ACCTCY FINAL

Which of the following will cause a company to show a lower amount of amortisation of intangible assets in the first year after acquisition?

a) A shorter useful life
b) A higher residual value
c) A higher amortisation rate
Click the card to flip 👆
1 / 19
Terms in this set (19)
Which of the following will cause a company to show a lower amount of amortisation of intangible assets in the first year after acquisition?

a) A shorter useful life
b) A higher residual value
c) A higher amortisation rate
a higher residual value
Juan Martinez, CFO of VIRMIN, S.A., is selecting the depreciation method to use for a new machine. The machine has an expected useful life of six years. Production is expected to be relatively low initially but to increase over time. The method chosen for tax reporting must be the same as the method used for financial reporting. If Martinez wants to minimize tax payments in the first year of the machine's life, which of the following depreciation methods is Martinez most likely to use?

a) Straight-line method
b) Units-of-production method
c) Double-declining balance method
Double declining balance method
The Industry and Business Risk excerpt states that, "Increased competition may lead to lower unit sales and excess production capacity and excess inventory. This may result in a further downward price pressure." The downward price pressure could lead to inventory that is valued above current market prices or net realizable value. Any writedowns of inventory are least likely to have a significant effect on the inventory valued using:
a) first-in, first-out (FIFO).
b) weighted average cost.
c) last-in, first-out (LIFO).
FIFO
A company issues €1 million of bonds at face value. When the bonds are issued, the company will record a:

a) cash inflow from investing activities.
b) cash inflow from financing activities.
c) cash inflow from operating activities.
cash inflow from financing activities
A company that has an operating cash flow more than amounts needed for capital expenditures and repayment of debt is most likely to have a:
a) Positive FCFE
b) Negative FCFE
c) Negative FCFF
Positive FCFE
. The first step in cash flow statement analysis should be to:
a) Evaluate the consistency of cash flows
b) Determine operating cash flow drivers
c) Identify the major sources and uses of cash
identify the major sources and uses of cash
The tax reform signed into law under President Trump (the Tax Cuts and Jobs Act of December 22, 2017) reduced the corporate tax rate from a maximum of 35% under the existing graduated rate structure to a flat 21% rate for tax years beginning 2018. Other things equal, this change in the tax code, considered in isolation, will most likely have the effect of
a) An increase in deferred tax liabilities for U.S. corporations.
b) A decrease in deferred tax asset valuation allowances for U.S. corporations starting in 2018.
c) An increase in deferred tax asset valuation allowances for U.S. corporations starting in 2018.
c) An increase in deferred tax asset valuation allowances for U.S. corporations starting in 2018.
The tax reform signed into law under President Trump (the Tax Cuts and Jobs Act of December 22, 2017) allows 100% expensing for certain business property acquired and placed in service after September 27, 2017, and before January 1, 2023. It is an empirical fact that 95% of U.S. firms use straight line depreciation for financial reporting purposes. Other things equal, this change in the tax code, considered in isolation, will most likely have the effect of:
a) An increase in deferred tax liabilities for U.S. corporations
b) A decrease in deferred tax assets for U.S. corporations
c) No change in the value of deferred tax liabilities for U.S. corporations
a) An increase in deferred tax liabilities for U.S. corporations
Other things equal, taken together, the rate reductions and expensing allowance changes in the tax code under the Trump tax cuts will most likely have the combined effect of
a) No change in the net value of deferred tax liabilities and assets for U.S. corporations
b) A decrease in deferred tax liabilities for U.S. corporations
c) An increase in deferred tax liabilities for U.S. corporations
b) A decrease in deferred tax liabilities for U.S. corporations
Stansfield Inc., presents it financial statements in accordance with U.S. GAAP. In 2020, Stansfield discloses a valuation allowance of $1,100 against total deferred tax assets of $20,000. In 2019, Stansfield disclosed a valuation allowance of $1,400 against total deferred tax assets of $18,000. The change in the valuation allowance most likely indicates that Stansfield's:
a) Marginal tax rates were reduced in 2020
b) Expectations of future earning power have increased.
c) Expectations of future earning power have decreased.
b) Expectations of future earning power have increased.
Cimarron, Inc., recorded a total deferred tax asset in 2020 of $12,301, offset by a $12,301 valuation allowance. Cimarron most likely: a) Fully utilized the deferred tax asset in 2021 b) Has an equal and offsetting amount of deferred tax assets and deferred tax liabilities c) Expects not to earn any taxable income before the deferred tax asset expiresc) Expects not to earn any taxable income before the deferred tax asset expiresYour firm estimated warrantee expense of ten percent of sales when preparing financial reporting per GAAP. That same year, actual warrantee expense was closer to eight percent of sales. As a result, other things being equal: a) Your firm will have a decrease in deferred tax assets. b) Your firm will have an increase in deferred tax assets. c) Your firm will have an increase in deferred tax liabilities.b) Your firm will have an increase in deferred tax assets.A company receives advance payments from customers that are immediately taxable but will not be recognized for accounting purposes until the company fulfills its obligation. The company will most likely record: a) A deferred tax liability b) A deferred tax asset c) A valuation allowanceb) A deferred tax assetTo properly assess a company's past performance, an analyst requires: a) High earnings quality b) High financial reporting quality c) Both high earnings quality and high financial reporting qualityb) High financial reporting qualityIn early 2022 the Stormborn Company must pay the IRS $37,500 on the income it earned in 2021. This amount was recorded on the company's 31 December 2021 financial statements as: a) Taxes payable b) Income tax expense c) A deferred tax liabilitytaxes payableWhich of the following events will most likely result in a decrease in a valuation allowance for a deferred tax asset under US GAAP? A(n): a) reduction in tax rates b) decrease in interest rates c) extension in the tax loss carry- forward periodextension in the tax loss carry forward period14. Income tax expense reported on a company's income statement equals taxes payable, plus the net increase in: a) deferred tax assets and deferred tax liabilities. b) deferred tax assets, less the net increase in deferred tax liabilities. c) deferred tax liabilities, less the net increase in deferred tax assetsc) deferred tax liabilities, less the net increase in deferred tax assetsWhich of the following is an indication that a company may be recognizing revenue prematurely? Relative to its competitors, the company's: a) asset turnover is decreasing. b) receivables turnover is increasing. c) days sales outstanding is increasing.c) days sales outstanding is increasing.All else being equal, a decrease in which of the following financial metrics would most likely result in a lower return on equity (ROE)? a) Leverage b) The tax rate c) Days of sales outstandinga) Leverage