8/28/25, 9:53 AM Wall Street Prep: Advanced Accounting Exam Questions & Answers | 100% Verified solutions |Questions with Correct Answers 202…
Wall Street Prep: Advanced Accounting Exam
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Terms in this set (35)
The impact on EPS is that the share count increases,
which decreases EPS. But there can be an impact on
net income, assuming the share issuances generate
cash because there would be higher interest income,
which increases net income and EPS. However, most
companies' returns on excess cash are low, so this
How would raising capital
doesn't offset the negative dilutive impact on EPS
through share issuances
from the increased share count.
affect earnings per share
(EPS)?
Alternatively, share issuances might affect EPS in an
acquisition where stock is the form of consideration.
The amount of net income the acquired company
generates will be added to the acquirer's existing net
income, which could have a net positive (accretive) or
negative (dilutive) impact on EPS.
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,8/28/25, 9:53 AM Wall Street Prep: Advanced Accounting Exam Questions & Answers | 100% Verified solutions |Questions with Correct Answers 202…
The impact on EPS following a share repurchase is a
reduced share count, which increases EPS. However,
there would be an impact on net income, assuming
the share repurchase was funded using excess cash.
The interest income that would have otherwise been
How would a share
generated on that cash is no longer available, causing
repurchase impact
net income and EPS to decrease.
earnings per share (EPS)?
But the impact would be minor since the returns on
excess cash are low, and would not offset the positive
impact the repurchase had on EPS from the reduced
share count.
Effective tax rate: % corporations must by in taxes
What is the difference Effective tax rate = Taxes paid / earnings before tax
between the effective and
marginal tax rates? Marginal tax rate: % on the last dollar of a company's
taxable income.
Effective and marginal tax rates differ because the
effective tax rate calculation uses pre-tax income
from the accrual-based income statement. Since
Why is the effective and there's a difference between the taxable income on
marginal tax rate often the income statement and taxable income shown on
different? the tax filing, the tax rates will nearly always be
different. Thus, the "Tax Provision" line item on the
income statement rarely matches the actual cash
taxes paid to the IRS.
https://quizlet.com/1069225614/wall-street-prep-advanced-accounting-exam-questions-answers-100-verified-solutions-questions-with-correct-answer… 2/23
, 8/28/25, 9:53 AM Wall Street Prep: Advanced Accounting Exam Questions & Answers | 100% Verified solutions |Questions with Correct Answers 202…
Under GAAP, many companies follow different
accounting standards and rules for tax and financial
reporting.
i. Most companies use straight-line depreciation (i.e.,
equal allocation of the expenditure over the useful
life) for reporting purposes, but the IRS requires
accelerated depreciation for tax purposes - meaning,
book depreciation is lower than tax depreciation for
Could you give specific
earlier periods until the DTLs reverse.
examples of why the
effective and marginal tax
ii. Companies that incurred substantial losses in earlier
rates might differ?
years could apply tax credits (i.e., NOL carryforwards)
to reduce the amount of taxes due in later periods.
iii. When debt or accounts receivable is determined to
be uncollectible (i.e., "Bad Debt" and "Bad AR"), this
can create DTAs and tax differences. The expense can
be reflected on the income statement as a write-off
but not be deducted in the tax returns.
https://quizlet.com/1069225614/wall-street-prep-advanced-accounting-exam-questions-answers-100-verified-solutions-questions-with-correct-answer… 3/23
Wall Street Prep: Advanced Accounting Exam
Questions & Answers | 100% Verified solutions
|Questions with Correct Answers 2025 latest
update!!
Save
Terms in this set (35)
The impact on EPS is that the share count increases,
which decreases EPS. But there can be an impact on
net income, assuming the share issuances generate
cash because there would be higher interest income,
which increases net income and EPS. However, most
companies' returns on excess cash are low, so this
How would raising capital
doesn't offset the negative dilutive impact on EPS
through share issuances
from the increased share count.
affect earnings per share
(EPS)?
Alternatively, share issuances might affect EPS in an
acquisition where stock is the form of consideration.
The amount of net income the acquired company
generates will be added to the acquirer's existing net
income, which could have a net positive (accretive) or
negative (dilutive) impact on EPS.
https://quizlet.com/1069225614/wall-street-prep-advanced-accounting-exam-questions-answers-100-verified-solutions-questions-with-correct-answer… 1/23
,8/28/25, 9:53 AM Wall Street Prep: Advanced Accounting Exam Questions & Answers | 100% Verified solutions |Questions with Correct Answers 202…
The impact on EPS following a share repurchase is a
reduced share count, which increases EPS. However,
there would be an impact on net income, assuming
the share repurchase was funded using excess cash.
The interest income that would have otherwise been
How would a share
generated on that cash is no longer available, causing
repurchase impact
net income and EPS to decrease.
earnings per share (EPS)?
But the impact would be minor since the returns on
excess cash are low, and would not offset the positive
impact the repurchase had on EPS from the reduced
share count.
Effective tax rate: % corporations must by in taxes
What is the difference Effective tax rate = Taxes paid / earnings before tax
between the effective and
marginal tax rates? Marginal tax rate: % on the last dollar of a company's
taxable income.
Effective and marginal tax rates differ because the
effective tax rate calculation uses pre-tax income
from the accrual-based income statement. Since
Why is the effective and there's a difference between the taxable income on
marginal tax rate often the income statement and taxable income shown on
different? the tax filing, the tax rates will nearly always be
different. Thus, the "Tax Provision" line item on the
income statement rarely matches the actual cash
taxes paid to the IRS.
https://quizlet.com/1069225614/wall-street-prep-advanced-accounting-exam-questions-answers-100-verified-solutions-questions-with-correct-answer… 2/23
, 8/28/25, 9:53 AM Wall Street Prep: Advanced Accounting Exam Questions & Answers | 100% Verified solutions |Questions with Correct Answers 202…
Under GAAP, many companies follow different
accounting standards and rules for tax and financial
reporting.
i. Most companies use straight-line depreciation (i.e.,
equal allocation of the expenditure over the useful
life) for reporting purposes, but the IRS requires
accelerated depreciation for tax purposes - meaning,
book depreciation is lower than tax depreciation for
Could you give specific
earlier periods until the DTLs reverse.
examples of why the
effective and marginal tax
ii. Companies that incurred substantial losses in earlier
rates might differ?
years could apply tax credits (i.e., NOL carryforwards)
to reduce the amount of taxes due in later periods.
iii. When debt or accounts receivable is determined to
be uncollectible (i.e., "Bad Debt" and "Bad AR"), this
can create DTAs and tax differences. The expense can
be reflected on the income statement as a write-off
but not be deducted in the tax returns.
https://quizlet.com/1069225614/wall-street-prep-advanced-accounting-exam-questions-answers-100-verified-solutions-questions-with-correct-answer… 3/23
