The income statement approach to measuring income tax expense: U

1. The income statement approach to measuring income tax expense:

compares revenues and expenses recognized for book and tax purposes, eliminates permanent differences, and computes income tax expense based on book income before taxes excluding permanent differences.

2. U.S. GAAP, IFRS, and other major accounting standards are best characterized as:

mixed attribute accounting models.

3. Normally, cash flows from investing activities will start providing cash during which phase of the product life cycle?

Maturity

4. Free cash flows to all debt and common equity shareholders represents the excess of cash flows from:

operating activities over cash flows for investing activities

5. In a statement of cash flows, interest received from sources other than a company's investments would be classified as cash inflows from:

operating activities.

6. Which of the following transactions would not create a cash flow?

Amortization of patent for the period.

7. Asset turnover represents:

The ability to generate sales from a particular investment in assets.

8. Return on assets can be disaggregated into three components. Which of the following is not one of the components?

Debt to equity ratio

9. The financial statements for Warren Company show the following:
   
   Cost of goods sold $725,000
   
   Beginning Balance Ending Balance
   
   Merchandise Inventory $45,000 $56,000
   
   Accounts Receivable 53,000 50,000
   
   Accounts Payable 37,000 42,000

Based on this information, cash paid for merchandise was:

Cost of goods sold: 725,000

Add inventory: (56,000-45,000)= 11,000. 725,000+11,000= 736,000

Accounts payable increase (42,000-37,000)= 5,000. 736,000-5,000= $731,000

10. Tinker Company reported sales revenue of $500,000 and total expenses of $450,000 (including depreciation) for the year ended December 31, 2010. During 2010, accounts receivable decreased by $5,000, merchandise inventory increased by $4,000, accounts payable increased by $6,000, and depreciation expense of $10,000 was recorded. Assuming no other data is needed and using the indirect method, the net cash inflow from operating activities for 2010 was:

Working capital: Current assets- current liabilities

Non-working capital: Working Current Assets- Current liabilities

Net income: Sales - expenses= 500,000-450,000= $50,000

Cash inflow of $5000. --> 50,000+5,000

Inventory of 4,000. à 55,000-4,000= 51,000

Accounts payable increased à 51,000+6,000= 57,000

Depreciation expense à 57,000+10,000= 67,000