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Bài test tiếng Anh ngành ngân hàng và đáp án phần 3

Chapter 3 Test Bank

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
1. GAAP represents a set of rules and procedures that define accounting practice at a
particular point in time.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium
2. GAAP principles determine the rules for how a company can issue stock to raise
money.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium

3. The cost principle assumes that both parties to a transaction are economically rational
and are free to act independently of each other.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
4. The balance sheet identifies the productive resources (assets) that a firm uses to
generate income, as well as the sources of funding from creditors (liabilities) and
owners (shareholders' equity) that were used to buy the assets.
A) True
B) False
Ans: A

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Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
5. The balance sheet identity can be stated as Total assets = Total liabilities + Total
stockholders' equity.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
6. The balance sheet identity can be stated as Total assets – Total liabilities = Total
stockholders' equity.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
7. Book value is the amount a firm paid for its assets at the time of purchase.
A) True
B) False


Ans: A
Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
Note: Incorrect answer
8. The book value of an asset is the historical cost of the asset less the accumulated
depreciation.
A) True
B) False
Ans: A

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Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
9. The current market value of an asset is the amount that a firm would receive for the
asset if it was sold on the open market.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
10. Preparing a market-value balance sheet is rather straightforward because it is easy to
obtain market values for all assets and liabilities.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 4
Level of Difficulty: Easy
11. The net cash flow from operating activities (NCFOA) is another term for net income.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 4
Level of Difficulty: Easy
12. The income statement identifies the major sources of revenues generated by the firm
and the corresponding expenses that were needed to generate those revenues.
A) True
B) False
Ans: A

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Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
13. Accounting profits include noncash revenues (e.g., prepaid rent) and noncash expenses
(e.g., depreciation), whereas cash flows do not include these items.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 6
Level of Difficulty: Easy
14. The key financial statement that ties the other three statements together is the balance
sheet, which summarizes the firm's investment and financing activities at a point in
time.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 7
Level of Difficulty: Medium
15. The average tax rate is the total taxes divided by taxable income. It takes into account
the taxes paid at all levels of income, and therefore it will usually be lower than the
marginal tax rate, which is the rate that is paid on the last dollar of income earned.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
16. Depreciation and amortization are examples of prepaid expenses.
A) True
B) False
Ans: B

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Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
17. Cash flows from operations are the net cash flows that support a firm's principal
business activities.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
18. Rent and insurance are examples of depletion expenses.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 5
Level of Difficulty: Medium
19. Cash flows from operating activities relate to the buying and selling of long-term
assets.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
20. Making and collecting loans, issuing and paying out on insurance contracts, and buying
and selling debt or equity instruments of other firms are examples of financing
activities.
A) True
B) False
Ans: B

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Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
21. Typical financing activities include cash payments on the principal of long-term debt,
cash payments of dividends to shareholders, and cash purchases of treasury stock.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
22. The going concern assumption states that a business will be shutting down its operation
in the near future.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
23. In a rising price environment, a company using the LIFO method assumes that the sale
of a product is from the newest, highest-cost inventory.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
24. If a company values its inventory using the FIFO method, when the firm makes a sale
in a rising price environment, it assumes the sale is from the newest, highest-cost
inventory.
A) True
B) False
Ans: B

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Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
25. Which of the following sections do annual reports typically contain?
A) financial summary related to the past year's performance
B) information about the company, its products, and its activities
C) audited financial statements, including limited historical financial data
D) All three of the above sections are included in the annual report.
Ans: D
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
26. Annual reports are prepared by a firm's management to
A) communicate to shareholders the firm's failures in the previous year.
B) provide overview of the firm's financial and operating performance.
C) highlight the performance of its chief competitors.
D) provide a forecast of the economy in the coming years.
Ans: B
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
27. The generally accepted accounting principles (GAAP) are
A) rules that outline how a firm can operate ethically.
B) rules on how the firm will be valued in the event of a merger.
C) rules and procedures that define how companies are to maintain financial records
and prepare financial reports.
D) rules for how a company can issue stock to raise money.
Ans: C
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
28. Accounting standards prescribed by GAAP are important because
A) they make the financial statements of all firms standardized.
B) they allow one to examine a firm's performance over time.
C) they make it possible for management or analysts to compare the firm's performance to
that of other competitors.
D) all of the above.
Ans: D

