ACCOUTING 333 CHAPTER 2 QUIZ
A current asset is best defined as:
o the market value of all assets currently owned by the firm.
o an asset the firm expects to purchase within the next year.
o the amount of cash on han
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ACCOUTING 333 CHAPTER 2 QUIZ
A current asset is best defined as:
o the market value of all assets currently owned by the firm.
o an asset the firm expects to purchase within the next year.
o the amount of cash on hand the firm currently shows on its balance sheet.
o cash and other assets owned by the firm that will convert to cash within the next year.
o the value of fixed assets the firm expects to sell within the next year
2. Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $126,500?
o 21.38%
o 23.88%
o 25.76%
o 34.64%
o 39.00%
Tax = .15($50,000) + .25($25,000) + .34($25,000) + .39($126,500 - 100,000) = $32,585
Average tax rate = $32,585/$126,500 = .2576, or 25.76%
3. A(n) ____ asset is one which can be quickly converted into cash without significant loss in value.
o tangible
o fixed
o intangible
o liquid
o long-term
4. _____ refers to the changes in net capital assets.
• Cash flow from assets
• Net working capital
• Cash flow from investing
• Operating cash flow
• Cash flow to creditors
5. Which of the following are included in current liabilities?
I. Debt payable to a mortgage company in nine months
II. Note payable to a supplier in eighteen months
III. Accounts payable to suppliers
IV. Loan payable to a bank in fourteen months
o I and III only
o II and III only
o III and IV only
o II, III, and IV only
o I, II, and III only
6. Which one of the following statements concerning liquidity is correct?
o Fixed assets are more liquid than current assets.
o Balance sheet accounts are listed in order of decreasing liquidity.
o Liquid assets tend to be highly profitable.
o The less liquidity a firm has, the lower the probability the firm will encounter financial difficulties.
o Trademarks and patents are highly liquid
7. A firm has total equity of $1,890, net working capital of $150, long-term debt of $890, and current liabilities of $720. What is the amount of the net fixed assets?
o $2,330
o $2,930
o $2,630
o $3,050
o $3,350
Net fixed assets = $890 + 1,890 - 150 = $2,630
8. Book value is:
o based on historical cost.
o equivalent to market value for firms with fixed assets.
o more of a financial than an accounting valuation.
o the amount a willing buyer will pay for an asset.
o adjusted to market value whenever the market value exceeds the stated book value.
9. Depreciation:
o reduces both the net fixed assets and the costs of a firm.
o decreases net fixed assets, net income, and operating cash flows.
o is a non-cash expense that decreases the selling, general, and administrative expenses.
o is a non-cash expense that reduces the pretax income.
o increases the net fixed assets as shown on the balance sheet.
10. Free cash flow is:
o without cost to the firm.
o equal to net income plus taxes.
o a term used to describe an increase in net working capital.
o cash that is available to distribute to creditors and equity holders.
o another term for operating cash flow.
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