Question :
81. The more variable the firm’s cash flows from operating activities, : 1230517
81. The more variable the firm’s cash flows from operating activities, the more risk that the firm will not have sufficient cash to meet the required payments. Failure to meet these obligations can result in
A. default
B. creditor intervention in the management of the firm
C. regulatory intervention in the management of the firm
D. bankruptcy
E. all of the above
82. Which of the following is true regarding the balance sheet
A. does not provide all the information an analyst wants or needs about a firm’s resources and the claims on those resources
B. authoritative accounting guidance precludes the recognition of some resources as assets and some obligations as liabilities
C. amounts reported on the balance sheet for assets, liabilities, and shareholders’ equity do not necessarily reflect current market conditions
D. astute analysts recognize the features of the balance sheet and adjust the reported numbers
E. all of the above
83. The current price of a share of common stock reflects current economic conditions, not the requirements of authoritative guidance. Market-to-bookvalue ratios tend to be large for firms that
A. make substantial expenditures on internally developed assets
B. have a favorable competitive position
C. have a favorable growth potential
D. all of the above
E. none of the above
84. Key factors in preparing a balance sheet is/are deciding
A. whether items meet the definitions for assets and liabilities
B. whether items meet the recognition criteria for assets and liabilities
C. how to measure the items
D. all of the above
E. none of the above
85. For a firm to recognize an asset
A. a resource must represent a future economic benefit that the firm controls as a result of a past transaction or exchange
B. the firm must be able to measure the resource with sufficient reliability
C. must impose a future economic sacrifice because of a past event or transaction that the firm has little or no discretion to avoid
D. choices a and b
E. none of the above
86. Under both U.S. GAAP and IFRS, the firm must immediately expense all expenditures on _____.
A. research
B. development
C. nonfinancial assets
D. financial assets
E. intangible assets
87. The principal objective of accounting reports as currently prepared is to present ______ the results of operations and the financial condition of the firm.
A. fairly
B. accurately
C. objectively
D. subjectively
E. correctly
88. Accountants record assets at
A. acquisition cost
B. the present value of the future net cash flows based on estimated receipts
and operating expenses
C. current economic value
D. current replacement cost
E. appraised value
89. In the recognition criteria for liabilities with uncertain amount and/or timing, probable is used in U.S. GAAP to refer to a threshold of likelihood—a rule of thumb used in practice is approximately _____ In IFRS, probable as recognition criterion for liabilities with uncertain amount and/or timing means approximately _____.
A. 33%; 25%
B. 51%; 51%
C. 60%; 25%
D. 80%; 51%
E. 90%; 75%
90. Assume that Trader Pete’s, an organic food retailer in the United States, recently purchased a new refrigeration system for its Washington, DC, store. Trader Pete’s paid $1.3 million for the refrigeration unit and paid an additional $120,000 to modify the unit to meet its specific needs. Trader Pete’s paid $55,000 for the transportation and installation of the unit, plus $48,000 for an annual insurance premium for the first year, which begins next month. Finally, assume that Trader Pete’s hired a refrigeration technician, who is charged with the maintenance of the unit; that technician’s annual salary is $80,000. How much should Trader Pete’s record as the acquisition cost of the refrigeration unit?
A. 1,300,000
B. 1,420,000
C. 1,475,000
D. 1,523,000
E. 1,603,000
