Questions and Answers of International Financial Reporting And Analysis

Which of the following best describes reporting and disclosure requirements for a company that enters into an operating lease as the lessee? Th e operating lease obligation is:A . reported as a
Th e following presents selected fi nancial information for a company:Th e fi nancial leverage ratio is closest to:A . 0.113.B . 0.277.C . 2.452. Short-term borrowing Current portion of long-term
An analyst evaluating three industrial companies calculates the following ratios:Th e company with both the lowest fi nancial leverage and the greatest ability to meet interest payments is:A .
An analyst evaluating a company’s solvency gathers the following information:Th e company’s debt-to-assets ratio is closest to:A . 0.18.B . 0.27.C . 0.37. Short-term interest-bearing debt $
Th e following information is associated with a company that off ers its employees a defi ned benefi t plan:Based on this information, the company’s balance sheet will present a net pension:A .
In contrast to earnings quality, fi nancial reporting quality most likely pertains to:A . sustainable earnings.B . relevant information.C . adequate return on investment.
Earnings that result from non-recurring activities most likely indicate:A . lower-quality earnings.B . biased accounting choices.C . lower-quality fi nancial reporting.
Which attribute of fi nancial reports would most likely be evaluated as optimal in the fi nancial reporting spectrum?A . Conservative accounting choices B . Sustainable and adequate returns C .
When earnings are increased by deferring research and development (R&D) investments until the next reporting period, this choice is considered:A . non-compliant accounting.B . earnings management as
A high-quality fi nancial report may refl ect:A . earnings smoothing.B . low earnings quality.C . understatement of asset impairment.
Which of the following is most likely to be considered a potential benefi t of accounting conservatism?A . A reduction in litigation costs B . Less biased fi nancial reporting C . An increase in
Which of the following concerns would most likely motivate a manager to make conservative accounting choices?A . Attention to future career opportunities B . Expected weakening in the business
Which of the following conditions best explains why a company’s manager would obtain legal, accounting, and board level approval prior to issuing low-quality fi nancial reports?A . Motivation B .
Which of the following situations represents a motivation, rather than an opportunity, to issue low-quality fi nancial reports?A . Poor internal controls B . Search for a personal bonus C .
Which technique most likely increases the cash fl ow provided by operations?A . Stretching the accounts payable credit period B . Applying all non-cash discount amortization against interest
An analyst reviewing a fi rm with a large reported restructuring charge to earnings should:A . view expenses reported in prior years as overstated.B . disregard it because it is solely related to
In 2018, if Cinnamon is deemed to have control over Cambridge, it will most likely account for its investment in Cambridge using:A. the equity method.B. the acquisition method.C. proportionate
At December 31, 2018, Cinnamon’s total shareholders’ equity on its balance sheet would most likely be:A. highest if Cinnamon is deemed to have control of Cambridge.B. independent of the
In 2018, Cinnamon’s net profi t margin would be highest if:A. it is deemed to have control of Cambridge.B. it had not increased its stake in Cambridge.C. it is deemed to have signifi cant infl
At December 31, 2018, assuming control and recognition of goodwill, Cinnamon’s reported debt to equity ratio will most likely be highest if it accounts for its investment in Cambridge using the:A.
Compared to Cinnamon’s operating margin in 2017, if it is deemed to have control of Cambridge, its operating margin in 2018 will most likely be:A. lower.B. higher.C. the same.
At December 31, 2018, Zimt’s total assets balance would most likely be:A. highest if Zimt is deemed to have control of Oxbow.B. highest if Zimt is deemed to have signifi cant infl uence over
Based on Gelblum’s estimates, if Zimt is deemed to have signifi cant infl uence over Oxbow, its 2018 net income (in € millions) would be closest to:A. €75.B. €109.C. €143.
Based on Gelblum’s estimates, if Zimt is deemed to have joint control of Oxbow, and Zimt uses the proportionate consolidation method, its December 31, 2018 total liabilities(in € millions) will
Based on Gelblum’s estimates, if Zimt is deemed to have control over Oxbow, its 2018 consolidated sales (in € millions) will be closest to:A. €1,700.B. €2,375.C. €3,050.