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Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
29. The assumption of arm's-length transaction states that
A) both parties to a transaction can act independently of each other and make
economically rational decisions.
B) both parties to a transaction must have had previous transactions.
C) one of the parties to the transaction is a bank that has full knowledge of the firm's
creditworthiness.
D) none of the above
Ans: A
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
30. Your uncle, who has a second home in Bethany Beach, Delaware, is planning to sell it
in the next few weeks. You are interested in buying this beachside property, so your
agent negotiates a price for the house with your uncle's agent. This transaction is an
example of
A) The cost principle.
B) the assumption of arm's-length transactions.
C) the realization principle.
D) the going-concern assumption.
E) the matching principle.
Ans: B
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
31. The going concern assumption implies that
A) a firm will continue to be in business for the foreseeable future.
B) a firm will be going out of business in the near future.
C) a firm will continue to operate in the near future but only after being acquired by another
firm.
D) none of the above
Ans: A

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Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
32. Dell Computer Corporation has receivables of $2.5 million and inventory worth $1.8
million. The firm plans to borrow $2 million for working capital purposes from Austin
First National Bank. In evaluating the loan request, the bank should place the most
emphasis on
A) the matching principle.
B) the realization principle.
C) the going-concern assumption.
D) the assumption of arm's-length transactions.
Ans: C
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
33. The matching principle calls for the accountant of a firm to
A) identify an asset with each liability of the firm.
B) associate the revenue generated from a sale to the costs incurred to produce the
product.
C) match each item of inventory with the historical cost at which it was acquired.
D) none of the above
Ans: B
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
34. Tyson Corporation bought raw materials on April 23, 2008 and also on July 2, 2008.
Products produced in the months of May were sold in July. The firm uses FIFO to value
its inventory. According to the matching principle, the firm's accountant should
associate
A) the inventory acquired on July 2 with the products sold.
B) the inventory acquired on April 23 with the products sold.
C) Neither of these dates is valid because the products were sold in July.
D) None of the above.
Ans: B

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Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Medium
35. According to the realization principle, revenue from a sale of the firm's products are
recognized
A) when the products are shipped to the buyer.
B) when the buyer orders the goods.
C) when cash is realized from the sale of the products.
D) at the time of the sale.
Ans: D
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
36. On June 23, 2008, Mikhal Cosmetics sold $250,000 worth of its products to Rynex
Corporation, with the payment to be made in 90 days on September 20. The goods were
shipped to Rynex on July 2. The firm's accountants should recognize the sale on
A) June 23, 2008.
B) July 2, 2008.
C) September 20, 2008.
D) none of the above.
Ans: A
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
37. The cost principle states that an asset should be recognized on the balance sheet at
A) the market value of the asset.
B) at the market value less the accumulated depreciation on the asset.
C) at its historical cost.
D) at its historical cost less the accumulated depreciation on the asset.
Ans: C

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Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
38. Trekkers Footwear bought a piece of machinery on January 1, 2006 at a cost of $2.3
million, and the machinery is being depreciated annually at an amount of $230,000 for
10 years. Its market value on December 31, 2008 is $1.75 million. The firm's
accountant is preparing its financial statement for the fiscal year end on December 31,
2008. The asset's value should be recognized on the balance sheet at
A) $2.3 million.
B) $1.61 million.
C) $230,000.
D) $1.75 million.
Ans: B

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
39. The conventional way of preparing a balance sheet is to list all assets in the order of
their
A) market value.
B) risk.
C) liquidity.
D) historical cost.
Ans: C
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
40. Petra, Inc., has $400,000 as current assets, $1.225 million as plant and equipment, and
$250,000 as goodwill. In preparing the balance sheet, these assets should be listed in
which of the following orders?
A) current assets, goodwill, and plant and equipment
B) current assets, plant and equipment, and goodwill
C) goodwill is not an asset and is not listed here
D) none of the above.
Ans: B

