TIF_ch03 - Test Bank Chapter 3 ACCOUNTING CASH FLOWS AND TAXES EFS I True or False(Definitions and Concepts F 1 The income statement reports the

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Test Bank Chapter 3: ACCOUNTING, CASH FLOWS, AND TAXES EFS I. True or False (Definitions and Concepts) F 1. The income statement reports the financial position of a firm at a particular point in time. (FALSE: Should be balance sheet instead of income statement.) T 2. The income statement reports the income, expenses, and profit (or loss) over a specific interval of time. F 3. Depreciation increases an asset's book value each year. (FALSE: Should be lowers instead of increases.) T 4. The average tax rate is the total taxes paid divided by taxable income. T 5. GAAP stands for generally accepted accounting principles. T 6. The annual report includes an income statement, a balance sheet, a statement of cash flows, and accompanying notes F 7. Long-term refers to more than six months. (FALSE: Should be one year instead of six months.) T 8. Adverse selection can discourage people from offering to sell good-quality products. T 9. The difference between current assets and current liabilities is the firm’s net working capital. F 10. EBIT is the earnings after interest and taxes. (FALSE: Should earnings before instead of earnings after.) F 11. Dividends per share divided by EPS gives the firm’s liquidity ratio. (FALSE: Should be payout ratio instead of liquidity ratio.) F 12. The income statement indicates how the cash position of the firm has changed during the period covered by the income statement. (FALSE: Should be statement of cash flows instead of income statement.) T 13. The notes to the financial statements are an integral part of the statements. T 14. The current market value of an asset can be very different from its book value. T 15. A progressive tax system has an average tax rate that increases for some increases in the level of income but never decreases with such increases. II. Multiple Choice (Definitions and Concepts) d 16. GAAP include that define how firms should maintain records and prepare financial reports. a. conventions
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b. rules c. procedures d. all of these c 17. Accepted standards among countries making it hard to compare the information contained in financial statements for firms in different countries. a. agree b. conform c. differ d. a 18. Generally accepted accounting principles (GAAP) refer to: a. a technical accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. b. a report issued annually by a firm that includes, at a minimum, an income statement, a balance sheet, a statement of cash flows, and accompanying notes. c. the length of an asset’s life when it is issued. d. the extent to which something can be sold for cash quickly and easily without loss of value. b
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This note was uploaded on 01/21/2011 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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TIF_ch03 - Test Bank Chapter 3 ACCOUNTING CASH FLOWS AND TAXES EFS I True or False(Definitions and Concepts F 1 The income statement reports the

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