Based on Gelblum’s estimates, Zimt’s net income in 2018 will most likely be:A. highest if Zimt is deemed to have control of Oxbow.B. highest if Zimt is deemed to have signifi cant infl uence over
Th e balance sheet carrying value of Confabulated’s investment portfolio (in € thousands) at December 31, 2018 is closest to:A. 112,000.B. 115,000.C. 118,000.
Th e balance sheet carrying value of Confabulated’s investment portfolio at December 31, 2018 would have been higher if which of the securities had been reclassifi ed as FVPL security?A. Bugle.B.
Compared to Confabulated’s reported interest income in 2018, if Dumas had been classifi ed as FVPL, the interest income would have been:A. lower.B. the same.C. higher.
Based on Ohalin’s estimates, the amount of joint venture revenue (in $ millions) included on BetterCare’s consolidated 2018 fi nancial statements should be closest to:A. $0.B. $715.C. $1,430.
Based on Ohalin’s estimates, the amount of the joint venture’s December 31, 2018 total assets (in $ millions) that will be included on Supreme Healthcare’s consolidated fi nancial statements
Based on Ohalin’s estimates, the amount of joint venture shareholders’ equity at December 31, 2018 included on the consolidated fi nancial statements of each venturer will most likely be:A.
If Supreme Healthcare sells its receivables to the SPE, its consolidated fi nancial results will most likely show:A. a higher revenue for 2018.B. the same cash balance at December 31, 2018.C. the
NinMount’s current ratio on December 31, 2018 most likely will be highest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full goodwill.C.
NinMount’s long-term debt to equity ratio on December 31, 2018 most likely will be lowest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full
Based on Byron’s forecast, if NinMount deems it has acquired control of Boswell, Nin-Mount’s consolidated 2019 depreciation and amortization expense (in £ millions) will be closest to:A. 102.B.
Based on Byron’s forecast, NinMount’s net profi t margin for 2019 most likely will be highest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full
Based on Byron’s forecast, NinMount’s 2019 return on beginning equity most likely will be the same under:A. either of the consolidations, but diff erent under the equity method.B. the equity
Based on Byron’s forecast, NinMount’s 2019 total asset turnover ratio on beginning assets under the equity method is most likely:A. lower than if the results are reported using consolidation.B.
Th e carrying value reported on the balance sheet of Topmaker’s investment in Blanca’s debt securities at December 31, 2018 is:A. $10,940,000.B. $11,000,000.C. $12,000,000.
Based on Exhibit 1 and Blanca’s plans to borrow against its fi nancial receivables, the consolidated balance sheet will show total assets of:A. $50,000,000.B. $140,000,000.C. $150,000,000.
Topmaker’s infl uence on Rainer’s business activities can be best described as:A. signifi cant.B. controlling.C. shared control.
Based on Exhibit 2, the goodwill included in Topmaker’s purchase of Rainer is:A. $21 million.B. $60 million.C. $99 million.
Based on Exhibit 2, the carrying value of Topmaker’s investment in Rainer at the end of 2018 is closest to:A. $282 million.B. $317 million.C. $321 million.
Which of the following statements regarding the sale of inventory by Rainer to Topmaker is correct?A. Th e sale represents a downstream sale.B. Topmaker’s unrealized profi ts are initially
Based on Exhibit 3, Topmaker’s impairment loss under IFRS is:A. $120 million.B. $300 million.C. $400 million.
Th e value of the minority interest at the acquisition date of January 1, 2020 is:A. $300 million.B. $400 million.C. $500 million.
Which of the following best describes the role of fi nancial statement analysis?A. To provide information about a company’s performance.B. To provide information about a company’s changes in fi
Th e role of fi nancial statement analysis is best described as:A. providing information useful for making investment decisions.B. evaluating a company for the purpose of making economic decisions.C.
