the

A) letter to shareholders.
B) management's discussion and analysis.
C) auditors note to shareholders.
D) all of the above

Question 64

Accounting practices and procedures used to prepare financial statements are called

A) CCRA.
B) CICA.
C) GAAP.
D) AcSB.

Question 65

$\text { A corporation had the following earnings and loss record for the years } 1997 \text { through 2002: }$
$\begin{array}{cc}1997 & \$ 200,000 \\1998 & 100,000 \\1999 & 100,000 \\2000 & (800,000) \\2001 & 200,000 \\2002 & 300,000\end{array}$

-The corporation in Figure 2.1 had taxable income in 2001 of

A) $0
B) -$200,000
C) $200,000
D) $160,000

Question 66

Given the financial manager's preference for faster receipt of cash flows,

A) the manager is not concerned with depreciable lives, because depreciation is a non-cash expense.
B) a longer depreciable life is preferred to a shorter one.
C) a shorter depreciable life is preferred to a longer one.
D) the manager is not concerned with depreciable lives, because once purchased, depreciation is considered a sunk cost.

Question 67

Financial cash flows through the firm include

A) interest expense.
B) labor expense.
C) rent.
D) salaries.

Question 68

RUFF 5ANDPAPER CO.
Balance Sheets
For the Years Ended 2002 and 2003

$\begin{array}{lrr}&2003&2002\\\hline\text { Assets }\text { Cash } & 800 & 600 \\\text { Marketable securities } & 200 & 200 \\\text { Accounts receivable } & 1,200 & 1,000 \\\text { Inventories } & 2,000 & 1,800 \\\text { Gross fixed asset } & 3,000 & 2,800\\\text { Less Accumulated amortization }&1,000&800\\\text { Net fixed assets }&2,000&2,000\\&---&---\\\text { Total assets }&6,200&5,600\\\\\text { Liabilities }\\\text { Accounts payable } & 200 & 100 \\\text { Notes payable } & 800 & 900 \\\text { Accruals } & 100 & 100 \\\text { Long-term debt } & 2,000 & 1,500\\\text { Stockholders' equity }\\\text { Common stock } & 2,500 & 2,500 \\\text { Retained eamings } & 600 & 500\\&---&----\\\text { Total liabilities and equity }&6,200&5,600\end{array}$

-Sources of funds for 2003 totaled__________

A) $600
B) $800
C) $700
D) $950

Question 69

A corporation sold a fixed asset for $100,000, which was also its book value.

A) an operating cash flow and a use of funds.
B) an operating cash flow and a source of funds.
C) an investment cash flow and a use of funds.
D) an investment cash flow and a source of funds.

Question 70

Since financial decisions usually involve new cash flows or changes in existing ones, the relevanttax rate is the

A) marginal tax rate.
B) going-concern tax rate.
C) average tax rate.
D) CCA tax rate.

Question 71

The statement of cash flows provides a summary of the firm's

A) cash inflows from financing.
B) cash flows from operations.
C) investment cash flows.
D) all of the above

Question 72

$\text { A corporation had the following earnings and loss record for the years } 1997 \text { through 2002: }$
$\begin{array}{cc}1997 & \$ 200,000 \\1998 & 100,000 \\1999 & 100,000 \\2000 & (800,000) \\2001 & 200,000 \\2002 & 300,000\end{array}$

-In 2002 the corporation in Figure 2.1 will have taxable income of

A) $100,000
B) $200,000
C) $0
D) $300,000

Question 73

Retained earnings on the balance sheet represents

A) net profits after taxes.
B) the cumulative total of earnings reinvested in the firm.
C) cash.
D) net profits after taxes minus preferred dividends.

Question 74

The after-tax cost of a $40 can of paint to a company with a marginal tax rate of 40% is

A) $24.
B) $40.
C) $16.
D) not determinable.

Question 75

For the year ended December 31, 2003, a corporation had cash flow from operating activities of$20,000, cash flow from investment activities of -$15,000, and cash flow from financing activities of-$10,000. The Statement of Cash Flows would show a

A) net decrease of $15,000 in cash and marketable securities.
B) net decrease of $5,000 in cash and marketable securities.
C) net increase of $25,000 in cash and marketable securities.
D) net increase of $5,000 in cash and marketable securities.

Question 76

A firm has just ended the calendar year making a sale in the amount of $150,000 of merchandisepurchased during the year at a total cost of $112,500. Although the firm paid in full for themerchandise during the year, it has yet to collect at year end from the customer. The net profit and cash flow for the year are

A) $0 and $150,000 respectively.
B) $150,000 and $112,500 respectively.
C) $37,500 and -$150,000 respectively.
D) $37,500 and -$112,500 respectively.

Question 77

The depreciable value of an asset, under CCA, is

A) the full cost including installation costs adjusted for the salvage value.
B) the full cost excluding installation costs.
C) the full cost minus salvage value.
D) the full cost including installation costs.

Question 78

The statement of retained earnings reports all of the following EXCEPT

A) preferred stock dividends.
B) interest.
C) common stock dividends.
D) net profits after taxes.

Question 79

If a corporation sells certain assets for more than their initial purchase price, the difference betweenthe sale price and the purchase price is called

A) an ordinary gain.
B) a capital gain.
C) a capital loss.
D) an ordinary loss.

Question 80

A firm's operating cash flow is defined as

A) gross profit minus operating expenses.
B) EBIT - taxes + depreciation.
C) gross profit minus depreciation.
D) EBIT + depreciation.