1) Which answer is false?

A. The concept of working capital is a basis for determining liquidity
B. The working capital is the net short-term(1-year or operating cycle) monetary need to carry on day-to-day activities.
C. Liquidity is a basis for the classification of assets on the financial statements
D. Working capital cannot present information on which to base predictions of future inflows and outflows.

2) Which answer is false?

A. Generally cash equivalents include the investments purchased within three months of their maturity value.
B. Holding gain or loss for trading and available for sale securities are reported on income statement.
C. Trading securities are in current assets, but securities available for sale and securities held to maturity can be in long-term assets (non current)
D. Holding gain or loss for trading securities are estimated at the end of every accounting period

3) Which answer is false?

A. Liquidity problems can arise from the failure to convert current assets into cash in a timely manner or from excessive bad debt losses.
B. Under inflation, use of LIFO can result in distortions of earnings when normal inventory levels are depleted because of LIFO liquidation
C. The amount of inventory disclosed on the financial statements represent the future cash receipts expected to be generated.

4) Which answer is false?

A. Depreciation is not a valuation of assets, but a form of cost allocation.
B. SFAS no 144 requires the impairment test for long-term assets held and used, and the impairment test is a valuation process.
C. The valuation of property, plant, and equipment assets are particularly important in capital-intensive industries.
D. Depreciation is not affected by asset impairment.

5) Which is not a GAAP for investment securities?

A. Equity method
B. Consolidation
C. Market Value Method
D. Replacement Value Method

6) Which answer is false?

A. Goodwill is not amortized, but tested for impairment.
B. SFAS 142 requires that all intangibles should not be amortized. Instead they should be tested for impairment
C. ARB 43 noted that there are two separate types of intangibles: those having a term of existence limited by regulation and others and those having no such term of existence.

7) Users are looking for firms who can generate more future cash flows. which one may mostly decrease earnings quality when the users examine the earnings figures as the indicator of future cash flows?

A. R&D expense
B. Credit sales
C. Long-term asset value based on historical cost