A company’s profi tability for a period would b est be evaluated using the:A. balance sheet.B. income statement.C. statement of cash fl ows.
Th e fi nancial statement that presents a shareholder’s residual claim on assets is the:A. balance sheet.B. income statement.C. cash fl ow statement.
A company’s profi tability over a period of time is b est evaluated using the:A. balance sheet.B. income statement.C. cash fl ow statement.
Th e income statement is b est used to evaluate a company’s:A. fi nancial position.B. sources of cash fl ow.C. fi nancial results from business activities.
Which of the following best describes why the notes that accompany the fi nancial statements are required? Th e notes:A. permit fl exibility in statement preparation.B. standardize fi nancial
An auditor determines that a company’s fi nancial statements are prepared in accordance with applicable accounting standards except with respect to inventory reporting. Th is exception is most
An independent audit report is m ost likely to provide:A. absolute assurance about the accuracy of the fi nancial statements.B. reasonable assurance that the fi nancial statements are fairly
Interim fi nancial reports released by a company are m ost likely to be:A. monthly.B. unaudited.C. unqualifi ed.
Which of the following sources of information used by analysts is found outside a company’s annual report?A. Auditor’s report.B. Peer company analysis.C. Management’s discussion and analysis.
Which phase in the fi nancial statement analysis framework is most likely to involve producing updated reports and recommendations?A. Follow-up.B. Analyze/interpret the processed data.C. Develop and
A company previously expensed the incremental costs of obtaining a contract. All else being equal, adopting the May 2014 IASB and FASB converged accounting standards on revenue recognition makes the
A company chooses to change an accounting policy. The is change requires that, if practical, the company restate its financial statements for:A. all prior periods.B. current and future periods.C.
For its fi scal year-end, Calvan Water Corporation (CWC) reported net income of $$12$ million and a weighted average of 2,000,000 common shares outstanding. Th e company paid $$800$,000 in
A company with no debt or convertible securities issued publicly traded common stock three times during the current fi scal year. Under both IFRS and US GAAP, the company’s:A . basic EPS equals its
Laurelli Builders (LB) reported the following fi nancial data for year-end December 31:Which statement about the calculation of LB’s EPS is most accurate?A . LB’s basic EPS is $1.12.B . LB’s
For its fiscal year-end, Sublyme Corporation reported net income of $$200$ million and a weighted average of 50,000,000 common shares outstanding. There are 2,000,000 convertible preferred shares
When calculating diluted EPS, which of the following securities in the capital structure increases the weighted average number of common shares outstanding without aff ecting net income available to
Which statement is m ost accurate? A common-size income statement:A . restates each line item of the income statement as a percentage of net income.B . allows an analyst to conduct cross-sectional
Selected year-end fi nancial statement data for Workhard are shown below.Workhard’s comprehensive income for the year:A . is $$18$ million.B . is increased by the derivatives accounted for as
When preparing an income statement, which of the following items would most likely be classifi ed as other comprehensive income?A . A foreign currency translation adjustment.B . An unrealized gain on
Equity equals:A. Assets − Liabilities.B. Liabilities − Assets.C. Assets + Liabilities.
Shareholders’ equity reported on the balance sheet is m ost likely to differ from the market value of shareholders’ equity because:A. historical cost basis is used for all assets and
Th e information provided by a balance sheet item is limited because of uncertainty regarding:A. measurement of its cost or value with reliability.B. the change in current value following the end of
Which of the following is most likely classified as a current liability?A. Payment received for a product due to be delivered at least one year after the balance sheet date.B. Payments for
The most likely company to use a liquidity-based balance sheet presentation is a:A. bank.B. computer manufacturer holding inventories.C. software company with trade receivables and payables.
The most likely costs included in both the cost of inventory and property, plant, and equipment are:A. selling costs.B. storage costs.C. delivery costs.
An example of a contra asset account is:A . depreciation expense.B . sales returns and allowances.C . allowance for doubtful accounts.
