Question 1

The 2016 financial statements of CVS Health Corporation reported the following information (in millions):
 The inventory turnover ratio for 2016 is:
A) 9.22
B) 11.48
C) 9.33
D) 10.34
E) None of the above

Accepted Answer

The answer of The 2016 financial statements of CVS Health...

Question 2

CarMax Inc. reports sales of $15,875,118 thousand and cost of sales of $13,691,824 thousand for the year ended February 28, 2017.
The gross profit for the year is:
A) $2,183,294 thousand
B) $1,464,362 thousand
C) 86.2%
D) 13.8%
E) There is not enough information to determine gross profit.

Accepted Answer

Gross profit is calculated as sales minus cost of sales. Therefore, $15,875,118 thousand - $13,691,824 thousand = $2,183,294 thousand.

Question 3

Hauser Corporation has the following metrics for 2016.
 The cash conversion cycle for 2016 is:
A) 2.2 days
B) 61.3 days
C) 47.4 days
D) 70.8 days
E) None of the above

Accepted Answer

The answer of Hauser Corporation has the following metrics for...

Question 4

Which of the following estimates are not always required when calculating depreciation expense? Select all that apply.
A) Depreciation rate
B) Useful life
C) Depreciation method
D) Salvage value
E) None of the above

Accepted Answer

Salvage value is not always required when calculating depreciation expense.

Question 5

Central Supply purchased a new printer for $67,500. The printer is expected to operate for nine (9) years, after which it will be sold for salvage value (estimated to be $6,750).
How much is the first year's depreciation expense if the company uses the double-declining-balance method?
A) $15,000
B) $ 7,500
C) $18,000
D) $13,500
E) None of the above

Accepted Answer

The double-declining-balance method calculates depreciation expense as a percentage of the book value of the asset. The book value is the original cost of the asset minus the accumulated depreciation. The depreciation rate is twice the straight-line depreciation rate.In this case, the original cost of the printer is $67,500 and the salvage value is $6,750. The straight-line depreciation rate is (100% - 0%) / 9 = 11.11%. The double-declining-balance depreciation rate is 2 * 11.11% = 22.22%.The first year's depreciation expense is 22.22% * $67,500 = $15,000.

Question 6

One difference between straight-line and double-declining-balance depreciation methods is that:
A) Straight-line method will fully depreciate the asset more quickly.
B) Double-declining-balance method will fully depreciate the asset more quickly.
C) Income taxes paid will be lower under the double-declining-balance method.
D) Losses on disposal will be lower under the straight-line method.
E) None of the above

Accepted Answer

The answer of One difference between straight-line and double-declining-balance depreciation...

Question 7

An asset is impaired when the asset's carrying value is:
A) Greater than the sum of discounted expected cash flows.
B) Less than the sum of discounted expected cash flows.
C) Less than the sum of undiscounted expected cash flows.
D) Greater than the sum of undiscounted expected cash flows.
E) None of the above

Accepted Answer

An asset is considered impaired when its carrying value exceeds the sum of its undiscounted expected cash flows, indicating that the asset may not be recoverable.

Question 8

Dow Chemical Corporation plans to build a laboratory dedicated to a special project. The company will not use the laboratory after the project is finished. Under GAAP, this laboratory should be:
A) Capitalized and depreciated.
B) Expensed in the current year.
C) Depreciated and expensed.
D) Capitalized only.
E) None of the above

Accepted Answer

Under GAAP, if the laboratory will not be used after the project is finished, the cost should be expensed in the current year as it does not provide future economic benefits beyond the current period.

Question 9

Fey Enterprises recorded a restructuring charge of $16.2 million during fiscal 2016 related entirely to the closing of its division located in Denver, Colorado. The company's financial statement footnotes indicated that expected employee separation payments amounted to $12.6 million and that fixed asset write-downs accounted for the remainder. Nickolas had never before incurred restructuring charges. At the end of the year, the company's balance sheet included a restructuring accrual of $2,700,000.
The cash flow effect of Fey Enterprises' restructuring during fiscal 2016 is:
A) $0 (there was no cash flow effect in 2016)
B) $13,200,000
C) $16,800,000
D) $ 9,900,000
E) $21,600,000

Accepted Answer

The cash flow effect is the actual cash paid out during the year. The total restructuring charge was $16.2 million, with $12.6 million for employee separation payments. The balance sheet shows a restructuring accrual of $2.7 million, indicating that this amount is yet to be paid. Therefore, the cash paid out is $12.6 million - $2.7 million = $9.9 million.

Question 10

InterTech Corporation recorded pretax restructuring charges of $1,033.5 million in 2017. The charges consisted of asset write-downs of $681 million, costs associated with exit or disposal activities of $99 million, and employee severance costs of $253.5 million. The company paid $108 million cash to settle these restructuring charges during the year (2017).
At year end, the restructuring accrual associated with these charges was:
A) $ 1,033.5 million
B) $ 326.0 million
C) $ 253.5 million
D) $ 244.5 million
E) There is not enough information to determine the amount.

Accepted Answer

The restructuring accrual at year-end is calculated as the total restructuring charges minus the cash paid. Thus, $1,033.5 million - $108 million = $925.5 million. However, the question asks for the accrual associated with the charges, which is the remaining unpaid portion of the severance costs, $253.5 million - $108 million = $145.5 million, plus the exit or disposal activities, $99 million, totaling $244.5 million.

Question 11

Acadia, Inc. recorded restructuring charges of $235,542 thousand during fiscal 2017 related entirely to anticipated employee separation payments. Acadia, Inc. had never before incurred restructuring charges. At the end of the year, the company's balance sheet included a restructuring accrual of $29,643 thousand.
The cash flow effect of Acadia's restructuring during fiscal 2017 was:
A) $205,899 thousand
B) $235,542 thousand
C) $265,185 thousand
D) $ 29,643 thousand
E) None of the above

Accepted Answer

The cash flow effect is calculated by subtracting the ending restructuring accrual ($29,643 thousand) from the total restructuring charges ($235,542 thousand), resulting in $205,899 thousand.

