INCOME STATEMENT

Question 1

Firms that EXPENSE costs compared to those which CAPITALZE will have

Answer 1

Higher variability of income

Question 2

An analyst least likely rely on as objeticve information in a company analysis?

Answer 2

Corporate press release

Question 3

Cost basis. Valuing a long live assets, fair value is a consideration when calculating gain or loss in:

Answer 3

Exchanging in assets. Carrying - fair

Question 4

Gain on a selling long lived asset

Answer 4

Carrinh - cash receveid

Question 5

Loss on abandoned an asset

Answer 5

= Carrying value

Question 6

Double Balance Sheet declining method STEP BY STEP

Answer 6

Cost - svg x 2/useful life
IMPORTANT: you can NOT DEPRECIATE more than SALVAGE VALUE
Example
Cost 100k
Salvage 20k

Y1 = 100k x 2/5 = 40k
Y2 = (100-40)k x 2/5 = 24k
Y3 = (60-24) k x 2/5 = 14.4k

ATENTION: depreciation expense = 78.4k so far.

So total expense in year 4 will be 80-78.4= 1.6k

Question 7

Causes of differences Between
Effective Tax expense ‘n Statutory tax

Answer 7

Permanent tax differences:
tax credits,
NON deductible expenses,
Tax differences between Capital Gains and operating Income

Question 8

Interest Expense

Answer 8

Book value Bond (beginning) x market rate

Question 9

CASH CONVERTION CYCLE

Answer 9

Avg. collection period + avg. inventory processing period - Payables payment

Question 10

What is the impact on NET income to Revalue an equipment ASSET from 500 to 600?

Answer 10

Will be lower.
Increase an asset = increase depreciation in the future periods

BUT increase in equity ( if not recognized as a loss yet)

Question 11

How Debt Issued and Held to maturity are reported ?

Answer 11

Amortized cost

Question 12

What is the meaning and the effect of ACCOUNTS PAYABLE on CASH PAID TO SUPLIERS

Answer 12

If accounts payables UP

Means that you need to pay your supplier and haven’t done it yet.

So you SUBTRACT of the total of cash paid