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Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
41. When prices are rising, valuing ending inventory using the FIFO method rather than
LIFO gives
A) inventory a higher value but lowers net income.
B) inventory a lower value and also lowers net income.
C) both inventory and net income a higher value.
D) inventory a lower value and net income a higher value.
Ans: C
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
42. When prices are falling, valuing inventory using the LIFO method rather than FIFO
gives
A) inventory a higher value but lowers net income.
B) inventory a lower value and also lowers net income.
C) both inventory and net income a higher value.
D) inventory a lower value and net income a higher value.
Ans: C
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
43. Which one of the following is NOT true about goodwill?
A) It is an intangible asset.
B) It represents the value of all unrecorded assets acquired in a merger.
C) It equals the premium paid over the fair market value of the assets acquired in a merger.
D) When goodwill appears on a firm's balance sheet, it reduces the firm's net worth by
that amount.
Ans: D
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
44. Which of the following is NOT true about treasury stock?
A) It is the firm's own shares repurchased in the market by the firm.
B) It can be reissued under stock option and other employee benefit plans.
C) It lowers the value of the company.
D) It increases the net worth of the company.
Ans: C
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Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
45. The major disadvantages of market-value accounting include
A) the difficulty in estimating the current value for some assets.
B) the difficulty in applying some of the valuation models used to estimate market values.
C) the resulting numbers are potentially open to abuse.
D) All of the above are disadvantages of market-value accounting.
Ans: D
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
46. Which one of the following does NOT belong on an income statement?
A) depreciation and amortization
B) goodwill
C) extraordinary items
D) nonrecurring expenses
Ans: B
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
47. Which one of the following are NOT all noncash items?
A) depreciation, deferred taxes, and prepaid expenses
B) depletion charges, taxes, and amortization
C) depletion charges, deferred taxes, and prepaid expenses
D) depreciation, amortization, and prepaid taxes
Ans: B
Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Medium
48. Which one of the following is NOT a cash flow from operating activities?
A) cash payments on the principal of long-term debt
B) payments for utilities and rent
C) payments to purchase raw materials
D) cash receipts from selling goods and services
Ans: A

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Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Hard
49. Cash flows from financing activities include all but one of the following:
A) cash payments on the principal of long-term debt
B) issuing and paying out on insurance contracts
C) cash purchases of treasury stock
D) cash proceeds from a bank loan
Ans: B
Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Hard
50. Which one of the following is NOT a cash flow from investing activities?
A) buying and selling bonds or stock of other firms
B) buying or selling of land, buildings, and plant and equipment
C) cash payments of dividends to shareholders
D) issuing and paying out on insurance contracts
Ans: C
Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Medium
51. Trident Corporation had the following cash flows in the current year. Which one of the
following is a financing activity cash flow?
A) Rent on a warehouse amounting to $1.1 million
B) Purchase of $125,000 worth of five-year bonds issued by Towson Utilities
C) Preferred dividends to the tune of $330,000 paid to shareholders
D) Lease income received on a piece of land
Ans: C
Format: Multiple Choice
Learning Objective: LO 7
Level of Difficulty: Medium
52. Clarity Music Company has a marginal tax rate of 34 percent and an average tax rate of
32 percent this year. It is planning to construct a new recording studio next year. The
appropriate tax rate to be applied on the income generated from the new studio is
A) the average tax rate.
B) the marginal tax rate.
C) either one.
D) none of the above.
Ans: B
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Format: Multiple Choice
Learning Objective: LO 7
Level of Difficulty: Medium
53. Which one of the following is NOT true for a corporation?
A) Interest paid on bonds issued last year is tax deductible.
B) Common-stock dividends to be paid this year are not tax deductible.
C) Common-stock dividends to be paid this year will be tax deductible if the firm has a
net loss for the year.
D) Preferred stock dividends to be paid this year are not tax deductible.
Ans: C
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
54. Maddux, Inc., has completed its fiscal year and reported the following information. The
company had current assets of $153,413, net fixed assets of $ 412,331, and other assets
of $7,822. The firm also has current liabilities worth $65,314, long-term debt of
$178,334, and common stock of $162,000. How much retained earnings does the firm
have?
A) $ 405,648
B) $243,648
C) $167,918
D) $573,566
Ans: C
Feedback:
Total assets = $153,413 + $412,331 + $7,822 = $573,566
Total liabilities = $65,314 + $178,334 = $243,648
Total stockholders' equity
= Total assets – Total liabilities
= $573,466 – $243,648 = $329,918
Retained earnings = Stockholders' equity – Common stock
= $329,918 – $162,000 = $167,918

