Filters
Question type
Study Flashcards

Canadian Beer had a capital acquisitions ratio of 7.49, which means its net income exceeded its cash investment in property, plant and equipment by almost 7.5 times.

A) True
B) False

Correct Answer

verifed

verified

Which of the following transactions would not be reported within the investing section of the cash flow statement?


A) The cash sale of land at a gain.
B) The purchase of a building for cash.
C) The purchase of a stock investment for cash.
D) The cash receipt of a dividend from a stock investment.

E) A) and C)
F) B) and C)

Correct Answer

verifed

verified

D

Which of the following transactions decreases the quality of income ratio?


A) The cash purchase of equipment.
B) The issue of stock in exchange for cash.
C) Collecting cash for services to be provided in the future.
D) Earning revenue that was previously recorded as unearned revenue.

E) None of the above
F) All of the above

Correct Answer

verifed

verified

D

Which of the following statements regarding use of the direct and indirect methods of determining cash flows from operating activities is incorrect?


A) The indirect method starts with net income.
B) The direct method calculates cash collected from customers.
C) The majority of U.S. companies use the indirect method.
D) The FASB recommends use of the indirect methoD.The FASB recommends use of the direct method.

E) B) and C)
F) None of the above

Correct Answer

verifed

verified

Amanda Company reported income tax expense of $250,000. Beginning income taxes payable was $30,000, while ending income taxes payable was $25,000, and accounts payable decreased $10,000. How much cash was paid for taxes?


A) $280,000.
B) $255,000.
C) $245,000.
D) $265,000.

E) C) and D)
F) B) and C)

Correct Answer

verifed

verified

Under the indirect method, an increase in accounts receivable during the year will be added to net income.

A) True
B) False

Correct Answer

verifed

verified

Most companies use the direct method for disclosing their cash flows from operating activities rather than the indirect method.

A) True
B) False

Correct Answer

verifed

verified

Which of the following items about the statement of cash flows is correct?


A) Noncash expenses such as depreciation are subtracted from net income when using the indirect method for computing cash flows from operating activities.
B) Cash equivalents are highly liquid investments with maturities at the date of purchase of less than three months.
C) The acquisition of land by issuing bonds payable would not appear on the statement of cash flows.
D) Cash paid for interest would be classified as a financing cash flow.

E) A) and B)
F) B) and D)

Correct Answer

verifed

verified

Halbur Company reported the following for its recent year of operation:  From the income statement:  Depreciation expense $1,000 Loss on sale of equipment 3,000 From the comparative balance sheet:  Beginning balance, equipment $12,500 Ending balance, equipment 8,000 Beginning balance, accumulated depreciation 2,000 Ending balance, accumulated depreciation 2,400\begin{array}{lr}\text { From the income statement: } \\\text { Depreciation expense } & \$ 1,000 \\\text { Loss on sale of equipment } & 3,000\\\text { From the comparative balance sheet: } & \\\text { Beginning balance, equipment } & \$ 12,500 \\\text { Ending balance, equipment } & 8,000 \\\text { Beginning balance, accumulated depreciation } & 2,000 \\\text { Ending balance, accumulated depreciation } & 2,400\end{array} No new equipment was purchased during the year. What was the selling price of the equipment?


A) $3,900.
B) $1,000.
C) $900.
D) $600.

E) A) and B)
F) None of the above

Correct Answer

verifed

verified

The financial statements for World Company show the following: Cost of goods sold, $725,000.  Beginning Balance  Ending Balance  Merchandise Inventory $45,000$56,000 Accounts Receivable 53,00050,000 Accounts Pavable 37,00042,000\begin{array}{lrr}&\text { Beginning Balance }&\text { Ending Balance }\\\text { Merchandise Inventory } & \$ 45,000 & \$ 56,000 \\\text { Accounts Receivable } & 53,000 & 50,000 \\\text { Accounts Pavable } & 37,000 & 42,000\end{array} How much cash was paid to suppliers?


A) $731,000.
B) $736,000.
C) $719,000.
D) $714,000.

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

Atkins Corporation has provided the following information for the year ended December 31, 2014: • The equipment account balance increased $200,000. • The equipment accumulated depreciation account increased $35,000. • Equipment costing $50,000 was sold during the year resulting in a $10,000 gain. • Depreciation expense recorded on the equipment during the year was $65,000. How much was the investing activities cash inflow from the sale of the equipment? Assume that the equipment purchase and sale resulted in cash flows.


