Accouting 333 Chapter 2 Quiz | Verified Guide

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.