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Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
55. Galan Associates prepared its financial statement for 2008 based on the information
given here. The company had cash worth $1,234, inventory worth $13,480, and
accounts receivables of $7,789. The company's net fixed assets are $42,331, and other
assets are $1,822. It had accounts payables of $9,558, notes payables of $2,756,
common stock of $22,000, and retained earnings of $14,008. How much long-term debt
does the firm have?
A) $54,342
B) $76,342
C) $12,314
D) $18,334
Ans: D
Feedback:
Current assets = $1,234 + $7,789 + $13,480 = $22,503
Total assets = $22,503 + $42,331 + $1,822 = $66,656
Current liabilities = $9,558 + $2,756 = $12,314
Stockholders' equity = $22,000 + $14,008 = $36,008
Long-term debt = Total assets – Current liabilities – Stockholders' equity
= $66,656 – $12,314 – $36,008 = $18,334
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
56. Tumbling Haven, a gymnastic equipment manufacturer, provided the following
information to its accountants. The company had current assets of $145,332, net fixed
assets of $356,190, and other assets of $4,176. The firm has long-term debt of $76,445,
common stock of $200,000, and retained earnings of $134,461. What amount of current
liabilities does this firm have?
A) $94,792
B) $505,678
C) $171,217
D) none of the above
Ans: A
Feedback:
Total assets = $145,332 + 356,190 + $4,176 = $505,698
Stockholders' equity = $200,000 + $134,461 = $334,461
Current liabilities = Total liabilities – Long-term debt – Stockholders' equity
= $505,698 – $76,445 – $334,461 = $94,792

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Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
57. Teakap, Inc., has current assets of $ 1,456,312 and total assets of $4,812,369 for the
year ending September 30, 2006. It also has current liabilities of $1,041,012, common
equity of $1,500,000, and retained earnings of $1,468,347. How much long-term debt
does the firm have?
A) $1,844,022
B) $2,303,010
C) $2,123,612
D) $803,010
Ans: D
Feedback:
Stockholders' equity = $1,500,000 + $1,468,347 = $2,968,347
Long-term debt = Total assets – Current liabilities – Stockholders' equity
= $4,812,369 – $1,041,012 – $2,968,347 = $803,010
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
58. Chandler Sporting Goods produces baseball and football equipment and lines of
clothing. This year the company had cash and marketable securities worth $335,485,
accounts payables worth $1,159,357, inventory of $1,651,599, accounts receivables of
$1,488,121, short-term notes payable worth $313,663, and other current assets of
$121,427. What is the company's net working capital?
A) $3,596,632
B) $1,801,784
C) $2,123,612
D) $1,673,421
Ans: C
Feedback:
Total current assets = $335,485 + 1,488,121 + $1,651,599 + $121,427 = $3,596,632
Total current liabilities = $1,159,357 + $313,663 = $1,473,020
Net working capital = $3,596,632 – $1,473,020 = $2,123,612

3-17


Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
59. Tre-Bien Bakeries generated net income of $233,412 this year. At year end, the
company had accounts receivables of $47,199, inventory of $63,781, and cash of
$21,461. It also had accounts payables of $51,369, short-term notes payables of
$11,417, and accrued taxes of $6,145. The net working capital of the firm is
A) $68,931
B) $63,510
C) $69,655
D) none of the above
Ans: B
Feedback:
Total current assets = $21,461 + $47,199 +$63,781 = $132,481
Total current liabilities = $51,369 + $11,417 + $6,145 = $68,931
Net working capital = $132,481 – $68,931 = $63,510
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
60. Spartan, Inc., is a manufacturer of automobile parts located in Greenville, South
Carolina. At the end of the current fiscal year, the company had net working capital of
$157,903. The company showed accounts payables of $94,233, accounts receivables of
$83,112, inventory of $171,284, and cash and marketable securities of $12,311. What
amount of notes payables does the firm have?
A) $14,571
B) $26,882
C) $15,471
D) none of the above
Ans: A
Feedback:
Total current assets = $12,311 + $83,112 + $171,284 = $266,707
Net working capital = $266,707 – Total current liabilities = $157,903
Total current liabilities = $266,707 – $157,903 = $108,804
Total current liabilities = $108,804 = Accounts payables + Notes payables
Notes payables = $108,804 - $94,233 = $14,571

