4.6 Chapter 4: Review Questions
Chapter 4: Review Questions
- What are some of the critical differences between Accounting and Finance?
- In what ways can Accounting data be “managed”?
- What are the critical differences between the Balance Sheet and the Income Statement?
- Identify the correct choices: Assets are dr /cr balance accounts while Liabilities and Equity are dr /cr balance accounts.
- How are the Additions to Retained Earnings and Retained Earnings different from one another?
- Who takes the most risk in order to earn the highest return?
- Give an example where it is permissible to use different accounting methods for reporting versus tax accounting.
- What are some problems pursuant to using LIFO-based accounting?
- True or False: Operating Profits include interest paid.
- If the company does not pay its dividends on Preferred Stock, has it “defaulted”?
- True or False: Interest is not tax-deductible whereas Dividends are tax-deductible.
- What are some of the differences between what the accountant and financial analyst do?
- If there is some inflation, which will produce higher gross profits – FIFO or LIFO?
- Provide some examples of and discuss each of the four interpretive problems readers of financial statements may encounter.
- Solve the following Calculation Problems:
- Assume the following:
Equipment cost: $12 million
Estimated Life: 8 years
Salvage Value: $1.75 million
What are the second year’s depreciation expenses and asset balances under each of the three reporting methods?
2. Assume the following:
Beginning Inventory: $2 million
Ending Inventory: $4 million
Purchases: $10 million
What is the company’s Cost of Goods Sold?
