SAINT ACC498 FINAL EXAM

The two primary qualities of accounting information to make
it useful for decision making are:
reliability and comparability.
relevance and reliability.
materiality and comparability.
full disclosure and relevance.
Points Received: 10 of 10
Comments:
Question 2. Question
: Which of the following does
not represent future expected cash inflows?
accounts receivable
prepaid expenses
inventory
notes receivable
Points Received: 10 of 10
Comments:
Question 3. Question
: Which of the following is true
concerning bond covenants?
Bond covenants are restrictions placed on
bondholders to protect rights of equity holders.
Violation of a bond covenant requires that a
company declares bankruptcy.
If a company violates a bond covenant, it
means it has failed to make interest or principal repayments on debt in a
timely manner.
Bond covenants are legal restrictions placed
in order to minimize the risk of default on bonds.
Points Received: 10 of 10
Comments:
Question 4. Question
: Pitfalls when forecasting
earnings include failure to consider
I. capital adequacy
II. capacity constraints
III. anticipated return on equity
IV. new management
I and III
II and IV
I, III and IV
I, II and III
Points Received: 10 of 10
Comments:
Question 5. Question
: Which of the following might
give rise to off-balance sheet financing?
I. Long-term operating leases
II. Sale of receivables without recourse
III. Through-put agreements
IV. Purchase commitments
I, II, III and IV
I, II and IV
II, III and IV
I, III and IV
Points Received: 10 of 10
Comments:
Question 6. Question
: Given the following
information:

Return on common
equity for 2005 is:
11.42%
10.0%
11.0%
10.47%
Points Received: 10 of 10
Comments:
Question 7. Question
: Wilco Company reports the
following:
Dividend payout ratio for 2005 was:
27%
12%
22.2%
Not determinable
Points Received: 10 of 10
Comments:
Question 8. Question
: The following information
should be used according to the provisions of SFAS 95 (Statement of Cash flows)
and using the following data.

What is net cash flow from investing?
$10,000
$5,000
($5,000)
($15,000)
Points Received: 10 of 10
Comments:
Question 9. Question
: Which of the following is
likely to be the most informative source if you were interested in a company’s
business plan or strategy?
Auditor’s letter
Management discussion and analysis
Proxy statement
Footnotes
Points Received: 10 of 10
Comments:
Question 10. Question
: The equity method of
accounting for investments requires:
Investment should be marked to market each
accounting period.
Pro-rata share of investee’s earnings should
be recorded as investment income.
Company should not have significant influence
over investee.
Goodwill related to purchase of investee stock
to be recorded separately on balance sheet.
Points Received: 10 of 10
Comments:
Question 11. Question
: Which of the following
represents an investing
activity in the statement of cash flows
depreciation of plant assets
sale of plant assets at a loss
stock dividend
purchase of inventory
Points Received: 10 of 10
Comments:
Question 12. Question
: The treasurer of Simmons
Corporation, a newly formed software company is trying to ascertain Simmons
cash flows for the next three months. Expected sales are:
50% of sales are made for cash. Simmons expects to receive
25% in the month following the sale and 20% in the second month following the
sale. The remaining 5% are expected to be un-collectible. Gross margin is 20%,
and purchases are made one month prior to sale. Purchases are paid one month
after received.
Cash outflows in March for purchases will be:
$240
$220
$200
$176
Points Received: 10 of 10
Comments:
Question 13. Question
: Company ABC acquires company
XYZ on 12/31/06 in a share-for-share transaction worth $10M. On 12/31/06, XYZ
financial statements reported the following:
At the time of acquisition, the fair value of XYZ’s assets
equals its book values, except for plant, property and equipment which has a
fair value $2M higher than its book value. Goodwill is expected to be amortized
over 10 years, and the average life of depreciable assets is 10 years.
If ABC uses purchase accounting to record the acquisition,
the amount of goodwill that will appear on its balance sheet as of 12/31/06
with respect to the acquisition of XYZ will be:
$0
$2M
$4M
$6M
Points Received: 10 of 10
Comments:
Question 14. Question
: Beginning and ending accounts
receivable are $76,000 and $42,000, respectively. Sales for the period total
$384,000, of which $40,000 was directly for cash. How much cash was collected
from making sales and collecting accounts receivable?
$344,000
$418,000
$378,000
$376,000
Points Received: 10 of 10
Comments:
Question 15. Question
: Which of the following would
be considered the most discretionary of the following cash outflows?
Interest payment
Payment to suppliers
Repurchase of stock
Dividend payments
Points Received: 10 of 10
Comments:
Question 16. Question
: Which of the following is the
best measure of operating
efficiency?
Return on net operating assets
Return on equity
Return on sales
Return on inventory
Points Received: 10 of 10
Comments:
Question 17. Question
: Assume all assets are
operating assets; all current liabilities are operating liabilities.

Return on net
operating assets for 2005 is:
11.30%
12.73%
9.93%
11.19%
Points Received: 10 of 10
Comments:
Question 18. Question
: Which of the following
actions, all other things being equal, will increase the need for a company to
borrow money in the short-term?
I. Extending more
credit to customers
II. Increasing inventory turnover
III. Expensing advertising expenses rather than capitalizing
them
IV. Contributing more to pension plan
I, II, III
I and III
I, III and IV
I and IV
Points Received: 10 of 10
Comments:
Question 19. Question
: What would be the net income
in the consolidated income statement for year X2 assuming any excess purchase
price relates to goodwill, and goodwill was found to be impaired by $830?
$1,461
$1,560
$1,012.2
$730
Points Received: 10 of 10
Comments:
Question 20. Question
: The capitalization of
interest cost during construction:
increases future net income.
decreases future depreciation expense.
increases net income during construction
phase.
decreases assets during construction phase.
Points Received: 10 of 10
Comments:
Question 21. Question
: One advantage of LIFO over
FIFO under normal conditions is that:
it reports higher retained earnings.
it results in higher cash flows.
it results in higher current ratios.
it results in higher gross margins.
Points Received: 10 of 10
Comments:
Question 22. Question
: Which of the following best
describes the current ratio?
debt ratio
operating performance ratio
liquidity ratio
efficiency ratio
Points Received: 10 of 10
Comments:
Question 23. Question
: Which of the following
statements about stock dividends is true?
Stock dividends increase the number of shares
outstanding.
Stock dividends are more valuable than stock
splits.
Stock dividends are recorded as a reduction in
cash.
Stock dividends are dividends given in the
form of stock from another company.
Points Received: 10 of 10
Comments:
Question 24. Question
: Which of the following factors
is least likely to affect earnings persistence?
Changing price levels
Extraordinary items
Usual operating costs
Accounting methods used
Points Received: 10 of 10
Comments:
Question 25. Question
: Variability in earning
numbers:
Is desirable as it increases variance of
earnings and hence value of stock options
Increases if a company increases its operating
leverage
Increases if a company decreases its financial
leverage
Is independent of operating leverage
Points Received: 10 of 10
Comments: