答案和详解如下： 9.What is the value of the leverage ratio (liabilities/equity) using the adjusted data? A) 3.36. B) 2.81. C) 2.16. D) 1.75. The correct answer was A) The following balance sheet adjustments are indicated in the footnotes: Adjustment | Long-term Assets | Long-term Liabilities | Equity | Pre-adjustment value | 20,500,000 | 13,000,000 | 11,300,000 |
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| FIFO adjustment (1) |
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| 1,200,000 | Capitalized interest (2) | (550,000) |
| (550,000) | Funded status of pension fund (3) | (1,500,000) | 1,000,000 | (2,500,000) | Market value of debt (4) |
| (650,000) | 650,000 | Redeemable preferred stock (5) |
| 950,000 | (950,000) | Lawsuit liability (6) |
| 3,000,000 | (3,000,000) | Goodwill (7) | (1,000,000) |
| (1,000,000) |
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| Post-adjustment values | 17,450,000 | 17,300,000 | 5,150,000 |
Notes: (1) FIFO accounting gives the best estimate of the economic value of the inventory. Therefore, inventory and equity will increase by the LIFO reserve amount of $1.2 million. (2) Capitalized interest should be removed from the balance sheet by reducing long-term assets and equity. (3) The underfunded pension plan requires a compound adjustment. First, reduce assets and equity by the amount shown on the asset side of the balance sheet. Next, increase liabilities and decrease equity to reflect the amount of underfunding. (4) The reduction in the value of the debt (650,000) is offset by an increase to equity. (5) Because the preferred stock is redeemable it should be treated as a liability. Therefore, a liability of 950,000 (100,000 × 9.50) will reflect the market value of the preferred shares. The equity account is adjusted by 1) reducing equity by 1,000,000 to reflect the reclassification of the preferred stock to a liability and 2) increase equity by 50,000 to reflect the reduction in the value of the preferred shares (1,000,000 – 950,000). Therefore, the total adjustment is a reduction of 950,000. (6) Because the settlement associated with the lawsuit is a probable event, that is measurable, it must be included in liabilities. The settlement amount of $3 million is used for the adjustment. A more aggressive stance would be to recognize the potential loss of $5 million if the analyst believed the settlement would not be accepted. (7) Goodwill is eliminated and equity is reduced as an offset to the elimination. The adjusted liabilities/equity ratio is 3.36 (17,300,000 / 5,150,000). 10.A firm seeking to lower current tax liability may elect to use which method of inventory valuation during an inflationary period? A) LIFO. B) FIFO. C) Average cost. D) Specific identification. The correct answer was A) During a inflationary period, using LIFO would increase COGS, thereby decreasing earnings and taxes. 11.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. D) increase and inventory turnover will decline. The correct answer was C) Depreciation expense increases as the depreciable life of an asset decreases. Thus, net income will decline. Ordinarily, depreciation has no effect on inventory turnover. 12.Coastal Drilling Corp (CDC) reported the following year-end data: Net income | $23 million | Total liabilities | $50 million | Total shareholder’s equity | $50 million | Effective tax rate | 40 percent |
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 90.9%. B) The new debt/equity ratio is 94.3%. C) The debt/equity ratio is still 100%. D) The new debt/equity ratio is 86.2%. The correct answer was D) The increase in return on plan assets will increase overall assets and equity by $5 million. The increase will also reduce pension expense by $5 million resulting in an increase in net income and retained earnings of $3 million (5 × (1 - .40)). Therefore, the new debt/equity ratio is 86.2 percent (50 / (50 + 5 + 3)). | 
发表于 2008-5-21 14:55
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