Question 12

The 2016 financial statements for BNSF Railway report the following information:
 The 2016 property, plant and equipment turnover is:
A) 0.39
B) 2.38
C) 0.33
D) 0.70
E) None of the above

Accepted Answer

The answer of The 2016 financial statements for BNSF Railway...

Question 13

The 2016 financial statements for Leggett & Platt, Inc., report the following information:
 Which of the following estimates the property and equipment's percent-used-up at December 31, 2016?
A) 68.8%
B) 45.4%
C) 16.9%
D) 42.3%
E) None of the above

Accepted Answer

The answer of The 2016 financial statements for Leggett &...

Question 14

The 2016 financial statements of Willamette Valley Vineyards, Inc. include the following footnote:
 The average useful life of Willamette's depreciable assets at the end of fiscal 2016 is:
A) 14.2 years
B) 19.6 years
C) 2.4 years
D) 21.7 years
E) None of the above

Accepted Answer

The answer of The 2016 financial statements of Willamette Valley...

Question 15

Aiello, Inc. had the following inventory in fiscal 2016. Compute the company's cost of goods sold for fiscal 2016 assuming the company used a) FIFO and b) LIFO methods of accounting for inventory:
Beginning Inventory, January 1, 2016: 130 units @ $15.00
Purchase 200 units @ $18.00
Purchase 50 units @ $13.50
Purchase 110 units @ $15.75
Ending Inventory, December 31, 2016: 120 units

Accepted Answer

The answer of Aiello, Inc. had the following inventory in...

Question 16

Everett Company uses the average cost method to account for inventory and has the following activity during the month of March 2017. 
  During March, Everett sold 850 units.
Compute the cost of goods sold for March and the ending inventory balance at March 31, 2017.

Accepted Answer

The answer of Everett Company uses the average cost method...

Question 17

Leggett and Platt reported total inventory of $519.6 million on their 2016 balance sheet along with a LIFO reserve of $33.8 million. 
What would the company have reported on its balance sheet for inventory if it had used the FIFO method of accounting for inventory?

Accepted Answer

The answer of Leggett and Platt reported total inventory of...

Question 18

Leggett and Platt uses the LIFO method of accounting for inventory. The company reported a LIFO reserve of $22.6 million at the beginning of the 2016 fiscal year and a LIFO reserve of $33.8 million at the end of the 2016 fiscal year. Cost of goods sold reported on the 2016 income statement was $2,850.7 million. 
What would the company have reported for cost of goods sold had they used FIFO to account for inventory costs?

Accepted Answer

The answer of Leggett and Platt uses the LIFO method...

Question 19

Note 3 to the 2016 financial statements of Willamette Valley Vineyards reports that Inventories consist of the following:
  The company reported cost of goods sold of $7,204,884 in 2016 and $7,092,111 in 2015. At December 31, 2014, Total inventories were $ 9,910,570.
Compute average days inventory outstanding for both years. What does this ratio mean? Interpret the ratios.

Accepted Answer

The answer of Note 3 to the 2016 financial statements...

Question 20

The January 28, 2017 (fiscal year 2016) financial statements of Caleres, Inc. reported the following information (in thousands):
  The footnotes to the 2016 financial statements of Skechers U.S.A., Inc., a competitor of Caleres, Inc., reported that the company uses the FIFO method of accounting for inventories. Financial statements reported the following (in thousands):
  Compare the two companies' days-inventory-outstanding ratios for 2016. To do this properly, you will need to convert the companies' cost of sales and inventories to a common inventory costing method. Which company is more efficient with its inventory?

Accepted Answer

The answer of The January 28, 2017 (fiscal year 2016)...

Quiz 6: Inventory, Accounts Payable, and Long-Term Assets

The 2016 financial statements of CVS Health Corporation reported the following information (in millions) : The inventory turnover ratio for 2016 is:

CarMax Inc. reports sales of $15,875,118 thousand and cost of sales of $13,691,824 thousand for the year ended February 28, 2017. The gross profit for the year is:

Hauser Corporation has the following metrics for 2016. The cash conversion cycle for 2016 is:

Which of the following estimates are not always required when calculating depreciation expense? Select all that apply.

Central Supply purchased a new printer for $67,500. The printer is expected to operate for nine (9) years, after which it will be sold for salvage value (estimated to be $6,750) . How much is the first year's depreciation expense if the company uses the double-declining-balance method?

One difference between straight-line and double-declining-balance depreciation methods is that:

An asset is impaired when the asset's carrying value is:

Dow Chemical Corporation plans to build a laboratory dedicated to a special project. The company will not use the laboratory after the project is finished. Under GAAP, this laboratory should be:

The 2016 financial statements for BNSF Railway report the following information: The 2016 property, plant and equipment turnover is:

The 2016 financial statements for Leggett & Platt, Inc., report the following information: Which of the following estimates the property and equipment's percent-used-up at December 31, 2016?

The 2016 financial statements of Willamette Valley Vineyards, Inc. include the following footnote: The average useful life of Willamette's depreciable assets at the end of fiscal 2016 is:

Everett Company uses the average cost method to account for inventory and has the following activity during the month of March 2017. During March, Everett sold 850 units. Compute the cost of goods sold for March and the ending inventory balance at March 31, 2017.

Leggett and Platt reported total inventory of $519.6 million on their 2016 balance sheet along with a LIFO reserve of $33.8 million. What would the company have reported on its balance sheet for inventory if it had used the FIFO method of accounting for inventory?