3-18


Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
61. Centennial Brewery produced revenues of $1,145,227 in 2008. It has expenses
(excluding depreciation) of $812,640, depreciation of $131,335, and interest expense of
$81,112. It pays an average tax rate of 34 percent. What is the firm's net income after
taxes?
A) $120,140
B) $248,475
C) $79,292
D) $40,848
Ans: C
Feedback:
Earnings before taxes = $1,145,227 – ($812,640 + $131,335 + $81,112) = $120,140
Net income = $120,140 (1 – 0.34) = $79,292
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
62. Simplex Healthcare had net income of $5,411,623 after paying taxes at 34 percent. The
firm had revenues of $20,433,770. Their interest expense for the year was $1,122,376,
while depreciation expense was $2,079,112. What was the firm's operating expenses
excluding depreciation?
A) $8,199,429
B) $9,032,853
C) $9,321,805
D) none of the above
Ans: B
Feedback:
Earnings before taxes = Net income / (1 – Tax rate)
= $5,411,623 / (1 – 0.34) = $8,199,429
EBIT = EBT + Interest expense = $8,199,429 + $1,122,376 = $9,321,805
Revenues – Operating expenses – Depreciation = EBIT
Operating expenses = Revenues – Depreciation – EBIT
= $20,433,770 – $2,079,112 – $9,321,805
= $9,032,853

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Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Hard
63. Triumph Trading Company provided the following information to its auditors. For the
year ended March 31, 2008, the company had revenues of $1,122,878, operating
expenses (excluding depreciation and leasing expenses) of $612,663, depreciation
expenses of $231,415, leasing expenses of $126,193, and interest expenses equal to
$87,125. If the company's tax rate was average 34 percent, what is its net income after
taxes?
A) $43,218
B) $65,482
C) $152,607
D) none of the above
Ans: A
Feedback:
EBIT = $1,122,878 – ($612,663 + $231,415 + $126,193) = $152,607
Earnings before taxes = ($152,607 – $87,125) = $65,482
Net income = $65,482 (1 – 0.34) = $43,218
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Hard
64. Parrino Corporation has announced that its net income for the year ended June 30,
2008, is $1,824,214. The company had an EBITDA of $ 5,174,366, and its depreciation
and amortization expense was equal to $1,241,790. The company's average tax rate is
34 percent. What is the amount of interest expense for the firm?
A) $2,763,961
B) $939,747
C) $1,187,720
D) $1,168,615
Ans: D
Feedback:
Amount
EBITDA
$5,174,366.00
Depreciation
1,241,790.00
EBIT
$3,932,576.00
Interest
1,168,615.39
EBT
$2,763,960.61
Taxes (34%)
939,746.61
Net income
$1,824,214.00

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Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Hard
65. During 2008, Towson Recording Company increased its investment in marketable
securities by $36,845, funded fixed assets acquisition by $109,455, and had marketable
securities to the tune of $14,215 mature. What is the net cash provided (used) in
investing activities?
A) $132,085
B) $145,940
C) –$132,085
D) none of the above
Ans: C
Feedback:
Cash inflows from investing activities = $14,215
Cash outflows from investing activities = $36,845 + $ 109,455 = $146,300
Net cash flows from investing activities = $14,215 – $146,300 = $(132,085)
Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Hard
66. Trident Manufacturing Company's treasurer identified the following cash flows during
this year as significant. It had repaid existing debt to the tune of $425,110, while raising
additional debt capital of $750,000. It also repurchased stock in the open markets for a
total of $63,250. It paid $233,144 in dividends to its shareholders. What is the net cash
provided (used) by financing activities?
A) $28,496
B) $91,746
C) –$28,496
D) –$91,746
Ans: A
Feedback:
Cash inflows from financing activities = $750,000
Cash outflows from financing activities = $425,110 + $63,250 + $233,144 = $721,504
Net cash flows from financing activities = $750,000 – $721,504 = $28,496

