1. The use of LIFO rather than FIFO for inventory costing under normal economic conditions results in: I. lower net income. II. higher total assets. III. gher retained earnings. I V. unchanged retained earnings. A. II and III B. I, II and IV C. I only D. I and IV 2. The inventory costing method used by a company (LIFO, FIFO, etc.) will affect: Asset turnover, Debt/Equity Ratio A Yes Yes B Yes No C No No D No Yes A. Option A B. Option B C. Option C D. Option D 3. Companies are supposed to write-down value of assets if a permanent impairment of value or loss of utility occurs. If a company writes down its assets this year the effect on: This years ROA , Next years ROA A Increased No Change B Decreased No change C Decreased Decreased D Decreased Increased A. Option A B. Option B C. Option C D. Option D 4. Target Inc. has 30M shares outstanding and trades at $50 per share. Target has net identifiable assets with a book value of $1,000M and a fair value of $1,200M. Acquirer Corporation purchases all of Target Inc. stock for $60 per share. How much will Acquirer record as goodwill upon acquiring Target? A. 300M B. 500M C. 600M D. 800M 5. A Corporation wants to increase its current ratio from its present level of 1.2 before it ends the fiscal year. The action having the desired effect is: A. delaying the next payroll. B. writing down impaired assets. C. selling furniture for cash. D. selling current marketable securities at cash for their book value. Below is selected information taken from the balance sheet of Huy Corporation as of 12/31/06. 12/31/05, 12/31/06 Land $100,000 $100,000 Machines $80,000 $70,000 Gross P.P&E 180,000 170,000 Accummulated depreciation 25,000 $10,000 Net P,P&E $155,000 $160,000 Depreciation expense $5,000 6. The average depreciable life of Huy's depreciable assets as of 2006 is: A. 2 years B. 7 years C. 14 years D. 34 years 7. As a general rule, revenue is normally recognized when it is: A. measurable and earned. B. measurable and received. C. realizable and earned. D. realizable. 8. Which of the following measures of accounting income is typically reported in an income statement? A. Net income B. Comprehensive income C. Continuing income D. All of the above 9. Differences in taxable income and pretax accounting income that will not be offset by corresponding differences or "turn around" in future periods are called: A. timing differences. B. circular differences. C. permanent differences. D. reverse differences. The following information was extracted from Smurm Corporation's 2006 annual report: Common stock Share outstanding 12/31/05, 90 million New shares issued 4/1/06, 10 million Shares outstand 12/31/06, 100 million Preferred stock $10 par, 10%, convertible into 2 shares of common stock, shares Outstanding 50 million Options 1 million options, each to purchase one common share at $50 per share Market price of stock Average for year $75 Beginning of year $70 End of year $78 Preferred dividends paid $50,000,000 Net income for 2006 $350,000,000 10. Basic earnings per share for 2006 was: A. $3.50 B. $3.16 C. $3.08 D. $3.00 11. Compared with companies that expense costs, firms that capitalize costs can be expected to report: A. higher asset levels and lower equity levels. B. higher asset levels and higher equity levels. C. lower asset levels and higher equity levels. D. lower asset levels and lower equity levels. 12. Two growing firms are identical except that one firm capitalizes whereas the other firm expenses costs for long-lived resources over time. For these two firms, which of the following statements is generally true? I. The expensing firm will show a more volatile pattern of reported income than capitalizing firm. II. The expensing firm will show a less volatile pattern of return on assets than the capitalizing firm. III. The expensing firm will show lower cash flows from operations than the capitalizing firm. A. I only B. II only C. I and III only D. II and III only 13. If a company changes the useful life of its assets from 10 years to 12 years, this will be recorded as: A. a non-recurring gain. B. an extraordinary item. C. a change in accounting principle. D. None of the above 14. Which of the following would be considered an extraordinary item? I. Write-down of receivables II. Gains on disposal of a business segment III. Loss of inventory resulting from a fire IV. Loss resulting from a strike A. I and IV B. I, III and IV C. III only D. I, II and III 15. Which of the following statements is true? Under GAAP, comprehensive income: A. may be reported in addition to net income. B. must be reported in addition to net income. C. may be reported instead of net income. D. must be reported instead of net income