CHAPTER 18 FINANCIAL STATEMENT ANALYSIS

Question

 167. What
type of ratios best measure the short-term ability of the enterprise to pay its
maturing obligations and to meet unexpected needs for cash?

a. Leverage

b. Solvency

c. Profitability

d. Liquidity

168. The acid-test ratio is also known as
the

a. current
ratio.

b. quick
ratio.

c. fast
ratio.

d. times
interest earned ratio.

169. The debt to assets ratio

a. is
a solvency ratio.

b. is
computed by dividing total assets by total debt.

c. measures
the total assets provided by stockholders.

d. is
a profitability ratio.

170. An
extraordinary item is one that

a. occurs
infrequently and is uncontrollable in nature.

b. occurs
infrequently and is unusual in nature.

c. is
material and is unusual in nature.

d. is
material and is uncontrollable in nature.

171. Troy, Inc. decided on January 1 to
discontinue its telescope manufacturing division. On July 1, the division’s
assets with a book value of $1,260,000 are sold for $840,000. Operating income
from January 1 to June 30 for the division amounted to $130,000. Ignoring
income taxes, what total amount should be reported on Troy’s income statement
for the current year under the caption, Discontinued Operations?

a. $130,000

b. $290,000
loss

c. $420,000
loss

d. $550,000

172. When there has been a
change in accounting principle,

a. the
old principle should be used in reporting the results of operations for the
current year.

b. the
cumulative effect of the change should be reported in the current year’s
retained earnings statement.

c. the
change should be reported retroactively.

d. the new principle should be
used in reporting the results of operations of the current year, but there is
no change to prior years.

173. Under IFRS, there is no
classification for

a. changes
in accounting estimates.

b. changes
in accounting principles.

c. discontinued
operations.

d. extraordinary
items.

174. The accounting for each of the following is the same under IFRS
and GAAP except for

a. extraordinary
items.

b. discontinued
operations.

c. changes
in accounting principles.

d. changes
in accounting estimates.

175. Distinguishing normal levels of income from irregular items is
of interest for the

FASB IASB

a. no no

b. no yes

c. yes no

d. yes yes

176. All revenue and expense items are considered ordinary in nature
under

a. both
IFRS and GAAP.

b. GAAP.

c. IFRS.

d. neither
IFRS or GAAP.

177. Under IFRS, the statement of comprehensive income can be
prepared under

a. the
one-statement approach only.

b. the
two-statement approach only.

c. either
the one-statement approach or the two-statement approach

d. either
the two-statement approach or the stockholders’ equity statement approach.

178. Under
IFRS, the components of other comprehensive income can be reported in each of
the following ways except

a. the
one-statement approach.

b. the
two-statement approach.

c. the
statement of stockholders’ equity approach.

d. All
of these answer choices are correct.

179. Which
of the following is not an acceptable way of displaying the components
of other comprehensive income?

a. Combined
statement of retained earnings

b. One-statement
approach

c. Two-statement
approach

d. All
of these answer choices are correct.

180. Under
IFRS, comprehensive income may be displayed (reported) in

a. the
equity section of the statement of financial position.

b. the
one-statement or the two-statement approach.

c. two-statement
approach only.

d. the
retained earnings statement.