3-21


Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Hard
67. Super Grocers, Inc., provided the following financial information for the quarter ending
September 30, 2006:
Depreciation and amortization – $133,414
Increase in receivables – $ 112,709
Increase in accounts payables – $62,411
Decrease in marketable securities – $31,225

Net income – $341,463
Increase in inventory – $81,336

What is the cash flow from operating activities generated during this quarter by the
firm?
A) $308,458
B) $374,468
C) –$374,468
D) –$308,458
Ans: B
Feedback:
2008 Statement of Cash Flows ($ thousands)
Operating Activities
Net income
$341,463
Additions (sources of cash)
Depreciation and amortization
133,414
Increase in accounts payable
62,411
Decrease in marketable securities
31,225
Subtractions (uses of cash)
Increase in accounts receivable
(112,709)
Increase in inventories
(81,336)
Net cash provided by operating activities
$374,468

3-22


Use the following to answer questions 68-70:
Thunderbird Amusement Park—Balance Sheet as of June 30
Assets
2007
2008
Cash
$ 13,221
$ 11,729
Accounts receivables
31,323
37,909
Inventory
77,244
91,617
Total current assets
$121,788
$141,255
Net fixed assets
344,712
390,836
Total assets
$466,500
$532,091
Liabilities and Stockholders' Equity
Accounts payable
Notes payable
Deferred taxes
Total current liabilities
Long-term debt
Common stock
Retained earnings
Total liabilities and stockholders' equity

$ 38,549
12,004
21,934
$ 72,487
78,445
125,000
190,568
$466,500

$ 42,881
16,753
16,788
$ 76,422
61,290
175,000
219,379
$532,091

The company had a net income of $248,462, and depreciation expenses were equal to $72,487.
Reference: Ref 3-1
Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Hard
68. What is the firm's cash flow from operating activities?
A) $304,322
B) $299,176
C) $192,602
D) none of the above
Ans: B
Feedback:
Operating Activities
Net income
$248,462
Additions (sources of cash)
Depreciation and amortization
72,487
Increase in accounts payable
4,332
Subtractions (uses of cash)
Increase in accounts receivable
(6,586)
Increase in inventories
(14,373)
Decrease in deferred taxes
(5,146)
Net cash provided by operating activities
$299,176
3-23


Reference: Ref 3-1
Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Hard
69. What is the firm's cash flow from investing activities?
A) $0
B) $46,124
C) –$46,124
D) none of the above
Ans: C
Feedback:
Cash inflows from investing activities = $0
Cash outflows from investing activities = $46,124
Net cash flows from investing activities = –$46,124
Reference: Ref 3-1
Format: Multiple Choice
Learning Objective: LO 5
Level of Difficulty: Hard
70. What is the firm's cash flow from financing activities?
A) –$66,405
B) $61,656
C) –$61,656
D) -$182,057
Ans: D
Feedback:
Cash inflows from financing activities = $4,749 + $50,000 = $54,749
Net income – Dividends = increase to R/E
$248,462 – $28,811 = $219,651
Cash outflows from financing activities = $17,155 + $219,651 = $ 236,806
Net cash flows from financing activities = $54,749 – $236,806 =
- $182,057

3-24


Format: Multiple Choice
Learning Objective: LO 7
Level of Difficulty: Hard
71. Trimeton Corporation announced that in the year ended June 30, 2008, its earnings
before taxes amounted to $2,367,045. Calculate its taxes using the following table.
Tax Rate
Taxable Income
15%
$0 to $50,000
25
50,001 – 75,000
34
75,001 – 100,000
39
100,001 – 335,000
34
335,001 – 10,000,000
35
10,000,001 – 15,000,000
38
15,000,001 – 18,333,333
35
More than $18,333,333
A) $804,795
B) $690,895
C) $713,145
D) none of the above
Ans: A
Feedback:
Earnings before tax = $2,367,045
Tax rate
15%
25
34
39
34
35
38
35

Income

Tax

$0 to $50,000
50,001 – 75,000
75,001 – 100,000
100,001 – 335,000
335,001 – 10,000,000
10,000,001 – 15,000,000
15,000,001 – 18,333,333
More than $18,333,333
Total taxes payable

3-25

$ 7,500.00
6,250.00
8,500.00
91,650.00
690,895.30

$804,795.30


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