Question

In: Accounting

1. Companies having cash denominated in foreign currency units will not translate those units into U.S....

1. Companies having cash denominated in foreign currency units will not translate those units into U.S. dollars because cash has the same value in all currencies.

True or False

2. Long-term debt:

a. never has any portion classified as a current liability.

b. when issued, is carried at an amount based on the proceeds received.

c. consists of monetary obligations that fall due beyond two years from the balance sheet date.

d. usually has an effective yield that is much different than the cost of borrowing.

3. The indirect method of presenting cash flow from operating activities:

a. focuses on how cash flows deviate from a natural benchmark - net income.

b. presents cash transactions related to the determination of net income.

c. is more difficult than the direct method to incorporate working capital changes into a financial model.

d. is strongly recommended by both U.S. GAAP and IFRS.

4. Cash interest from investments is recorded as _______ in statements of cash flows for U.S. GAAP, but can be recorded as ________ when using IFRS.

a. cash flows from financing activities / cash flows from operating activities

b. cash flows from investing activities / cash flows from financing activities

c. cash flows from operating activities / cash flows from financing activities

d. cash flows from operating activities / cash flows from investing activities

5. The cash flow from operating activities:

a. can vary depending on whether the presentation is done under the direct method or the indirect method.

b. comprises only the increase in cash arising from the firm’s profit-making activities.

c. can be presented by using either the direct method or the indirect method.

d. is required to be presented using the direct method by U.S. GAAP and IFRS.

Solutions

Expert Solution

1. the statement is false

this is so because the value of currency is one country differ from another country. say for example the value of $1 may differnt in uk or any other country. due to foreign exchange fluctuation rate.

2.Correct option is D. usually has an effective yield that is much different than the cost of borrowing

the yield on long term debt might differ from coupon rate on debt

3.Correct option is A. focuses on how cash flows deviate from a natural benchmark - net income.

the indirect method of cash flow from operating activity presence the differnet between net income computed as per income statement to cash flow from operating activity.

4.Correct option is C. cash flows from operating activities / cash flows from financing activities

under US GAAP interest received is recorded as income from operating activty where as under IFRS it ca be recorded as either cash flow from operating activity or financing activity.

5.Correct answer is C. can be presented by using either the direct method or the indirect method.

ekkarill92 answered 11 months ago

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