Question

(Multiple Choice)
1. What is the best source of income for a corporation?
a. Prior-period adjustments
b. Continuing operations
c. Discontinued operations
d. Extraordinary items

2. Leslie’s Lotion Company reports several earnings numbers on its current-year income statement (parentheses indicate a loss):


How much net income would most investment analysts predict for Leslie’s to earn next year?
a. $40,000
b. $38,000
c. $71,000
d. $30,000

3. Return to the preceding question. Suppose you are evaluating Leslie’s Lotion Company stock as an investment. You require an 8% rate of return on investments, so you capitalize Leslie’s earnings at 8%. How much are you willing to pay for all of Leslie’s stock?
a. $2,062,500
b. $975,000
c. $512,500
d. $500,000

4. Boston Systems purchased inventory on account from Megaplex. The price was ¥140,000, and a yen was quoted at $0.0091. Boston paid the debt in yen a month later when the price of a yen was $0.0092. Boston
a. recorded a Foreign-Currency Transaction Gain of $14.
b. debited Inventory for $1,288.
c. debited Inventory for $1,274.
d. None of the above

5. One way to hedge a foreign-currency transaction loss is to
a. pay debts as late as possible.
b. pay in the foreign currency.
c. offset foreign-currency inventory and plant assets.
d. collect in your own currency.

6. Foreign-currency transaction gains and losses are reported on the
a. balance sheet.
b. income statement.
c. statement of cash flows.
d. consolidation work sheet.

7. Earnings per share is not reported for
a. discontinued operations.
b. extraordinary items.
c. comprehensive income.
d. continuing operations.

8. Copycat Corporation has income before income tax of $110,000 and taxable income of $100,000. The income tax rate is 30%. Copycat’s income statement will report net income of
a. $30,000.
b. $33,000.
c. $77,000.
d. $107,000.

9. Copycat Corporation in the preceding question must immediately pay income tax of
a. $77,000.
b. $30,000.
c. $33,000.
d. $70,000.

10. Use the Copycat Corporation data in question 43. At the end of its fi rst year of operations, Copycat’s deferred tax liability is
a. $27,000.
b. $11,000.
c. $3,000.
d. $19,000.

11. Which of the following items is most closely related to prior-period adjustments?
a. Retained earnings
b. Earnings per share
c. Preferred stock dividends
d. Accounting changes

12. Examine the statement of stockholders’ equity of Wellington Electronics Corporation. What was the market value of each share of the stock that Wellington gave its stockholders in the stock dividend?


a. $26
b. $39,000
c. $3,000
d. $52

13. Which statement is true?
a. The Public Company Oversight Board evaluates internal controls.
b. GAAP governs the form and content of the financial statements.
c. Management audits the financial statements.
d. Independent auditors prepare the financialstatements.


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  • CreatedApril 22, 2013
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