Long-lived assets cease to be depreciated when the firms management decides to dispose of the assets by:
A. sale.
B. abandonment.
C. Exchange for another asset.
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An analyst is comparing two firms, one that reports under IFRS and one that reports under FASB standards. An analyst is least likely to do which of the following to facilitate comparison of the compan
Add the LIFO reserve to inventory for a U.S.-based firm that uses LIFO.
B. Add the present values of each firms future minimum operating lease payments to both assets and liabilities.
C. Adjust the income statement of one of the firms if both have significant unrealized gains or losses from changes in the fair values of trading securities.
If Lizard Inc., a lessee, treats a 5-year lease as a finance lease with straight line depreciation rather than as an operating lease:
A. It will have greater equity at lease inception.
B. Its operating income will be less in the first year of the lease.
C. Its CFO will be greater and CFF will be less in the second year of the lease.
An analyst wants to compare the cash flows of two U.S. companies, one that reports cash flow using the direct method and one that reports it using the indirect method. The analyst is most likely to:
A. Convert the indirect statement to the direct method to compare the firms cash expenditures.
B. Adjust the reported CFO of the firm that reports under the direct method for depreciation and amortization expense.
C. Increase CFI for any dividends reported as investing cash flows by the firm reporting cash flow by the direct method.
Accounting fraud risk factors related to attitudes and rationalizations are least likely to include:
A. Management has a strained relationship with the current or previous auditor.
B. The firm does not effectively communicate an appropriate set of ethical standards.
C. A high proportion of managements compensation depends on the firm exceeding targets for earnings or the stock price.
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