Chapter 2 Pre-test Quiz
1. The mark-to-market accounting rule
a) will be adapted in Canada in 2011 as part of the IFRS rules.
b) will increase transparency of financial information.
c) will allow Canadian companies to gain access to international financial markets.
d) will make Canadian companies’ financial statements more comparable to their
e) all of the above.
The correct answer is e. P.29
2. Given book values of current assets = $500, current liabilities = $300, net fixed assets =
$1,000, and long-term debt = $600; market values of net fixed assets = $1,500 and long-term
debt = $700. What is the market value of shareholders’ equity?
e) Insufficient information is given to calculate market value of equity.
The correct answer is c. MV(equity)=500+1500-300-700=1000
3. The balance sheet is potentially useful to
e) All of the above.
The correct answer is e. P29
4. Due to the realization principle in accounting, depreciation deductions should not be
included in calculations of cash flows.
The correct answer is b. P31
5. A financial