Question 1

In the United States,financial statements are prepared following the Financial Accounting Standards Board's generally accepted accounting principles (GAAP).

Accepted Answer

Financial statements in the United States are indeed prepared following the generally accepted accounting principles (GAAP) set forth by the Financial Accounting Standards Board (FASB).

Question 2

Which of the following statements about International Financial Reporting Standards (IFRS)is NOT true?

Accepted Answer

IFRS actually allows for more judgement and discretion than GAAP, as it focuses on principles rather than specific rules. Option A is true in that IFRS provides a conceptual framework rather than specific rules. Option C is also true as IFRS allows for more judgement, which could potentially be abused. Option D was true at the time but has since been delayed indefinitely.

Question 3

Which of the following statements about Generally Accepted Accounting Principles (GAAP)is NOT true?

Accepted Answer

All of the statements given in the options about Generally Accepted Accounting Principles (GAAP) are true. GAAP is indeed a set of rules, standards, and conventions that must be followed by accountants while preparing audited financial statements. It comprises more than 150 pronouncements that provide guidance on how to account for various types of transactions. The Financial Accounting Standards Board (FASB) is responsible for establishing and updating these standards.

Question 4

Please refer to Table 3-2 for the following questions.
Table 3-2
Enigma has the following financial information:
  No changes were made in interest payable or taxes payable.
-Based on the information in Table 3-2,what is Enigma's cash flow from operations?

Accepted Answer

The answer of Please refer to Table 3-2 for the...

Question 5

International Financial Reporting Standards (IFRS)is a set of principle-based accounting standards that were established by the International Accounting Standards Board (IASB).

Accepted Answer

IFRS is a set of principle-based accounting standards established by the IASB.

Question 6

Prepare an income statement using the information given below.Make sure to identify gross profit,operating income,and net income.

Accepted Answer

The answer of Prepare an income statement using the information...

Question 7

Generally Accepted Accounting Principles (GAAP).GAAP is a set of principle-based accounting standards established by the Financial Accounting Standards Board (FASB).

Accepted Answer

The answer of Generally Accepted Accounting Principles (GAAP).GAAP is a...

Question 8

It is possible for two companies to have the same financial performance,but their financial statements can be different,depending on how and when the managers choose to report certain transactions.

Accepted Answer

The presentation and timing of financial transactions can affect the appearance of financial statements, even if the underlying financial performance is the same. Managers have some discretion in how they report certain transactions, which can result in differences in financial statement presentation.

Question 9

Table 3-3 Marlett Company Financial Information  Based on the information in Table 3-3,prepare a statement of cash flows for 2010.Assume that there were no changes in any other asset or liability accounts,and that the ending cash balance for 2009 was $100.

Accepted Answer

The answer of Table 3-3 Marlett Company Financial Information ...

Question 10

Rogue Corp.has sales of $4,250,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000.The firm's interest expense is $250,000,and the corporate tax rate is 40%.What is Rogue's tax liability?

Accepted Answer

First, we need to calculate Rogue Corp's earnings before interest and taxes (EBIT):
EBIT = Sales - Cost of goods sold - Operating expenses
EBIT = $4,250,000 - $2,500,000 - $600,000
EBIT = $1,150,000

Next, we need to calculate Rogue Corp's earnings before taxes (EBT):
EBT = EBIT - Interest expense
EBT = $1,150,000 - $250,000
EBT = $900,000

Finally, we can calculate Rogue Corp's tax liability:
Tax liability = EBT x Tax rate
Tax liability = $900,000 x 0.40
Tax liability = $360,000

Therefore, the correct answer is C.

Question 11

A firm paid dividends of $10,000,paid interest of $20,000,reduced debt principal outstanding (paid off debt)in the amount of $100,000,and sold new stock for $150,000.What was the firm's cash flow from financing activities?

Accepted Answer

Cash flow from financing activities includes dividends paid, net changes in debt, and net changes in equity. Here, dividends paid out ($10,000) and debt reduction ($100,000) are cash outflows, while selling new stock ($150,000) is a cash inflow. The net cash flow from financing activities is $150,000 - $10,000 - $100,000 = $40,000 inflow, which is not an option provided. However, based on the options given, none directly match the correct calculation, suggesting a possible error in the question or answer choices. Given the options, none accurately reflect the correct calculation of cash flow from financing activities based on the provided data.

Question 12

The income statement for Simpson,Inc.indicates that tax expense was $30,000.The balance sheet indicates that taxes payable for the same year increased by $5,000.What amount did Simpson,Inc.actually pay in taxes during this year?

Accepted Answer

Tax expense on the income statement represents the amount of tax liability the company has incurred for the period, whereas taxes payable on the balance sheet represents the amount of taxes that the company owes to the tax authorities as of the balance sheet date. 
Therefore, the actual amount Simpson, Inc. paid for taxes during the year was the tax expense of $30,000 minus the increase in taxes payable of $5,000, which equals $25,000.

Question 13

Mr.Wizard's Magic Shoppe had the following condensed balance sheet at the end of operation for 2010: Mr.Wizard's Magic Shoppe Balance Sheet December 31,2010  During 2011,the following occurred a.Mr.Wizard's sold some of its investments for $13,000 which resulted in a gain of $300 after taxes.The gain (net of taxes)has been included in the company's 2011 net income. b.Additional land for a plant expansion was purchased for $25,000. c.Bonds payable were paid in the amount of $10,000. d.An additional $35,000 in capital stock was issued. e.Dividends of $15,000 were paid to stockholders. f.Net income for 2011 was $48,000 after allowing for $15,000 in depreciation. g.A second parcel of land was purchased through the issuance of $10,000 in bonds,and $5,000 in long-term notes payable. Required: a.Prepare a statement of cash flows for the year ended 12/31/2011.(check figure: ending cash balance = $72,500) b.Prepare a condensed balance sheet for Mr.Wizard's at December 31,2011.

Accepted Answer

The answer of Mr.Wizard's Magic Shoppe had the following condensed...

Question 14

Is it possible for a company that has negative net income and negative operating cash flow to end the year with an increase in cash and an increase in stock price? Explain your answer.

Accepted Answer

The answer of Is it possible for a company that...

Question 15

Which of the following best describes cash flow from financing activities?

Accepted Answer

The answer of Which of the following best describes cash...

Question 16

Please refer to Table 3-2 for the following questions.
Table 3-2
Enigma has the following financial information:
  No changes were made in interest payable or taxes payable.
-A firm has after-tax cash flow from operations equal to $100,000.Operating working capital increased by $20,000,and the firm purchased $30,000 of fixed assets.The firm's free cash flow was

Accepted Answer

Free cash flow is calculated as after-tax cash flow from operations minus investments in operating working capital minus investments in fixed assets. Here, it's $100,000 - $20,000 - $30,000 = $50,000.

Question 17

Given the information below,calculate the company's cash balance at the end of the year.

Accepted Answer

The answer of Given the information below,calculate the company's cash...

Quiz 3: Understanding Financial Statements and Cash Flows

In the United States,financial statements are prepared following the Financial Accounting Standards Board's generally accepted accounting principles (GAAP).

Which of the following statements about International Financial Reporting Standards (IFRS) is NOT true?

Which of the following statements about Generally Accepted Accounting Principles (GAAP) is NOT true?

Please refer to Table 3-2 for the following questions. Table 3-2 Enigma has the following financial information: No changes were made in interest payable or taxes payable. -Based on the information in Table 3-2,what is Enigma's cash flow from operations?