(Test Bank) Acct 370 Exam 4 Complete Solution

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ACCT 370 Exam 4 Complete solution ACCT 370 Exam 4 Complete solution 1. Condensed financial data are presented below for the Phoenix Corporation: 6. Accounts receivable 8. 267,500 9. 11.$ 12.230,000 22.Total current 24.670,000 assets 25. 27. 28.565,000 30.Intangible 32.50,000 33. 35. 36.60,000 assets 38.Total assets 40.825,000 41. 43. 44.695,000 54.Long-term liabilities 56.77,500 57. 59. 60.75,000 70.Cost of goods sold 72.982,500 73. 75. 76. 78.Interest 80.10,000 81. 83. 84. expense 62.Sales 64.1,640,000 65. 67. 68. 46.Current 48.252,500 49. 51. 52.200,000 liabilities 14.Inventory 16.312,500 17. 19. 20.257,500 2. 3. 2019 5. 2018 86.Income tax expense 88.77,500 89. 91. 92. 102. Cash flow from operations 104. 71,0 00 105. 107. 108. 118. Cash flow from financing activities 120. (62, 500 121. 123. 124. 134. The total asset turnover ratio for 2019 is (rounded): 135. Floating -rate debt is the most common method for lenders to protect themselves from losses that may arise as a result of: 136. Cheery Company follows IFRS for its financial reporting. On January 1, 2018 Cheery issued €250 million of 10-year convertible notes that pay interest at 5% 126. Tax 128. 30 129. 131. 132. rate 110. Cash flow from 112. (6,0 113. 115. 116. investing 00 activities 94.Net income 96.127,500 97. 99. 100. annually. Investors pay €250 million for the notes even though the company’s credit risk at the time implies a 10% interest rate for traditional debt of similar duration. When the cash flows associated with the debt are discounted at 10%, the resulting value is €175 million. 137. How much cash will Cheery pay for interest during 2018? 138. The components of pension expense are: 139. Defined contribution plans are preferred by companies for all except which of the following reasons? 140. Cash dividends paid by a corporation: 141. Companies with surplus cash will consider the needs of cash for: 142. When a dividend is not declared on preferred stock, and the common shareholders cannot receive a dividend until all past and current dividends are paid to the preferred shareholders, the preferred stock is: 143. Mandatorily redeemable preferred stock is reported on the balance sheet as: 144. Which of the following is not indicative of a complex capital structure? 145. The Heath Corporation reported net income for 2018 of $177,500. Heath began the year with 100,000 shares of $5 par value common shares outstanding and 2,500 shares of $100 par value 8% preferred shares outstanding. On October 1, Heath sold 10,000 shares of common stock for $6 per share. Heath paid dividends to the common shareholders in December. 146. If each share of preferred stock is convertible into 8 shares of common stock, the diluted earnings per share for 2018 is (rounded): 147. On January 1, 2018, Waddle Company adopted a compensatory stock option plan and granted its managers 10,000 options to buy shares of common stock; each option can be used to acquire a share of common stock at a price of $25 a share. The fair value of each option was $7.50 on January 1, 2018. The options can be converted into commo n stock after July 1, 2018. The required service period is three years. 148. What is the balance in paid -in capital -stock options as of December 31, 2019 assuming that the fair value approach to accounting for stock options is used? 149. Accounting for nonqualified stock option plans results in all of the following except : 150. To record newly issued stock shares upon conversion of debt, managers most often choose the method known as the: 151. A minority ownership interest generally occurs when an investor owns less than which of the following percentages of the stock of an investee company? 152. A parent company’s investment account would include an element which is representative of : 153. Testing for goodwill impairment: 154. Which of the following is not a use of a variable interest entity (VIE)? 155. Foreign currency nonmonetary assets and liabilities for non -free-standing subsidiaries are translated using the: 156. Which of the following is not true regarding consolidations under IFRS? 157. Other -than-temporary impairments are not an issue for debt investments classified as: 158. Cash flows arising from the payment of dividends are cash flows from: 159. Which of the following is not correct with respect to the difference between accrual accounting and cash flow reporting? 160. The FASB decided that the allocation of income taxes paid to operating, financing, and investing activities would be complex and arbitrary, and relied on which one of the following justifications for its decision? 161. Pipe Corporation reported cost of goods sold of $250,000 for 2018. It also reported an increase in inventory for the year of $30,000, an d an increase in accounts payable of $24,000. Pipe would report cash paid to suppliers in 2018 under the direct method for cash flows of: 162. The analyst would most likely understand that the change in the balance sheet account for property, plant, and equipment does not reconcile with the account change included in the statement of cash flows because of a write -off due to impairments which the analyst discovered when examining the: 163. Which of the following does not accurately describe the presentation of software development costs on the statement of cash flows? 164. Which of the following statements concerning IFRS and the statement of cash flows is correct? 165. The Xano Company reported merchandise inventory at LIFO of $450,000 on the year-end financial statements. The company also reported a LIFO reserve of $34,000. An estimate of the inventory balance if the inventory had been reported using the FIFO assumption is 166. The two broad categories of differences that result from determining the pre-tax book income and the taxable income are: 167. Which accounting choice would not be used to reduce the likelihood of a technical default? 