Marcus Corp.抯 balance sheet as of December 31, 2001 is as follows （in $ millions):Cash 30

ent used in its operations. The bonds were convertible into common stock at a conversion rate of 100 shares per $1,000 bond. In 2001 the market price of Copper, Inc.抯 common stock rose above $10 per share, and all of the outstanding bonds were converted into common stock when the common stock was selling for an average price of $15 per share. Copper, Inc. prepares its Statement of Cash Flows using the indirect method. Given the above information, Copper 抯 Statement of Cash Flows for the year ended December 31, 2001 should include the following:

A.no reporting of the transaction in the Statement of Cash Flows, except for a footnote describing the conversion of the bonds into common stock.

B.under Cash Flow from Financing, "Retirement of Bonds: $4,000,000" and "Issuance of Common Stock: $4,000,000."

C.under Cash Flow from Financing, "Retirement of Bonds: $4,000,000" and "Issuance of Common Stock: $6,000,000" and under Cash Flow from Investing "Loss on Retirement of Bonds: $2,000,000."

D.no reporting of the transaction.

A.be relevant.

B.be reliable.

C.consider the economic impact of the reported information.

D.be useful.

ear

ended December 31, 2001:

Sales $3,400,000

Cost of Goods Sold (2,100,000)

Depreciation (300,000)

Interest Paid (200,000)

Gain on Sale of Old Equipment 400,000

Income Taxes Paid (300,000)

Net Income $900,000

Brown issued bonds on June 30, 2001 and received proceeds of $4,000,000.

Old equipment with a book value of $2,000,000 was sold on August 15, 2001 for

$2,400,000 cash.

Brown purchased land for a new factory on September 30, 2001 for $3,000,000,

issuing a $2,000,000 note and paying the balance in cash.

Using the definition of free cash flow as cash flow from operations less capital expenditures,

Brown 抯 free cash flow available to equity shareholders for 2001 is:

A) $2,200,000

A.$2,200,000.

B.$200,000.

C.$2,600,000.

D.$6,200,000.

White Corp.抯 financial statements for the year ended December 31, 2001 included the

following:

Income Statement

Sales $8,000,000

Cost of Goods Sold (3,800,000)

Gross Profit 4,200,000

Wages (1,000,000)

Depreciation (600,000)

Interest (500,000)

Taxes (600,000)

Net Income $1,500,000

Selected Balance Sheet Accounts

Dec. 31, 2000 Dec. 31, 2001

Accounts Receivable $1,200,000 $1,500,000

Inventory 800,000 1,000,000

Accounts Payable 600,000 400,000

Equipment 5,300,000 5,500,000

White prepares its Statement of Cash Flow using the direct method.

The Cash Flow from Operations (CFO) section of the statement will show Cash Collections of:

A.$7,700,000.

B.$7,100,000.

C.$6,900,000.

D.$6,700,000.

Data Corp. manufactures and sells computer equipment. The following information is

available concerning a transaction between Data and Venture, Inc.:

On November 30, 2001 Data Corp. received a signed purchase order from Venture Inc.

for 100 model D computers at a price of $150,000. Under the terms of the purchase

order, Data arranges and pays for shipping, risk of ownership passes upon delivery,

and the transaction is not subject to revocation.

On December 29, 2001 100 model D computers were shipped from Data Corp.抯

factory.

On December 31, 2001 Data Corp. received cash payment for the computers in the

amount of $150,000.

On January 2, 2002 the computers were received at Venture, Inc.抯 headquarters.

Data Corp. should recognize $150,000 of revenue as of:

A.January 2, 2002.

B.November 30, 2001.

C.December 29, 2001.

D.December 31, 2001.

A.Reported earnings under the completed-contract method are more volatile than under the percent-of-completion method.

B.Reported earnings under the completed-contract method are more volatile than under the percent-of-completion method; Analysis of cash flow from operations is more important when using the completed-contract method than when using the percent-of-completion method.

C.Reported earnings under the completed-contract method are more volatile than under the percent-of-completion method; When cash receipts are greater than revenues earned the completed-contract method will give lower net income, retained earnings, liabilities, and current assets than the percent-of-completion method.

D.Analysis of cash flow from operations is more important when using the completed-contract method than when using the percent-of-completion method; When cash receipts are greater than revenues earned the completed-contract method will give lower net income, retained earnings, liabilities, and current assets than the percent-of-completion method.

A.Neither of these are correct.

B.With the installment sales method sales are recognized when cash is received but profits are only recognized after all costs have been recovered.

C.Both of these are correct.

D.With the cost recovery method sales and profits are recognized as cash is received.

A.Accounting income recognizes both current period actual cash flows and changes in asset value.

B.Reported income under the accrual concept provides a measure of current operating performance based solely on actual current period cash flows.

C.The accounting process only recognizes value changes arising from actual transactions.

D.Accrual accounting may allocate transactions and cash flows to time periods other than those in which the cash flows occur.

A.A local subsidiary corporation that provides investment management business.

B.A transnational investment consulting services company.

C.An independence investment research firm.

A.should follow the stricter standard between local laws and GIPS.

B.should calculate and present two groups of investment performance data separately complying with local laws and GIPS.

C.should comply with local laws and disclose the conflicts.