FRA 1.5 Test 1

• A. 22.7%.
• B. 4.8%.
• C. 15.2%.

Balance sheet items presented on a current value basis are measured at the:

• A. start of the reporting period.
• B. midpoint of the reporting period.
• C. end of the reporting period.

• A. ability to collect from customers.
• B. payments to suppliers.
• C. inventory management.

Which of the following statements about balance sheets is most accurate? For balance sheets prepared under:

• A. IFRS, a classified balance sheet must present current assets before non-current assets.
• B. US GAAP, intangibles must be valued at historical cost.
• C. IFRS, a commercial real estate company should use a liquidity based presentation.

Shares which have been repurchased by a company and not canceled are best described as:

• A. other reserves.
• B. treasury shares.
• C. minority interest.

The best description of a classified statement of financial position is one that:

• A. is supported by note disclosures relevant to understanding its components.
• B. distinguishes between current and non-current assets and liabilities.
• C. has not been audited.

Assume the companies use a periodic inventory system. <br /><br />Zimt AG uses the FIFO method, and Nutmeg Inc. uses the LIFO method. Compared to the cost of replacing the inventory, during periods of rising prices the ending inventory balance reported by:

• A. Zimt is too high.
• B. Nutmeg is too low.
• C. Nutmeg is too high.

Brown Corporation had average days of sales outstanding of 19 days in the most recent fiscal year. Brown wants to improve its credit policies and collection practices and decrease its collection period in the next fiscal year to match the industry average of 15 days. Credit sales in the most recent fiscal year were $300 million, and Brown expects credit sales to increase to $390 million in the next fiscal year. To achieve Brown’s goal of decreasing the collection period, the change in the average accounts receivable balance that must occur is closest to:

• A. +$0.41 million.
• B. –$0.41 million.
• C. –$1.22 million.

• A. Company A’s current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, but Company B is more solvent, as indicated by its lower debt-to-equity ratio.
• B. Company A’s current ratio of 0.25 indicates it is less liquid than Company B, whose current ratio is 0.83, and Company A is also less solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B’s debt-to-equity ratio of only 30 percent.
• C. Company A’s current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, and Company A is also more solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B’s debt-to-equity ratio of only 30 percent.

Under IFRS, a loss from the destruction of property in a fire would most likely be classified as:

• A. continuing operations.
• B. discontinued operations.
• C. other comprehensive income.