FIN 461 FINAL EXAM QUESTIONS WELL ANSWERED LATEST UPDATE 2026
Jordan's response about the financial statement impact of Alpha's decision to capitalize the cost of its
new computer system is most likely correct with respect to: - Answers higher cash flow from
operating activities
Jordan's response about the ratio impact of Alpa's decision to capitalize interest costs is most likely
correct with respect to the - Answers fixed asset turnover ratio
Jordan's response about the impact of Alpha's decision to classify its lease as an operating lease
instead of finance lease is most likely incorrect with respect to - Answers cash flow from operating
activities
Jordan's response about the impact of the different depreciation methods on net profit margin is
most likely incorrect with respect to: - Answers accelerated depreciation
Jordan's response about his approach to estimating a company's need to reinvest in its productive
capacity is most likely correct regarding: - Answers estimating the total useful life of the asset base
Jordan's response about the effect of Beta's impairment loss is most likely incorrect with respect to
the impact on its: - Answers cash flow from operating activities
Jordan's response about the effect of Alpha's revaluation is most likely correct with respect to the
impact on its: - Answers return on equity
Oil Exploration LLC paid $45,000 in printing, legal fees, commissions, and other costs associated with
its recent bond issue. It is most likely to record these costs on its financial statements as: - Answers
an asset under US GAAP and reduction of the carrying value debt under IFRS
Consolidated Enterprises issues $10 million face value, five year bonds with a coupon rate of 6.5
percent. At the time of issuance, the market interest rate is 6.0 percent. Using the effective interest
rate method of amortization, the carrying value after one year will be closest to: - Answers 10.17
million
Debt covenants are least likely to place restrictions on the issuers ability to: - Answers issue
additional equity
Financial reports of the lowest level of quality reflect: - Answers fictitious events
Which of the following statements most likely describes a situation that would motivate a manager to
issue low-quality financial reports? - Answers the managers compensation is tied to stock price
performance
Which of the following situations will most likely motivate managers to inflate earnings in the current
period? - Answers possibility of bond covenant violation
Which of the following best describes an opportunity for management to issue low-quality financial
reports? - Answers ineffective board of directors
Bias in revenue recognition would least likely be suspected if: - Answers reported revenue is higher
than the previous quarter
Galambos Corporation had an average receivables collection period of 19 days in 2003. Galambos has
stated that it wants to decrease its collection period in 2004 to match the industry average of 15 days.
Credit sales in 2003 were $300 million, and analysts expect credit sales to increase to $400 million in
2004. To achieve the company's goal of decreasing the collection period, the change in the average
accounts receivable balance from 2003 to 2004 that must occur is closest to: - Answers $836,000
(FIFO/LIFO workout) After adjusting the amounts to convert to the first in, first out (FIFO) method,
inventory at 31 December 2006 would be closest to: - Answers $670,000
To compute tangible book value, an analyst would: - Answers subtract all intangible assets from
stockholder's equity
Jordan's response about the financial statement impact of Alpha's decision to capitalize the cost of its
new computer system is most likely correct with respect to: - Answers higher cash flow from
operating activities
Jordan's response about the ratio impact of Alpa's decision to capitalize interest costs is most likely
correct with respect to the - Answers fixed asset turnover ratio
Jordan's response about the impact of Alpha's decision to classify its lease as an operating lease
instead of finance lease is most likely incorrect with respect to - Answers cash flow from operating
activities
Jordan's response about the impact of the different depreciation methods on net profit margin is
most likely incorrect with respect to: - Answers accelerated depreciation
Jordan's response about his approach to estimating a company's need to reinvest in its productive
capacity is most likely correct regarding: - Answers estimating the total useful life of the asset base
Jordan's response about the effect of Beta's impairment loss is most likely incorrect with respect to
the impact on its: - Answers cash flow from operating activities
Jordan's response about the effect of Alpha's revaluation is most likely correct with respect to the
impact on its: - Answers return on equity
Oil Exploration LLC paid $45,000 in printing, legal fees, commissions, and other costs associated with
its recent bond issue. It is most likely to record these costs on its financial statements as: - Answers
an asset under US GAAP and reduction of the carrying value debt under IFRS
Consolidated Enterprises issues $10 million face value, five year bonds with a coupon rate of 6.5
percent. At the time of issuance, the market interest rate is 6.0 percent. Using the effective interest
rate method of amortization, the carrying value after one year will be closest to: - Answers 10.17
million
Debt covenants are least likely to place restrictions on the issuers ability to: - Answers issue
additional equity
Financial reports of the lowest level of quality reflect: - Answers fictitious events
Which of the following statements most likely describes a situation that would motivate a manager to
issue low-quality financial reports? - Answers the managers compensation is tied to stock price
performance
Which of the following situations will most likely motivate managers to inflate earnings in the current
period? - Answers possibility of bond covenant violation
Which of the following best describes an opportunity for management to issue low-quality financial
reports? - Answers ineffective board of directors
Bias in revenue recognition would least likely be suspected if: - Answers reported revenue is higher
than the previous quarter
Galambos Corporation had an average receivables collection period of 19 days in 2003. Galambos has
stated that it wants to decrease its collection period in 2004 to match the industry average of 15 days.
Credit sales in 2003 were $300 million, and analysts expect credit sales to increase to $400 million in
2004. To achieve the company's goal of decreasing the collection period, the change in the average
accounts receivable balance from 2003 to 2004 that must occur is closest to: - Answers $836,000
(FIFO/LIFO workout) After adjusting the amounts to convert to the first in, first out (FIFO) method,
inventory at 31 December 2006 would be closest to: - Answers $670,000
To compute tangible book value, an analyst would: - Answers subtract all intangible assets from
stockholder's equity
