Chapter 4 Solutions
Chapter 04
Analyzing Investing Activities
Multiple Choice Questions 1. Which of the following would rarely be classified as a current asset?
A. Prepaid insurance
B. Goodwill
C. Marketable Securities
D. Work-in-progress 2. Which of the following would not be classified as a current asset?
A. Inventory
B. Accounts payable
C. Accounts receivable
D. Prepaid expenses 3. An asset is considered to be liquid if:
A. it is readily converted into a current asset.
B. it is an intangible asset.
C. it is readily converted into cash.
D. it is part of retained earnings. 4. Analysis of a company's assets will help evaluate its:
I. liquidity.
II. solvency.
III. operational capacity.
IV financing ability.
A. I, II, III and IV
B. 1, II and IV
C. II, III and IV
D. I, II and III 5. For Control Furniture Co.,
LIFO Reserve in Year 2006 $91 million
LIFO Reserve in Year 2005$82 million
Tax Rate is 35%.
To restate Year 2006 LIFO inventories to a FIFO basis, we use the following analytical entry: A. Option A
B. Option B
C. Option C
D. Option D The following information can be found in ABC Co.'s financial statements.
Assume a tax rate of 35%. Inventories valued using the LIFO method represented approximately 80% of consolidated inventories. 6. What will be the value of inventory for 2006 if ABC used FIFO valuation?
A. 633,485
B. 570,430
C. 633,381
D. 488,581 7. What will be the retained earnings for 2006 if ABC used FIFO valuation?
A. 3,205,271
B. 3,566,918
C. 3,893,000
D. 4,096,430 8. What will be the retained earnings for 2005 if ABC used FIFO valuation?
A. 3,205,271
B. 3,566,918
C. 3,893,000
D. 4,096,430 9. The use of LIFO rather than FIFO for inventory costing under normal economic conditions results in:
I. lower net income.
II. higher total assets.
III. gher retained earnings.
IV. unchanged retained earnings.
A. II and III
B. I, II and IV
C. I only
D. I and IV 10.
Analyzing Investing Activities
Multiple Choice Questions 1. Which of the following would rarely be classified as a current asset?
A. Prepaid insurance
B. Goodwill
C. Marketable Securities
D. Work-in-progress 2. Which of the following would not be classified as a current asset?
A. Inventory
B. Accounts payable
C. Accounts receivable
D. Prepaid expenses 3. An asset is considered to be liquid if:
A. it is readily converted into a current asset.
B. it is an intangible asset.
C. it is readily converted into cash.
D. it is part of retained earnings. 4. Analysis of a company's assets will help evaluate its:
I. liquidity.
II. solvency.
III. operational capacity.
IV financing ability.
A. I, II, III and IV
B. 1, II and IV
C. II, III and IV
D. I, II and III 5. For Control Furniture Co.,
LIFO Reserve in Year 2006 $91 million
LIFO Reserve in Year 2005$82 million
Tax Rate is 35%.
To restate Year 2006 LIFO inventories to a FIFO basis, we use the following analytical entry: A. Option A
B. Option B
C. Option C
D. Option D The following information can be found in ABC Co.'s financial statements.
Assume a tax rate of 35%. Inventories valued using the LIFO method represented approximately 80% of consolidated inventories. 6. What will be the value of inventory for 2006 if ABC used FIFO valuation?
A. 633,485
B. 570,430
C. 633,381
D. 488,581 7. What will be the retained earnings for 2006 if ABC used FIFO valuation?
A. 3,205,271
B. 3,566,918
C. 3,893,000
D. 4,096,430 8. What will be the retained earnings for 2005 if ABC used FIFO valuation?
A. 3,205,271
B. 3,566,918
C. 3,893,000
D. 4,096,430 9. The use of LIFO rather than FIFO for inventory costing under normal economic conditions results in:
I. lower net income.
II. higher total assets.
III. gher retained earnings.
IV. unchanged retained earnings.
A. II and III
B. I, II and IV
C. I only
D. I and IV 10.