Q4. Which of the following statements regarding problems that are commonly encountered in the analysis of a firm’s

financial reports is FALSE?

A)     Cash flows may be affected by the exclusion of off-balance sheet obligations.

B)     Income statement items that may require adjustment include accounting changes, one-time charges and restructuring charges.

C)     Adjustments to the income statement that may not be recorded include operating leases, take-or-pay contracts and environmental obligations.

Additional information:

• UNI uses the last in, first out (LIFO) inventory valuation method. The LIFO reserve is $20 million for 2007 and $10 million for 2006.
• UNI leases equipment. These leases are classified as operating leases and require annual, end-of-year payments of $10 million for each of the next 5 years.

Restating inventory according to first in, first out (FIFO) and capitalizing operating leases using an 8% discount rate results in adjusted total assets of:

A)   $1,060 million.

B)   $1,050 million.

C)   $1,040 million.

Q5. Adjustments for off-balance-sheet items include all but which of the following?

A)   Capitalizing operating leases, including this amount as an asset and a liability.

B)   Using the equity method in place of the proportionate consolidation to reflect the investment in affiliates.

C)   Estimating the probable obligation for contingent liabilities.

[此贴子已经被作者于2009-3-3 11:10:02编辑过]

Q4. Which of the following statements regarding problems that are commonly encountered in the analysis of a firm’s fficeffice" />

financial reports is FALSE?

A)     Cash flows may be affected by the exclusion of off-balance sheet obligations.

B)     Income statement items that may require adjustment include accounting changes, one-time charges and restructuring charges.

C)     Adjustments to the income statement that may not be recorded include operating leases, take-or-pay contracts and environmental obligations.

Correct answer is C)        

Adjustments to the balance sheet, (not income statement) that may not be recorded include operating leases, take-or-pay contracts and environmental obligations.

The UNI Company Balance Sheet As of December 31, 2007 (in millions)
	2006	2007					2006	2007
Cash	$50	$60		Accounts payable			$100	$150
Accounts receivable	100	110		Long-term debt			400	300
Inventory	200	180		Common Stock			50	50
				Retained earnings			400	500
Fixed assets (gross)	800	900		Total liabilities and equity			$950	$1,000
Accumulated depreciation	200	250
Fixed assets (net)	600	650
Total assets	$950	$1,000
The UNI Company Income Statement For year ended December 31, 2007 (in millions)
Sales					$1,000
Cost of goods sold (COGS)					600
Depreciation					50
Selling, general, and administrative expenses (SG&A)					160
Interest expense					23
Income before taxes					$167
Tax					67
Net income					$100

Additional information:

• UNI uses the last in, first out (LIFO) inventory valuation method. The LIFO reserve is $20 million for 2007 and $10 million for 2006.
• UNI leases equipment. These leases are classified as operating leases and require annual, end-of-year payments of $10 million for each of the next 5 years.

Restating inventory according to first in, first out (FIFO) and capitalizing operating leases using an 8% discount rate results in adjusted total assets of:

A)   $1,060 million.

B)   $1,050 million.

C)   $1,040 million.

Correct answer is A)

PV of lease (PMT = 10; N = 5; I = 8; solve for PV) = $39.93 million
Total adjustment = $39.93 + 20 = $59.93 million
Adjusted total assets = $1,000 + 59.93 = $1,059.93 million

Q5. Adjustments for off-balance-sheet items include all but which of the following?

A)   Capitalizing operating leases, including this amount as an asset and a liability.

B)   Using the equity method in place of the proportionate consolidation to reflect the investment in affiliates.

C)   Estimating the probable obligation for contingent liabilities.

Correct answer is B)

The correct statement is that proportionate consolidation should be used in place of the equity method.

thanks a lot