FIN575 - Quiz - 3 - SOLUTION - Graded 30/30

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1. (TCO F) The method of depreciation that allocates the cost of an asset to its useful life is _________. (Points : 3)

      [removed] straight line
      [removed] accelerated
      [removed] FIFO
      [removed] cost basis

Question 2.2. (TCO F) The LIFO Conformity rule states that if a company uses LIFO for tax purposes, it must also use it for: (Points : 3)

      [removed] balance sheet reporting.
      [removed] cash reporting.
      [removed] financial reporting.
      [removed] liability reporting.

Question 3.3. (TCO F) Which of the following would rarely be classified as a current asset? (Points : 3)

      [removed] Prepaid insurance
      [removed] Goodwill
      [removed] Marketable securities
      [removed] Work in progress

Question 4.4. (TCO F) Natural resources are also called _________. (Points : 3)

      [removed] wasting assets
      [removed] real assets
      [removed] net assets
      [removed] gross assets

Question 5.5. (TCO F) Solvency refers to the ability of a company to meet its: (Points : 3)

      [removed] long term obligations.
      [removed] leased payments.
      [removed] short term obligations.
      [removed] cash obligations.

Question 6.6. TCO F) Liquidity provides flexibility to: (Points : 3)

      [removed] take advantage of changing market conditions.
      [removed] react to strategic actions by competitors.
      [removed] All of the above
      [removed] None of the above

Question 7.7. (TCO F) FIFO provides a better ending inventory figure more closely reflecting: (Points : 3)

      [removed] current assets.
      [removed] current costs.
      [removed] current liabilities.
      [removed] current inventory.

Question 8.8. (TCO F) Which of the following is not considered an intangible asset? (Points : 3)

      [removed] Goodwill
      [removed] Customer lists
      [removed] Prepraid advertising expenses
      [removed] Memberships

Question 9.9. (TCO F) Goodwill is: (Points : 3)

      [removed] the excess of the purchase price of net assets over the book value of net assets.
      [removed] the excess of the appraised value of net assets over the book value of net assets.
      [removed] the excess of the purchase price of net assets over the fair value of net assets.
      [removed] the excess of the appraised value of net assets over the fair value of net assets.

Question 10.10. (TCO F) One advantage of LIFO over FIFO under normal conditions is that: (Points : 3)

      [removed] it reports higher retained earnings.
      [removed] it results in higher cash flows.
      [removed] it results in higher cash ratios.
      [removed] it results in higher gross margins.

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