Question 66

Marcel Inc. is considering whether to treat a lease as an operating lease or as a capital lease. All things being equal, which of the following are the correct impacts of the choice on Marcel’s cash flow from operations and operating income, respectively?

       Cash flow from operations Operating income

A)    Higher with capital lease     Same with both leases

B)   Higher with operating lease     Higher with capital lease

C)   Higher with capital lease     Higher with capital lease

D)   Higher with operating lease     Same with both leases

Which of the following statements about accounting treatments under IFRS and U.S. GAAP are most accurate regarding the periodic valuation of purchased intangible assets and marketable securities, respectively?

       Purchased intangible assets     Marketable securities

A)    Significantly different                Significantly different

B)   Significantly different                Similar

C)   Similar                      Similar

D)   Similar                      Significantly different

Financial information regarding Patricia Inc. is as follows:

Based on the information provided, which of the following amounts represents the amounts for Patricia’s free cash flow to the firm (FCFF) and free cash flow to equity (FCFE)?

       FCFF    FCFE

A)    +$60     −$115

B)   −$135   −$115

C)   −$135   +$10

D)   +$60     +$10

The average inventory processing period and operating cycle for RXV Corporation are 25% higher than the industry average. Which of the following is the least likely explanation for these relatively high financial values?

A)    RXV’s cost of goods sold is relatively high.

B)   RXV is carrying a relatively high volume of obsolete inventory.

C)   RXV’s inventory turnover is relatively high.

D)   RXV has too much capital invested in inventory.

The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in years 1 through 4, $35,000 per year in years 5 through 9, and $40,000 in year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10%. The payback period for this investment is closest to:

A)    5.23 years.

B)   4.00 years.

C)   4.86 years.

D)   6.12 years.

[此贴子已经被作者于2008-11-7 17:57:38编辑过]

答案和详解如下！

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Question 66

Marcel Inc. is considering whether to treat a lease as an operating lease or as a capital lease. All things being equal, which of the following are the correct impacts of the choice on Marcel’s cash flow from operations and operating income, respectively?

        Cash flow from operations Operating income

        Cash flow from operations Operating income

A)    Higher with capital lease     Same with both leases

B)   Higher with operating lease     Higher with capital lease

C)   Higher with capital lease     Higher with capital lease

D)   Higher with operating lease     Same with both leases

  The correct answer was C)  Higher with capital lease Higher with capital lease

  The correct answer was C)  Higher with capital lease Higher with capital lease

If a lease is an operating lease (i.e. rent expense), then the total cash payment reduces CFO. Therefore, CFO is higher for a capital lease because only the interest portion of the lease payment reduces CFO. All things being equal, operating income will be higher for firms that use capital leases relative to those that use operating leases. This is because the depreciation expense for a capital lease is lower than the lease payment. And of course, interest expense is not included in the calculation of operating income (although it is considered CFO).

This question tested from Session 9, Reading 40, LOS b

Question 67

Which of the following statements about accounting treatments under IFRS and U.S. GAAP are most accurate regarding the periodic valuation of purchased intangible assets and marketable securities, respectively?

       Purchased intangible assets     Marketable securities

A)    Significantly different                Significantly different

B)   Significantly different                Similar

C)   Similar                      Similar

D)   Similar                      Significantly different

  The correct answer was B
   ) Significantly different                Similar

  The correct answer was B
   ) Significantly different                Similar

Under IFRS and U.S. GAAP, purchased (and identifiable) intangible assets are reported on the balance sheet at their cost less accumulated amortization. However, a significant difference is that U.S. GAAP does not permit upward revaluations of intangible assets.

The accounting treatment for marketable securities is virtually the same under IFRS and U.S. GAAP. One minor difference is that trading securities (U.S. GAAP) are known as “held-for-trading” securities under IFRS.

This question tested from Session 10, Reading 43, LOS a

Question 68

Financial information regarding Patricia Inc. is as follows:

Based on the information provided, which of the following amounts represents the amounts for Patricia’s free cash flow to the firm (FCFF) and free cash flow to equity (FCFE)?

       FCFF    FCFE

A)    +$60     −$115

B)   −$135   −$115

C)   −$135   +$10

D)   +$60     +$10

 The correct answer was B ) −$135   −$115

 The correct answer was B ) −$135   −$115

Free cash flow to the firm (FCFF) is calculated as follows:
FCFF = NI + Depreciation + [Int × (1 – tax rate)] – FCInv – WCInv
= $200 + $40 + $50 − $300 − $125 = -$135

Free cash flow to equity (FCFE) is calculated as follows:
FCFE = CFO – FCInv + Net borrowing
where: CFO = NI + Depreciation – WCInv
FCFE = $200 + $40 − $125 − $300 + $70 = -$115

This question tested from Session 8, Reading 34, LOS i, (Part 1)

Question 69

The average inventory processing period and operating cycle for RXV Corporation are 25% higher than the industry average. Which of the following is the least likely explanation for these relatively high financial values?

A)    RXV’s cost of goods sold is relatively high.

B)   RXV is carrying a relatively high volume of obsolete inventory.

C)   RXV’s inventory turnover is relatively high.

D)   RXV has too much capital invested in inventory.

 The correct answer was C) RXV’s inventory turnover is relatively high.

 The correct answer was C) RXV’s inventory turnover is relatively high.

Average inventory processing period, also called the number of days in inventory, is equal to (365 / inventory turnover). Operating cycle = days of inventory + days of receivables. So, a high inventory turnover will lead to a relatively low (not high) average inventory processing period (days of inventory) and a short operating cycle. Inventory turnover is COGS / average inventory, so a relatively high COGS implies a relatively high inventory turnover ratio and a relatively low average inventory processing period.
   

This question tested from Session 11, Reading 46, LOS a

Question 70

The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in years 1 through 4, $35,000 per year in years 5 through 9, and $40,000 in year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10%. The payback period for this investment is closest to:

 A)    5.23 years.

 A)    5.23 years.

B)   4.00 years.

C)   4.86 years.

D)   6.12 years.

The correct answer was C) 4.86 years.

With $30,000 unrecovered cost in year 5, and $35,000 cash flow in year 5; $30,000 / $35,000 = 0.86 years

4 + 0.86 = 4.86 years

This question tested from Session 11, Reading 44, LOS d

[此贴子已经被作者于2008-5-10 17:29:36编辑过]

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