1.Three years ago, Ranchero Corporation purchased a patent for a process used in production, for ₤3 million. At the end of last year, Ranchero determined the fair value of the patent was greater than its book value. No impairment losses have been recognized on the patent. Assuming Ranchero follows International Financial Reporting Standards, what is the impact on its total asset turnover ratio and return on equity of reporting the value of the patent on the balance sheet at fair value?
| Total asset turnover
| Return on equity
|
A) Lower Higher B) Higher Lower C) Higher Higher D) Lower Lower
2.What would be the impact on a firm’s return on assets ratio (ROA) of the following independent transactions, assuming ROA is less than one?
Transaction #1 – A firm owned investment securities that were classified as available-for-sale and there was a recent decrease in the fair value of these securities.
Transaction #2 – A firm owned investment securities that were classified as available-for-trading and there was recent increase in the fair value of the securities.
| Transaction #1
| Transaction #2
|
A) Higher Lower B) Higher Higher C) Lower Higher D) Lower Lower
3.United Corporation and Intrepid Company are similar firms operating in the same industry. United follows U.S. Generally Accepted Accounting Principles and Intrepid follows International Financial Reporting Standards. At the end of last year, Intrepid had a higher inventory turnover ratio than Intrepid. Are the following plausible explanations for the difference?
Explanation #1 – United accounts for its inventory using the first-in, first-out method and Intrepid uses the last-in, first-out method.
Explanation #2 – United recognized an upward valuation of inventory that had been previously written down. Intrepid does not revalue its inventory upward.
| Explanation #1
| Explanation #2
|
A) No Yes B) Yes No C) Yes Yes D) No No | 
发表于 2008-5-15 11:45
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