Filters
Question type
Study Flashcards

All of the following are true regarding a high quality balance sheet except:


A) It should portray the economic resources that can be reasonably expected to generate future economic benefits.
B) It should provide a complete and fair portrayal of all of the firm's obligations at a point in time, including the present value of long-term liabilities for future payments.
C) It should minimize measurement error and bias.
D) It should be optimistic in terms of accounting numbers.

E) C) and D)
F) A) and D)

Correct Answer

verifed

verified

Penny Corp.manufactures telecommunication equipment and has been profitable each year for the past ten years.During 2014 the company saw its core market decline sharply when a competitor introduced a significant new product technology.In response to the decline in business Penny Corp.announced a major restructuring of its operations.The restructuring plan which would be implemented in 2010 would involve the following changes (all of the charges are material):  a.  Severance payments to reduce work force $9 million  b.  Write-down of inventory $13 million  c.  Penalty payment for termination of lease on manufacturing facility $6 million  d.  Write-down of equipment associated with manufacturing facility $12 million $40 million \begin{array} { l l l } \text { a. } & \text { Severance payments to reduce work force } & \$ 9 \text { million } \\\text { b. } & \text { Write-down of inventory } & \$ 13 \text { million } \\\text { c. } & \text { Penalty payment for termination of lease on manufacturing facility } & \$ 6 \text { million } \\\text { d. } & \text { Write-down of equipment associated with manufacturing facility } & \frac { \$ 12 \text { million } } { \$ 40 \text { million } }\end{array} Penny Corp.has never previously restructured its operations and believes that it can return to profitability within two years based on its current research and development activity. Required: 1.Discuss whether or not you would eliminate the restructuring charge from the 2010 income statement of Penny Corp.when using earnings to forecast future profitability. 2.Penny Corp.'s restructuring charges cover a wide range of different cost categories; identify those that entail a cash payment and those that do not require a cash payment.For those charges not requiring a cash payment how would they be treated in the Statement of Cash Flows?

Correct Answer

verifed

verified

Suggested Answer:
1.From the informatio...

View Answer

Firm's choices and estimates within U.S.GAAP should be determined by:


A) how the industry operates.
B) the firm's underlying economic circumstances.
C) SEC interpretations regarding specific choices.
D) the firm's auditor.

E) A) and D)
F) None of the above

Correct Answer

verifed

verified

____________________ represents the concept of being able to compare financial statement data across years for any particular firm.

Correct Answer

verifed

verified

All of the following are typically recognized as accounting liabilities except:


A) Bonds Payable
B) Rental Fees Received in Advance
C) Loan Guarantees
D) Taxes Payable

E) A) and D)
F) None of the above

Correct Answer

verifed

verified

On September 1,2012,Ramos Inc.approved a plan to dispose of a segment of its business.Ramos expected that the sale would occur on March 31,2013,at an estimated gain of $375,500.The segment had actual and estimated operating profits (losses as follows):  Realized loss from 1/1/12 to 8/31/12$200,000 Realized loss from 9/1/12 to 12/31/12(135,000 Expected profit from 1/1/13 to 3/31/13475,000\begin{array}{|l|r|}\hline \text { Realized loss from } 1 / 1 / 12 \text { to } 8 / 31 / 12 & \$ 200,000 \\\hline \text { Realized loss from } 9 / 1 / 12 \text { to } 12 / 31 / 12 & (135,000 \\\hline \text { Expected profit from } 1 / 1 / 13 \text { to } 3 / 31 / 13 & 475,000 \\\hline\end{array} Assume a marginal tax rate of 35% Required: A)In its 2012 income statement,what should Ramos report as profit or loss from discontinued operations (net of tax effects)? B)Calculate the amount of income that should be shown on the 2013 income statement as a result of the operating profit and the gain on disposal (net of tax)

Correct Answer

verifed

verified

A
Under U.S. GAAP, results of operations...

View Answer

Examples of poor earnings quality that hinder the forecasting of expected future earnings include all of the following except:


A) Earnings dominated by a substantial one-time gain from the sale of real estate tangential to the firm's operations.
B) Reporting a large expense from a warehouse fire that was not covered by insurance.
C) A local government corrects a processing error and a firm receives an unexpected rebate on property taxes previously paid.
D) The company adds equipment that reduces carbon emissions in response to EPA requirements and increases production efficiency.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

Quality accounting information should be informative as to both the __________________________________________________ of the current period's earnings and the long-run sustainability of profits.

Correct Answer

verifed

verified

economic v...

View Answer

When evaluating the quality of accounting information the user should consider the _____________________________________________ of the measurements made.

Correct Answer

verifed

verified

economic f...

View Answer

All of the following are the general principles underlying the valuation of liabilities except:


A) Liabilities requiring future cash payments appear at the present value of the required future cash flows discounted at an interest rate that reflects the uncertainty that the firm will be able to make the cash payments.
B) The fair value of a liability cannot differ from the amount appearing on the balance sheet, particularly for long-term debt.
C) Liabilities representing cash advances from customers appear at the amount of the cash advance.
D) Liabilities requiring the future delivery of goods or services appear at the estimated cost of those goods and services.

E) B) and D)
F) All of the above

Correct Answer

verifed

verified

One definition of earnings management is that it occurs when managers use:


A) judgment in financial reporting to alter financial reports to mislead stakeholder.
B) an accounting method that is inconsistent with other industry members.
C) more conservative accounting estimates than other companies.
D) pro forma accounting results as opposed to GAAP results.

E) B) and C)
F) A) and C)

Correct Answer

verifed

verified

Accounting information should be a fair and complete representation of the firm's economic ____________________,____________________,and ____________________.

Correct Answer

verifed

verified

performanc...

View Answer

Which of the following items is consistent with earnings being informative about current performance and informing the analyst that level of current earnings are not sustainable?


A) The firm recognizes an unexpected gain
B) The firm recognizes a fair value gain on a financial asset as a result of a favorable move in interest rates.
C) The firm recognizes additional expenses this period due to pre-opening costs associated with new stores.
D) The firm experiences a large jump in sales and earnings as a result of successful research and development of new products.

E) All of the above
F) C) and D)

Correct Answer

verifed

verified

The best measure of a firm's sustainable income is: 


A) net income.
B) income from continuing operations.
C) income before extraordinary items.
D) income before extraordinary item and change in accounting principle.

E) A) and C)
F) B) and C)

Correct Answer

verifed

verified

The Orbus Company has a 30,000 unrealized gain and a 10,000 unrealized loss.Where would Orbus Company report these transactions?


A) Only in non-current assets and liabilities
B) In stockholders' equity
C) Other comprehensive income
D) On the balance sheet as a current asset

E) B) and D)
F) A) and B)

Correct Answer

verifed

verified

Showing 61 - 75 of 75

Related Exams

Exam 1

Overview of Financial Reporting, Financial Statement Analysis, and Valuation

101 Questions

Exam 2

Asset and Liability Valuation and Income Recognition

79 Questions

Exam 3

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

84 Questions

Exam 4

Profitability Analysis

97 Questions

Exam 5

Risk Analysis

80 Questions

Exam 7

Financing Activities

69 Questions

Exam 8

Investing Activities

100 Questions

Exam 9

Operating Activities

78 Questions

Exam 10

Forecasting Financial Statements

63 Questions

Exam 11

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

52 Questions

Exam 12

Valuation: Cash-Flow-Based Approaches

64 Questions

Exam 13

Valuation: Earnings-Based Approaches

67 Questions

Exam 14

Valuation: Market-Based Approaches

61 Questions

Show Answer