Finance Chapter 3 2 According Accrual Accounting When Goods Are

68.

According to accrual accounting, when goods are not sold until the period after they were produced, then the cost of goods

sold will be:

69.

Accrual accounting, which attempts to match sales revenues and the expenses associated with the production of the goods, is

conducted in an attempt to:

70.

Which of the firm’s financial statements most clearly recognizes the payment for new equipment?

71.

If a firm pays taxes, which one of these will reduce net income but increase cash flow?

72.

Which one of the following will reduce the cash flow during an accounting period?

73.

Assume a firm generates $2,000 in sales and has a $500 increase in accounts receivable during an accounting period. Based

solely on this information, cash flow will increase by:

74.

In a statement of cash flows, which category includes depreciation expense as a line item?

75.

Which of the following will occur in a statement of cash flows as a result of paying cash dividends?

76.

Which of the following changes in working capital will result in an increase in cash flows?

77.

Which of the following statements is more likely if cash and marketable securities increase by $5,000 during a period in

which cash provided by operations increases by $1,000 and cash used by investments decreases by $500?

78.

If a firm’s net income is positive and its noncash expenses are positive, which of the following could account for a negative

amount of cash provided by operations?

79.

What is the most likely conclusion for a firm whose statement of cash flows shows an increase in cash balances and has

negative cash flows from both operations and financing?

80.

Johnson’s Nursery has net income of $42,500, depreciation expense of $1,800, interest expense of $900, taxes of $1,600,

additions to net working capital of $2,300, and capital expenditures of $11,700. What is the amount of the free cash flow?

81.

According to the statement of cash flows, cash flows from financing could be positive if:

82.

Which of the following categories of a statement of cash flows is affected by the payment of interest expense?

83.

Which of the following could account for a firm that has a negative net income, yet has a positive amount of cash provided

by operations?

84.

If a firm’s statement of cash flows shows that cash was used for investments, which of the following would seem most

likely?

85.

Interest expense appears in the operations section of the statement of cash flows because:

86.

Which one of these would not be paid from free cash flow?

87.

Which of the following statements correctly describes international accounting standards?

88.

Which of these statements related to free cash flow is correct?

89.

What is the fundamental difference between IFRS and GAAP?

90.

A company pays tax at a rate of 15% on its first $50,000 of income. If it has $60,000 of taxable income and an average tax

rate of 18%, what is the marginal tax rate on its last $10,000 of income?

91.

Assume a company pays tax at a rate of 15% on its first $50,000 of income. Any income above $50,000 is taxed at 25%. If a

company has $75,000 of taxable income, which of the following statements is correct?

92.

What is the marginal corporate tax rate for large companies?

93.

Which of the following cannot be used to reduce taxable corporate income?

94.

Assume a firm increases its revenue by $100 while increasing its cost of goods sold by $85. How much additional tax will

the firm owe if its marginal tax rate is 25%?

95.

According to the U.S. tax code at the beginning of 2016, the highest marginal tax rate for personal taxpayers is:

96.

Which one of the following statements is correct for a corporation with a negative net income in both the present and the last

fiscal year?

97.

Assume a single taxpayer is taxed at 10% on the first $9,275 of taxable income, 15% on the next $28,375 of income, and at

25% for the following $53,500 of income. What is the average tax rate for that individual if her taxable income is $42,000?

98.

An individual’s income for the year includes both dividend and interest payments. Which of these statements correctly

applies to that individual’s tax liability?

99.

A major goal of the Sarbanes-Oxley Act is to:

100.

Which one of the following is not a requirement imposed by the Sarbanes-Oxley Act?

101.

Who pays taxes on earnings distributed as dividends?

102.

Assume tax rates on single individuals are 10% on taxable income up to $9,275, 15% on income of $9,276 to $37,650 and

25% on income of $37,651 to $91,150. What is the tax liability for a single individual with $52,000 of taxable income, which

includes $2,000 of dividends?

103.

Which of the following forms of income can individuals defer from taxation?

104.

Which type of income is subject to “double taxation”?

105.

Professor Diehard found an effective antibiotic for the DEPRESS bacteria, and patented the drug. He believes that he could

sell the patent for $20 million. He then formed a corporation and invested $400,000 in setting up a production plant. There

are 2 million shares of stock outstanding. If the professor’s belief is correct, what would be the price per share and the book

value per share?

106.

You have gathered this information on a firm: $500,000 sales, $10,000 cash dividends, $300,000 cost of goods sold, $20,000

administrative expense, $20,000 depreciation expense, $40,000 interest expense, $10,000 purchase of productive equipment,

no changes in working capital, and a tax rate of 35%. What is the free cash flow?

107.

What is the overall change in cash resulting from: $300 increase in inventories, $150 increase in accounts payable, $120

decrease in accounts receivable, $60 decrease in other current assets, $150 decrease in other current liabilities?

108.

What is the change in cash for a firm with the following: $10,000 cash flow from operations, $1,600 cash used for new

investment, a reduction in the level of debt of $2,000, $1,000 in cash dividends, and $200 in depreciation expense?

109.

What are the average and marginal tax rates for a corporation that has $97,648 of taxable income? The tax rates are as

follows:

110.

Which one of these will increase a firm‘s cash balance?

Chapter 03 Test Bank – Static Summary