Q8. After adjusting the financial statements to current value, the long-term debt to asset ratio is (Note: do not include

   deferred tax liabilities as part of long-term debt):

A)   15.9%.

B)   15.3%.

C)   24.3%.

Q9. Coastal Drilling Corp (CDC) reported the following year-end data:

CDC also reported that it had changed the expected return on plan assets assumption which resulted in an increased return on plan assets of $5 million. This change resulted in an increase in the market-related value of plan assets with no long-term effect on the income statement. What is the impact on the debt/equity ratio?

A)   The new debt/equity ratio is 86.2%.

B)   The new debt/equity ratio is 90.9%.

C)   The debt/equity ratio is still 100%.

Q10. Holdall Corporation recently reclassified many of their assets such that the average useful life of their depreciable

assets was reduced. Which of the following is the most likely result from this change on net income and inventory

turnover? (Assume everything else remains constant.) Net income will:

A)   increase and inventory turnover will not change.

B)   decrease and inventory turnover will rise.

C)   decrease and inventory turnover will not change.

Q11. A firm seeking to lower current tax liability may elect to use which method of inventory valuation during an

     inflationary period?

A)     FIFO.

B)     Average cost.

C)     LIFO.

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