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Chapter 02 Financial Statements & Cash Flow




Question;25. Book value;A. is based on historical cost.;B. is equivalent to market value for firms with fixed assets.;C. is more of a financial than an accounting valuation.;D. generally tends to exceed market value when fixed assets are included.;E. is adjusted to market value whenever the market value exceeds the;stated book value.;26. When making financial decisions related to assets;you should;A. always consider market values.;B. place more emphasis on book values than on market values.;C. rely primarily on the value of assets as shown on the balance sheet.;D. place primary emphasis on historical costs.;E. only consider market values if they are less than book values.;27. As seen on an income statement;A. interest is deducted from income and increases the total taxes;incurred.;B. the tax rate is applied to the earnings before interest and taxes when;the firm has both depreciation and interest expenses.;C. depreciation is shown as an expense but does not affect the taxes;payable.;D. depreciation reduces both the pretax income and the net income.;E. interest expense is added to earnings before interest and taxes to get;pretax income.;28. The earnings per share will;A. decrease as the total revenue of the firm increases.;B. increase as the number of shares outstanding increase.;C. increase as net income increases.;D. decrease as the costs decrease.;E. increase as the tax rate increases.;29. Dividends per share;A. increase as the net income increases as long as the number of shares;outstanding remains constant.;B. decrease as the number of shares outstanding decrease, all else;constant.;C. are inversely related to the earnings per share.;D. are based upon the dividend requirements established by Generally;Accepted Accounting Procedures.;E. are equal to the amount of net income distributed to shareholders;divided by the number of shares outstanding.;30. According to Generally Accepted Accounting;Principles;A. income is recorded based on the matching principle.;B. costs are recorded based on the liquidity principle.;C. income is recorded based on the realization principle.;D. depreciation is recorded as it affects the cash flows of a firm.;E. net income is recorded based on the realization principle.;31. According to Generally Accepted Accounting;Principles, costs are;A. recorded as incurred.;B. recorded when paid.;C. matched with revenues.;D. matched with production levels.;E. expensed as management desires.;32. Depreciation;A. reduces both the net fixed assets and the costs of a firm.;B. is a non-cash expense that is recorded on the income statement.;C. is a non-cash expense which decreases the net operating income.;D. decreases net fixed assets, net income, and operating cash flows.;E. increases the net fixed assets as shown on the balance sheet.


Paper#55163 | Written in 18-Jul-2015

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