The following are all true concerning transactional analysis, except,
Answer(s): D
This method reconciles line-item changes in the balance sheet with their related income statement components to derive the cash flow consequences of the reported transactions and events.
The statement of cash flows cannot be used to
Answer(s): E
Income statement and balance sheet data must be combined with cash flows for insights into the firm's ability to realize assets based on reported revenues and settle liabilities resulting from accrued expenses.
Which of the following is/are true?
An increase in inventories implies cash was spent to obtain more goods than were sold. An increase in receivables implies part of the sales were made on credit, not a cash basis. Deferring taxes implies some of the cash expense was delayed into the future, increasing the current cash balance. Utilization of taxloss carry- forwards implies a reduction in the taxable income by the amount of the carry-forward. This reduces cash expense on taxes.
A benefit period for accounting amortization can not exceed how many years ________.
Answer(s): B
In accounting no benefit can be amortized over more than 40 years. The difficulties of going further do not provide sufficient benefit to justify the cost.
Suppose the average stock price in the above example were 40. How many shares will be used in the calculation of Diluted EPS now?
Answer(s): C
Since the average stock price now exceeds the strike price, the warrants are assumed converted. The proceeds from the exercise equal 800,000*35 = 28 million. The Treasury Stock method assumes a purchase of shares at 40 using these proceeds. Thus, the number of shares repurchased = 28,000,000/40 = 700,000. Thus, the additional shares arising from warrant exercise equals 800,000 - 700,000 = 100,000. Now, in the Treasury Stock method, options and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, whichever is later. Thus, in this case, the addition 100,000 shares have been outstanding since May 31, 1998. So the weighted number of shares for Diluted EPS = 1 million + 200,000*9/12 + 100,000*7/12 = 1,208,333 shares.
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