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A switch from first in first out (FIFO) to last in first out (LIFO) :（）

A. results in a more meaningful inventory valuation during periods of rising prices.
B. will result in higher taxes and smaller cash flows.
C. results in a lower current ratio during periods of rising prices.

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Kachelmeyer, Inc., signs an agreement on 1 January 2005, to lease equipment from Henderson Company. The term of the lease is five years, and the estimated economic life of the asset is also five years. The agreement requires equal annual payments of $ 36285.90, with the first payment on 1 January 2005. Kachelmeyer’ s incremental borrowing rate is 12 percent. Henderson’ s implicit rate is 10 percent and is known to Kachelmeyer. The prime rate is 8 percent. The discount rate that Kachelmeyer should use to capitalize the lease is:

A. 8%.

B. 12%.

C. 10%.

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An analyst is comparing a firm to its competitors. The firm has a deferred tax liability and is expected to continue to grow in the foreseeable future. How should the liability be treated for analysis purposes（）

A. It should be treated as equity at its full value.
B. It should be treated as a liability at its full value.
C. The present value should be treated as a liability with the remainder being treated as equity.

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During a period of rising prices a company may change from LIFO to FIFO to:（）

A. takes advantage of tax deferrals and reduce overall taxes paid.
B. increase COGS and, hence, increase the overall cash flow position of the firm.
C. increase reported inventory and, hence, improve various accounting constructs such as working capital

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Xanos Corporation faced a 50% marginal tax rate last year and showed the following financial and tax reporting information: Deferred tax asset of $1000. Deferred tax liability of $ 5000. Based only on this information and the news that the tax rate will decline to 40%, Xanos Corporation’ s :（）

A. deferred tax asset will be reduced by $ 400 and deferred tax liability will be reduced by $ 2000.
B. deferred tax liability will be reduced by $1000 and income tax expense will be reduced by $ 800.
C. deferred tax asset will be reduced by $ 200 and the income tax expense will be reduced by $1000.

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A switch from first in first out (FIFO) to last in first out (LIFO) :（）

A. results in a more meaningful inventory valuation during periods of rising prices. B. will result in higher taxes and smaller cash flows. C. results in a lower current ratio during periods of rising prices.

An analyst is comparing a firm to its competitors. The firm has a deferred tax liability and is expected to continue to grow in the foreseeable future. How should the liability be treated for analysis purposes（）

During a period of rising prices a company may change from LIFO to FIFO to:（）

A. results in a more meaningful inventory valuation during periods of rising prices.
B. will result in higher taxes and smaller cash flows.
C. results in a lower current ratio during periods of rising prices.