Question
Which of the following are possible motives for managers to manipulate their earnings higher (I.e., make reported earnings greater than unmanaged earnings)? (check all that
Which of the following are possible motives for managers to manipulate their earnings higher (I.e., make reported earnings greater than unmanaged earnings)? (check all that apply)
1 point
Unmanaged earnings would exceed security analysts' forecasts of earnings
The company is close to violating a debt covenant on its public bond issue because of low earnings
A potential customer is deciding whether to sign a long-term contract with the company and will only do so only if it thinks the company has strong profitability
Congress is planning a vote on extending tax credits to company's industry due to its poor recent performance
Government is investigating potential monopolistic practices by the company because of its high levels of profitability
2.
Question 2
Which of the following actions would be examples of "accrual-based earnings management"? (check all that apply)
1 point
Delay the write-off of a building that has dramatically dropped in value to the next period
Reduce the expected percentage of this period's sales that will be uncollectible
Delay an employee training program for the next period
Reduce the expected percentage of this period's sales that will result in warranty claims
Cut spending on R&D this period
3.
Question 3
Below are two years of quarterly data for Norwegian Elkhound Ltd. How much cash did Norwegian Elkhound collect in Q4 of This Year?
Fiscal Quarter | Revenue | Accounts Receivable |
Last Year Q1 | 78.087 | 61.053 |
Last Year Q2 | 39.624 | 34.586 |
Last Year Q3 | 52.602 | 43.492 |
Last Year Q4 | 73.897 | 64.226 |
This Year Q1 | 97.450 | 86.612 |
This Year Q2 | 61.916 | 55.809 |
This Year Q3 | 80.601 | 74.103 |
This Year Q4 | 99.650 | 90.583 |
1 point
99.650
73.293
9.067
83.170
95.679
4.
Question 4
Which of the following companies is the most likely suspect for managing earnings higher in Q4 of This Year?
Fiscal Quarter | YoY change in Revenue | YoY change in Accounts Receivable | YoY change in Cash Collected | Days A/R | TT Revenue/ Employees | |
ActiveLab Inc | Last Year Q4 | 20.4% | 21.0% | 23.4% | 76.65 | 108.1 |
ActiveLab Inc | This Year Q4 | 53.2% | 70.4% | 42.6% | 75.41 | 108.6 |
Akita Ltd | Last Year Q4 | 49.7% | 47.1% | 54.1% | 82.87 | 115.5 |
Akita Ltd | This Year Q4 | 27.5% | 31.9% | 25.4% | 82.25 | 139.8 |
HealthyDog Corp | Last Year Q4 | 10.4% | 11.3% | 5.0% | 88.36 | 115.9 |
HealthyDog Corp | This Year Q4 | 29.8% | 57.5% | 9.1% | 84.29 | 139.8 |
Jack Russell Pty | Last Year Q4 | 50.1% | 50.9% | 75.4% | 81.22 | 107.2 |
Jack Russell Pty | This Year Q4 | 25.8% | 24.9% | 67.7% | 84.41 | 83.8 |
Pugporium Co | Last Year Q4 | 20.9% | 27.2% | 10.3% | 75.58 | 150.7 |
Pugporium Co | This Year Q4 | 34.8% | 41.0% | 56.4% | 79.82 | 135.8 |
1 point
Pugporium Co
HealthyDog Corp
Jack Russell Pty
ActiveLab Inc
Akita Ltd
5.
Question 5
Below are two years of quarterly data for Devo Whippet Corp. Calculate Devo Whippet's Bookings for Q4 of This Year?
Revenue | Unearned Revenue | |
Last Year Q1 | 560.012 | 572.201 |
Last Year Q2 | 750.667 | 621.333 |
Last Year Q3 | 1047.111 | 774.222 |
Last Year Q4 | 678.074 | 696.148 |
This Year Q1 | 617.049 | 629.099 |
This Year Q2 | 825.700 | 683.399 |
This Year Q3 | 1151.800 | 851.599 |
This Year Q4 | 815.866 | 795.733 |
1 point
760.000
815.866
871.733
716.282
915.451
6.
Question 6
Which of the following actions would decrease a company's earnings during the period? (check all that apply)
1 point
Decrease the amortization period for capitalized costs
Capitalize a smaller percentage of cash costs
Increase the amortization period for capitalized costs
Capitalize a greater percentage of cash costs
7.
Question 7
Below are five years of data on Deferred Subscriber Acquisition Costs and Amortization of Deferred Subscriber Acquisition Costs for Finnish Lapphund Oyj. During which year did Finnish Lapphund make a big change to its amortization assumptions?
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
Deferred subscriber acquisition costs | 54 | 150 | 303 | 444 | 578 |
Amortization of Deferred subscriber acquisition costs | 18 | 61 | 126 | 159 | 221 |
1 point
Year 5
Year 4
Year 2
Year 3
None of the years
8.
Question 8
Dalmatian Inc. had $50 of Net Income this year. It capitalized $530 in software development costs and recognized Amortization Expense for those costs of $180 during the year. Dalmatian's tax rate is 40%. What would Dalmatian's Net Income have been this year if it had expensed all software development costs immediately?
1 point
$278
$140
($300)
($160)
$400
9.
Question 9
Below is the Accounts Receivable line from the Balance Sheet of Corgi Feldman Inc. Estimate how much Corgi Feldman reduced its expenses in Year 2 by reducing its estimated percentage of uncollectible accounts. (Hint: See the Dogamer case for an example of this calculation)
Year 1 | Year 2 | |
Accounts receivable, net of allowance of 21 and 12, respectively | 679 | 788 |
1 point
3.0
12.0
9.0
3.4
12.4
10.
Question 10
Which of the following assets are subject to write-downs under the "lower-of-cost-or-market" accounting principle? (check all that apply)
1 point
Accounts Receivable
Goodwill
Buildings
Cash
Inventory
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