All of the following would be considered financing activities except for:
Answer(s): D
Investing activities include lending funds and collecting the principal on these loans.
In a classified balance sheet the following is always true:
Answer(s): B
A classified balance sheet always breaks down current and non-current assets and liabilities. Items defined as current assets are those that will be converted to cash or used in operations within one year or the operating cycle, whichever is longer. Current liabilities are obligations due during the same period. Current assets minus current liabilities is equal to working capital.
Which of the following is a valuable investigation tool for analysis of the collectibility of a firm's receivables?
Answer(s): A
Each of the above mentioned tools are valuable in assessing the collectibility of a firm's accounts receivables.An aging schedule will pinpoint which customers are not paying within terms. An analyst should investigate if a firm is understating allowances for discounts, returns and allowances, as this would overstate receivables. If too much of a firm's sales are made to one or more firm's that are experiencing financial distress, receivables are at risk.
Which of the following is/are true under GAAP?
Answer(s): C
(I) is not true since after a write-down, inventories can be written back up to the original cost if the prices of goods increase sufficiently. (II) is also not true since marketable securities are carried at current market value.Finally, when prices are rising, the COGS under LIFO is higher than that under FIFO, leading to lower tax payments.
Which of the following is/are FALSE?
Unlike Accrual accounting, Cash accounting recognizes revenues and expenses when cash flows occur, not necessarily when the earnings process is complete or goods and services consumed.
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