A) $30,000.
B) $60,000.
C) $40,000.
D) $50,000.

E) A) and C)
F) All of the above

Correct Answer

verifed

verified

A company reported an increase in prepaid rent and an increase in accrued liabilities during 2014. Which of the following statements is correct?


A) When determining cash paid for operating expenses, both the increase in prepaid rent and the increase in accrued liabilities are subtracted from operating expenses.
B) When determining cash paid for operating expenses, both the increase in prepaid rent and the increase in accrued liabilities are added to operating expenses.
C) When determining cash paid for operating expenses, the increase in prepaid rent is added to operating expenses and the increase in accrued liabilities is subtracted from operating expenses.
D) When determining cash paid for operating expenses, the increase in prepaid rent is subtracted from operating expenses and the increase in accrued liabilities is added to operating expenses.

E) A) and C)
F) A) and B)

Correct Answer

verifed

verified

Which of the following would not be a cash flow from investing activities?


A) Purchase of long-term investments.
B) Sale of a patent.
C) Collection of principal on a long-term note receivable.
D) Collection of interest revenue on a long-term note receivable.

E) None of the above
F) B) and C)

Correct Answer

verifed

verified

Which of the following transactions is not reported in the statement of cash flows as a cash flow from investing activities?


A) Selling a depreciable asset for cash at a loss.
B) Purchasing a patent using cash.
C) Purchasing land in exchange for common stock.
D) Purchasing shares of common stock of another company using cash.

E) B) and C)
F) None of the above

Correct Answer

verifed

verified

Which of the following statements about the quality of income ratio is incorrect?


A) An increase in operating assets and a decrease in liabilities will reduce operating cash flows and thereby reduce the quality of income ratio.
B) Seasonal variations in sales and purchases of inventory can cause wide deviations in the quality of income ratio.
C) When sales are growing, receivables and inventory normally increase at a faster rate than accounts payable, which often causes cash flows from operating activities to be less than net income.
D) Aggressive revenue recognition tends to increase the quality of income ratio.

E) B) and C)
F) A) and D)

Correct Answer

verifed

verified

Which of the following would be a financing activities cash flow?


A) Common stock dividends received from an investment in another company.
B) Interest payments.
C) Purchase of treasury stock.
D) Purchase of a building by signing a note payable.

E) A) and B)
F) B) and D)

Correct Answer

verifed

verified

Which of the following would not be a cash flow from financing activities?


A) Issuance of common stock for cash.
B) Borrowing cash on a long-term note payable.
C) Collection of a cash dividend.
D) Repayment of principal on a long-term note payable.

E) C) and D)
F) A) and B)

Correct Answer

verifed

verified

Cash flows associated with issuance and retirement of long-term debt and equity are reported as cash flows from investing activities.

A) True
B) False

Correct Answer

verifed

verified

A higher quality of income ratio implies that operations tend to be financed internally without having to rely on external financing sources.

A) True
B) False

Correct Answer

verifed

verified

True

When accrued liabilities increase from the beginning to the end of the year, it means accrued expenses were greater than cash payments of such expenses, and, under the indirect method, the increase in accrued liabilities would be added to net income to convert to cash flow from operating activities.

A) True
B) False

Correct Answer

verifed

verified

Showing 1 - 20 of 116

Related Exams

Exam 1

Financial Statements and Business Decisions

122 Questions

Exam 2

Investing and Financing Decisions and the Accounting System

132 Questions

Exam 3

Operating Decisions and the Accounting System

114 Questions

Exam 4

Adjustments, Financial Statements, and the Quality of Earnings

136 Questions

Exam 5

Communicating and Interpreting Accounting Information

111 Questions

Exam 6

Reporting and Interpreting Sales Revenue, Receivables, and Cash

128 Questions

Exam 7

Reporting and Interpreting Cost of Goods Sold and Inventory

124 Questions

Exam 8

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

126 Questions

Exam 9

Reporting and Interpreting Liabilities

113 Questions

Exam 10

Reporting and Interpreting Bonds

120 Questions

Exam 11

Reporting and Interpreting Owners Equity

118 Questions

Exam 13

Analyzing Financial Statements

110 Questions

Exam 14

Reporting and Interpreting Investments in Other Corporations

112 Questions

Show Answer