168. The term "consolidated" is used in financial statements under U.S. GAAP to refer to the financial reporting for a parent and its subsidiaries. The equivalent term used on balance sheets in the United Kingdom is: 169. A lender may be protected from deterioration of the borrower’s creditworthiness if the commercial lending agreement requires the borrower to maintain a: 170. The role of financial accounting information is to facilitate economic transactions and to foster efficient allocation of resources among businesses and individuals. 171. Financial reports provide information that can reduce investors’ uncertainty about the company’s opportunities and risks, thereby raising the company’s cost of capital. 172. Comparability across companies allows analysts to identify real economic similarities in and differences between underlying economic events because those similarities or differences are not obscured by accounting methods or disclosure practices. 173. Executive compensation contracts seldom contain annual bonus and longer term pay components tied to financial statement results, but instead usually rely on stock options as a means to reward managers in a manner that is less subject to manipulation by management. 174. The public and private sector regulatory agencies establish and enfor ce financial reporting requirements designed to ensure that companies meet certain minimum levels of financial disclosure. 175. Although the SEC has the ultimate legal authority to set accounting principles in the U.S., it has looked to private -sector organizations (e.g., the FASB) to establish and enforce these principles. 176. Management has considerable discretion over the particular accounting procedures used in the financial statements and over the details contained in related note disclosures. 177. Accounting standard -setting in the U.S. is a technical process and thus little affected by political considerations. 178. The IASB and FASB have worked together to develop a single set of high - quality, understandable, enforceable and globally accepted international financial reporting standards. 179. Foreign companies registered with the SEC that use IFRS no longer have to reconcile their financial statements to U.S. GAAP. 180. U.S. GAAP has been criticized as being too ―rules -based‖ thus allowing managers to invent ―loopholes‖ that conform to the letter of a standard but simultaneously violate its spirit. 181. The goal of the movement toward international convergence of accounting standards is a single set of accounting standards accepted worldwide and superior to the choices presently available. 182. Regulators of industries granted monopoly privileges use financ ial statement data in setting the rates companies are permitted to charge for the services these industries provide. 183. Owners and managers have an economic incentive to supply the amount and type of financial information that will enable the company to raise capital at the lowest cost. 184. Financial statement information can help customers monitor a supplier’s manufacturing processes and thus evaluate the quality of its products. 185. The conceptual framework for financial reporting includes the standards of GAAP. 186. A company’s financial statements reflect information about 187. All financial statements: 188. A firm’s financial statements contain trends that give users insight into the firm’s 189. The ability to raise additional cash by selling assets, issuing stock, or borrowing more is 190. Creditors assess credit risk by comparing a firm’s required principal and interest payments to estimates of the firm’s current and future 191. Professional analysts need information on a company’s future earnings and cash flow to evaluate audit vulnerabilities, to assess debt repayment prospects and to 192. The costs of providing financial information is ultimately borne by 193. Which of the following statements is not correct regarding a company’s financial statements? 194. Which of the following are correct with respect to information contained in financial statements? 195. Which is not correct regarding Regulation Fair Disclosure (Reg FD) ? 196. Companies that have projected operating cash flows that are more than sufficient to meet debt payments are 197. Investors who compare a firm’s discounted future cash flows to the current market price of a stock are using the 198. A company’s financial statements can be used for all of the following purposes except 199. The market analysis known as fundamental analysis 200. Investors who follow a fundamental analysis approach 201. In designing audit procedures the auditor will include all of the following except : 202. Analytical review procedures include all of the following except 203. Relevant financial information 204. To achieve faithful representation, the financial information must be 205. Financial information that is provided to decision makers before it loses its capacity to influence their decisions is 206. Financial information which does not favor one set of interested parties over another is 207. Employees demand financial information for all of the following except : 208. Which of the following statements is correct with respect to economic incentives to release financial information? 209. Which statement below describes efficient market investors? 210. Which of the following create a competitive disadvantage according to the full disclosure principle? 211. When independent measurers get similar results when using the same accounting measurement methods, the financial information is 212. Being verifiable and neutral is part of what makes financial information 213. If a company fails to disclose information about a lawsuit because it might be embarrassing to the company, it is violating 214. Which of the following is not an accurate statement related to the demand for financial reporting? 215. Financial information capable of making a difference in a decision is