22. Which of the following will most likely help identify an increasing proportion of uncollectible sales? (Points : 2) a. accounts receivable turnover b. the ratio of bad debt expense to sales c. the ratio of sales returns to sales d. the ratio of cost of sales to sales 23. Under the percentage-of-completion contract method (Points : 2) a. revenue and cost are recognized during the production cycle, but gross profit recognition is deferred until the contract is completed. b. revenue, cost, and gross profit are recognized during the production cycle. c. revenue, cost, and gross profit are recognized at the time the contract is completed. d. none of these 26. All of the following are conditions for revenue recognition outlined by SAB 104 except: (Points : 2) a. There is pervasive evidence that an arrangement exists. b. Delivery has occurred or services have been performed. c. The seller?s price to the buyer can be variable. d. Collectability is reasonably assured. 27. Upton Company has consistently used the percentage-of-completion method of recognizing income. In 2010, Upton started on an $18,000,000 construction contract that was completed in 2012. The following information was taken from Upton?s 2010 accounting records: Progress billing $ 6,600,000 Costs incurred $ 5,400,000 Collections $ 4,200,000 Estimated costs to complete $10,800,000 What amount of revenue should Upton recognize on the contract in 2010? (Points : 2) a. $6,000,000 b. $5,400,000 c. $9,000,000 d. $0 28. The projected benefit obligation measures (Points : 2) a. the pension obligation on the basis of the plan formula applied to years of service to date and based on existing salary levels. b. an estimated total benefit at retirement and then computes the level cost that will be sufficient, together with interest expected to accumulate at the assumed rate, to provide the total benefits at retirement. c. the pension obligation on the basis of the plan formula applied to years of service to date and based on future salary levels. d. the shortest possible period for funding to maximize the tax deduction. 29. Academic research has found that market rates of return on common stock are the most highly correlated with (Points : 2) a. net income. b. cash flow from operations. c. EBITDA. d. cash flow from investing activities. 30. As products move through the maturity phase, companies invest to ___________ productive capacity. (Points : 2) a. increase b. decrease c. maintain d. Not enough information to answer this question. 41. All of the following statements are true regarding ratios and forecasts except: (Points : 2) a. Ratios cannot confirm whether forecast assumptions will turn out to be correct. b. Ratios can tell whether future sales growth was accurately captured. c. Ratios cannot tell whether assumptions about future cash flows are realistic. d. Ratios can tell whether growth rates for sales are consistent with past sales growth performance. 42. An analyst using the inventory turnover ratio to calculate future levels of inventory may face the problem that (Points : 2) a. the method reduces the potential understatement inherent in average balances. b. the method can introduce artificial volatility in ending balances. c. the method results in understating inventory each year. d. the method results in overstating inventory each year. 43. Financial statement forecasts rely on additivity within financial statements and articulation across financial statements. Given this information sales growth forecasts will most likely affect growth in (Points : 2) a. accounts receivables. b. accounts payable. c. depreciation. d. salary payable. 44. Sparky?s Sparky?s sells auto parts. Provided below is selected financial information from the company?s 2012 annual report: Sparky?s Selected Financial Statement data Fiscal year end 2012 2011 (amounts in thousands of dollars) Net sales $125,410 $106,380 Cost of Goods Sold -104,090 -89,359 Gross Profit $21,320 $17,021 Inventory $31,353 $30,850 Sparky?s forecasts that sales will grow by 25% in 2013 and that its cost of goods sold to sales ratio will be the same in 2013 as it was in 2012. If these assumptions prove correct and Sparky?s inventory turnover ratio for 2013 is 4.5 what will be the level of inventory at the end of 2013? (Points : 2) a. $31,353 b. $38,320 c. $40,000 d. $42,314 45. Which of the following statements does not apply to preventing ?garbage in, garbage out? when implementing a forecasting game plan? (Points : 2) a. The quality of the financial statement forecasts will depend on the quality of the b. forecast assumptions. c. The quantities forecasted within financial statement forecasts will depend on the quantity of the forecast assumptions. d. Analysts should justify and evaluate the most important assumptions that reflect the critical risk and success factors of the firm?s strategy. e. Analysts can impose reality checks on the assumptions by analyzing the forecasted financial statements using ratios, common-size, and rate-of-change financial statements. 46. As a firm progresses through the introduction life-cycle stage, what type of flexible account will it be more likely to use to balance the balance sheet? (Points : 2) a. dividends. b. growth related assets. c. issued equity. d. stock buy-backs. 48. If a firm competes in a capital-intensive industry with excess capacity, all of the following are true except: (Points : 2) a. price increases will be less likely. b. price increases will be more likely. c. companies in competitive industries face high exit barriers. d. companies in competitive industries may experience future price decreases.
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