A company has total liabilities of £35 million and total stockholders’ equity of £55 million.Total liabilities are represented on a vertical common-size balance sheet by a percentage closest to:A
Using the information presented in Exhibit 4, the quick ratio for SAP Group at 31 December 2017 is closest to:A . 1.00.B . 1.07.C . 1.17.
Using the information presented in Exhibit 14, the fi nancial leverage ratio for SAP Group at December 31, 2017 is c losest to:A . 1.50.B . 1.66.C . 2.00.
Based on Exhibit 1, which statement is most likely correct?A . Company A has below-average liquidity risk.B . Company B has above-average solvency risk.C . Company A has made one or more acquisitions.
Th e quick ratio for Company A is closest to:A . 0.43.B . 0.57.C . 1.00.
Based on Exhibit 1, the fi nancial leverage ratio for Company B is closest to:A . 0.55.B . 1.22.C . 2.22. EXHIBIT 1 Common-Size Balance Sheets for Company A, Company B, and Sector Average Company A
Based on Exhibit 1, which ratio indicates lower liquidity risk for Company A compared with Company B?A . Cash ratio.B . Quick ratio.C . Current ratio. EXHIBIT 1 Common-Size Balance Sheets for Company
Under which section of a manufacturing company’s cash fl ow statement are the following activities reported?Item 1: Purchases of securities held for trading Item 2: Sales of securities considered
A company recently engaged in a non-cash transaction that signifi cantly aff ected its property, plant, and equipment. Th e transaction is:A . reported under the investing section of the cash fl ow
A benefi t of using the direct method rather than the indirect method when reporting operating cash fl ows is that the direct method:A . mirrors a forecasting approach.B . is easier and less costly.C
Mabel Corporation (MC) reported accounts receivable of $$66$ million at the end of its second fi scal quarter. MC had revenues of $$72$ million for its third fi scal quarter and reported accounts
When computing net cash fl ow from operating activities using the indirect method, an addition to net income is most likely to occur when there is a:A . gain on the sale of an asset.B . loss on the
In 2018, a company using US GAAP made cash payments of $$6$ million for salaries, $$2$ million for interest expense, and $$4$ million for income taxes. Additional information for the company is
An analyst gathered the following information from a company’s 2018 fi nancial statements(in $ millions):Based only on the information above, the company’s 2018 statement of cash fl ows in the
An analyst gathered the following information from a company’s 2018 financial statements(in $ millions):In 2018, the company declared and paid cash dividends of $$10$ million and recorded
Silverago Incorporated, an international metals company, reported a loss on the sale of equipment of $$2$ million in 2018. In addition, the company’s income statement shows depreciation expense
Jaderong Plinkett Stores reported net income of $$25$ million. Th e company has no outstanding debt. Using the following information from the comparative balance sheets (in millions), what should
Th e following information is extracted from Sweetfall Incorporated’s fi nancial statements.Th e amount of cash Sweetfall Inc. paid to suppliers is:A . $25,700.B . $26,702.C . $27,826. Income
What is the value of ending inventory for the first quarter if the company uses a perpetual LIFO inventory valuation method?A . $14,500.B . $15,000.C . $16,000.A retail company is comparing different
Which inventory accounting method results in the lowest inventory turnover ratio for the fi rst quarter?A . Periodic LIFO.B . Perpetual LIFO.C . Perpetual FIFO.A retail company is comparing different
During periods of rising inventory unit costs, a company using the FIFO method rather than the LIFO method will report a lower:A . current ratio.B . inventory turnover.C . gross profi t margin.
LIFO reserve is most likely to increase when inventory unit:A . costs are increasing.B . costs are decreasing.C . levels are decreasing.
If inventory unit costs are increasing from period-to-period, a LIFO liquidation is most likely to result in an increase in:A . gross profi t.B . LIFO reserve.C . inventory carrying amounts.
A company using the LIFO method reports the following in £:Cost of goods sold for 2018 under the FIFO method is closest to:A . £48,530.B . £49,080.C . £52,520. 2018 2017 Cost of goods sold (COGS)

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