Accounting Final Review Multi-choice

Proceeds from sale of equipment at book value

Cash inflow- Investing activity

Issuance of common stock for cash

Cash inflow- financing activity

Purchase of a building for cash

Cash outflow- Investing activity

Redemption of bonds for cash

Cash outflow- financing activity

Declaration and payment of a cash dividend

Cash outflow-financing activity

Which of the following statements concerning taxation is accurate?

Corporations pay federal and state income taxes

Gross profit for a merchandiser is net sales minus

Cost of goods sold

The operating expense section of an income statement for a wholesaler would not include

Cost of goods sold

Indicated which one of the following would appear on the income statement of both a merchandiser and a service enterprise

Operating expenses

Retained earnings in a corporation is the same as

Owner's equity in a small business

Which of the following adjustments to convert net income to net cash provided by operating activities is incorrect?

Prepaid Expense (increase) add to NI (decrease) deduct from NI

Which one of the following is not a characteristic of a partnership?

Unlimited life

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of

a comparative balance sheet

Once all departmental income statements are put together, added, and summarized, the company now has

a consolidated income statement

Treasury stock is

a corporation's won stock which has been reacquired but not canceled

Which one of the following items is not generally used in preparing a statement of cash flows

adjusted trial balance

In a partnership the basis of division of net income or net loss is usually referred to as

all the above

Using the indirect method, if equipment is sold at a gain, the

amount of the gain is added in the operating activities section

On the statement of cash flows using the indirect method, patent amortization expense will

be added to net income in the operating section

The values assigned to assets during the formation of a partnership must

be agreed upon by all of the partners

If a company has both an inflow and outflow of cash related to property, plant, and equipment, the

cash inflow and cash outflow should be reported separately in the investing activities section

Treasury stock should be reported in the financial statements of a corporation as a(n)

deduction from total paid-in capital and retained earnings

Vertical analysis is a technique which expresses each item within a financial statement

in terms of a percent of a base amount

Times interest earned is also called the

interest coverage ratio

Net income flows

into cash as a debit

which of the following is considered to be the least liquid current asset?

inventory

In analyzing the financial statements of a company, a single item on the financial statements

is more meaningful compared to other financial information

Financing activities involve

issuing debt

the use of alternative accounting methods

may be a problem in ratio analysis even if disclosed

If a company reports a net loss, it

may still have a net increase in cash

The formula for horizontal analysis of changes since the base period is the current year amount

minus the base year amount divided by the base year amount

Acquisition of land in exchange for common stock

significant noncash investing and financing activity

A limitation in calculating ratios in financial statement analysis is that

some account balances may reflect a typical data at year end

a weakness of the current ratio is

that it doesn't take into account the composition of the current assets

When a business earns net income

the business has more cash for investment in the future and buying more assets to generate more revenues

The statement of cash flows will not provide inside into

the exact proceeds of a future bond issue

Hot Stuff Hot Wings reported net income of $50,000 for the year. During the year, accounts receivable increased by $18,000, accounts payable decreased by $7,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year is

$25,000.00

A company has an average inventory on hand of $80,000 and the average days to sell inventory is 73 days. What is the cost of goods sold?

$400,000

Decrease in accounts receivable during a period

Added to net income

Loss on sale of land

Added to net income

Which of the following represents the largest number of common shares?

Authorized shares

Increase in merchandise inventory during a period

Deducted from net income

Which of the following would be added to net income using the indirect method?

Depreciation expense

Which one of the following is an advantage of a partnership?

Ease of decision making

If $300,000 of bonds are issued during the year but $100,000 of old bonds are retired during the year, the statement of cash flows will show a(n)

Increase in cash of $300,000 and a decrease in cash of $100,000

Which of the following adjustments to convert net income to net cash provided by operating activities is correct?

Inventory (increase) add to NI (decrease) deduct from NI

Which one of the following is not a characteristic of a sole proprietorship?

Limited liability

In a partnership each partner's initial investment should be recorded at the fair ____ value of the assets at the date of their transfer to the partnership.

Market

Which of the following is primarily interested in the liquidity of a company?

Short-term creditors

which of the following is not true of a corporation?

The acts of its owners bind the corporation

The dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees is

The corporation

To determine the net cash provided (used) by operating activities, it is necessary to analyze

The current year's income statement, a comparative balance sheet, and additional information

Which one of the following is not an ownership right of a stockholder in a corporation?

To declare dividends on the common stock

Vertical analysis is also called

common size analysis

Each of the following is a limitation of financial statement analysis except

comparability of firms

Treasury Stock is a(n)

contra stockholders' equity account

The chief accounting officer in a company is known as the

controller

The ratios that are used to determine a company's short-term debt paying ability are

current ratio, acid-test ratio, receivables turnover, and inventory turnover

Percentage of sales formula

difference / original # X 100 = %

In a partnership mutual agency means

each partner acts on behalf of the partnership when engaging in partner business

Which department income statement will not show any revenues?

engineering

If accounts payable have increased during a period,

expenses on an accrual basis are greater than expenses on a cash basis

A ratio calculated in the analysis of financial statements

expresses a mathematical relationship between two numbers

If stock is issued for a noncash asset should be recorded on the books of the corporation at

fair market value

Any dollar a business makes as net income will flow

from the income statement as profit to the balance sheet to add into the retained earnings or equity account

In ratio analysis, the ratios are never expressed as a

negative figure

In performing a vertical analysis, the base for cost of goods sold is

net sales

In performing a vertical analysis, the base for sales revenues on the income statement is

net sales

Gross profit does not appear

on a single-step income statement

Horizontal analysis is appropriately performed

on all three of these statements (Inc., Bal, and RE)

Generally, the most important category on the statement of cash flows is cash flows from

operating activities

A liquidity ratio measures the

short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash

the order of presentation of activities on the statement of cash flows is

operating, investing, and financing

Horizontal analysis evaluates financial statement data

over a period of time

Stockholders are most interested in evaluating

profitability and solvency

The two ways that a corporation can be classified by ownership are

publicly held and privately held

One major challenge of owning a sole proprietorship is

raising funds on one person's collateral

A technique for evaluating financial statements that expresses the relationship among selected items of financial statement data is

ratio analysis

The acid-test (Quick) ratio

relates cash, short-term investments, and net receivables to current liabilities

If accounts receivable have increased during the period,

revenues on an accrual basis are greater than revenues on a cash basis

which of the following characteristics do not apply to cash equivalents

sensitive to interest rate changes

Partnership net income or net loss is shared equally unless

the partnership contract specifically indicates the manner in which net income and net loss are to be divided

The debt to total asset ratio measures

the percentage of the total assets provided by creditors

Significant noncash transactions would not include

treasury stock acquisition

Horizontal analysis is also called

trend analysis

Comparative balance sheets are usually prepared for

two years

Traditional financial statements are based on the

unadjusted cost

The current ratio is

used to evaluate a company's liquidity and short-term debt paying ability