QUESTION 20

Ken Can Co. has the following tax information for this year:

Pretax income $72,000

Taxes payable $12,000

Income tax expense $19,000

Income tax paid $11,000

The reported effective tax rate is:

	a.	16.7%
	b.	57.9%
	c.	15.3%
	d.	26.4%

1 points

QUESTION 21

Given the information from 20 above, what is the income tax paid rate for Ken Can?

	a.	57.9%
	b.	16.7%
	c.	15.3%
	d.	26.4%

1 points

QUESTION 22

Fly by Night Airways purchase or leases its entire aircraft fleet. Since Fly by Night already has too much debt, they would prefer off-balance-sheet financing, which can be achieved using:

	a.	Capital leases
	b.	Stock options
	c.	Using convertible bonds to buy all aircraft rather than leasing
	d.	Operating leases

1 points

QUESTION 23

Arrow Co. has a net income (after tax) of $1.5 million, a holding gain on marketable securities classified as held-to-maturity of $40,000, a foreign currency translation loss of (all-current method) of $90,000, and an income tax expense of $230,000. Arrow will report a comprehensive income of:

	a.	$1,410,000
	b.	$1,450,000
	c.	$1,500,000
	d.	$1,220,000

1 points

QUESTION 24

A major reason Enron used special purpose entities was:

	a.	To increase pension plan funding levels
	b.	To increase equity dilution
	c.	Off-balance-sheet reporting
	d.	To increase working capital

1 points

QUESTION 25

General Motors (Finance) had the following debt marketable securities for 2001 (in $ millions): trading securities=5,195; available-for-sale=5,195; held-to-maturity=371. Which of these are recorded at fair value.

	a.	Held-to-maturity & trading securities
	b.	Held-to-maturity & available-for-sale
	c.	Trading securities
	d.	Trading securities & available-for-sale

1 points

QUESTION 26

Which of the following statements is correct:

	a.	Capital leases are off-balance-sheet & recorded as a periodic rental expense
	b.	A special purpose entity is used only to record marketable securities
	c.	Intraperiod tax allocation is associated with non-recurring items reported net of tax
	d.	Leases are never used by airlines & department stores

1 points

QUESTION 27

GM has the following information on property, plant & equipment for 2001 (in $ millions): ending gross investment=59,748; accumulated depreciation=33,404; depreciation expense=7,051. The average age of GM's fixed assets was:

	a.	21.1 years
	b.	8.5 years
	c.	55.9 years
	d.	4.7 years

1 points

QUESTION 28

Given the information from Question 27, GM had an average depreciable life of:

	a.	55.9 years
	b.	4.7 years
	c.	8.5 years
	d.	21.1 years

1 points

QUESTION 29

GM has the following tax-related information (in $ millions): taxes payable=1,372; income tax expense=768; income before tax=1,518; net income=601. GM's effective tax rate was:

	a.	56.0%
	b.	50.6%
	c.	43.8%
	d.	39.6%

1 points

QUESTION 30

ABC uses the last-in first-out inventory method during a period of rising prices. This suggests that:

	a.	Cost of goods sold would be lower & net income higher than using FIFO
	b.	Cost of goods sold would be higher & income tax lower than using FIFO
	c.	They don't use lower-of-cost-or market
	d.	Revenues & net income would be higher than using FIFO