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Exam 3: Financial Statements, Cash Flows and Tax

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Question 21

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The assumption of arm's-length transaction states that:

A) both parties to a transaction can act independently of each other and make economically rational decisions.
B) both parties to a transaction must have had previous transactions.
C) one of the parties to the transaction is a bank that has full knowledge of the company's creditworthiness.
D) none of the above

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Question 22

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Depreciation and amortisation are examples of prepaid expenses.

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Question 23

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Which one of the following is NOT true regarding income tax and the imputation system?

On June 23, 2013, Mikhal Cosmetics sold $250,000 worth of its products to Rynex Company, with the payment to be made in 90 days on September 20. The goods were shipped to Rynex on July 2. The company's accountants should recognise the sale on:

Centennial Brewery produced revenues of $1,145,227 in 2012. It has expenses (excluding depreciation) of $812,640, depreciation of $131,335, and interest expense of $81,112. It pays a company tax rate of 30 percent. What is the company's profit after tax?

The going concern assumption states that a business will be shutting down its operation in the near future.

Identify and explain the five fundamental principles that form the basis of accounting standards in Australia.

The cost principle states that an asset should be recognised on the balance sheet at:

The balance sheet identity can be stated as Total assets - Total liabilities = Total shareholders' equity.

Inventory valuation methods can have a significant impact on both the income statement and the balance sheet.

Which one of the following is NOT true for a company?

According to the realisation principle, revenue from a sale of the company's products is recognised:

Chartworth Associates' financial statements indicated that the company had EBITDA of $3,145,903. It had depreciation of $633,000, and its interest rate on debt of $1.25 million was 7.5 percent. Calculate the amount of tax the company is likely to owe. The corporate tax rate is 30%.

Preparing a market-value balance sheet is rather straightforward because it is easy to obtain market values for all assets and liabilities.

Parrino Company has announced that its profit for the year ended June 30, 2013, is $1,824,214. The company had an EBITDA of $ 5,174,366, and its depreciation and ?mortization expense was equal to $1,241,790. The company's tax rate is 30 percent. What is the amount of interest expense for the company?

Which one of the following does NOT belong on an income statement?

Cash flows from financing activities include all but one of the following:

When prices are falling, valuing inventory using the weighted average cost method rather than FIFO gives:

The set of International Financial Reporting Standards has improved the comparability of financial statements around the world.

Chandler Sporting Goods produces baseball and football equipment and lines of clothing. This year the company had cash and marketable securities worth $335,485, accounts payables worth $1,159,357, inventory of $1,651,599, accounts receivables of $1,488,121, short-term notes payable worth $313,663, and other current assets of $121,427. What is the company's net working capital?