Accounting Test 2
Which of the following transactions does not affect cash during a period?
Write-off of an uncollectible account
The statement of cash flows will not report the
amount of checks outstanding at the end of the period.
Pension funds and mutual funds regularly invest in debt and stock securities to
generate earnings.
In Jude Company, land decreased $150,000 because of a cash sale for $150,000, the equipment account increased $60,000 as a result of a cash purchase, and Bonds Payable increased $120,000 from issuance for cash at face value. The net cash provided by investing activities is
$150,000 − $60,000 = $90,000
Penny Company owns 20% interest in the stock of Lynn Corporation. During the year, Lynn pays $25,000 in dividends, and reports $200,000 in net income. Penny Company's investment in Lynn will increase by
35000
Which one of the following items is not generally used in preparing a statement of cash flows?
Adjusted trial balance
Yeloe Corporation sells 400 shares of common stock being held as an investment. The shares were acquired six months ago at a cost of $60 a share. Yeloe sold the shares for $40 a share. The entry to record the sale is
Cash 16,000 Loss on Sale of Stock Investments 8,000 Stock Investments
Which of the following is not a true statement regarding short-term debt investments?
Debt investments are recorded at the price paid less brokerage fees.
Corporations invest in other companies for all of the following reasons except to
Increase trading of the other companies stock
On January 1, 2017, Brenner Company purchased at face value, a $1,000, 8% bond that pays interest on January 1. Brenner Company has a calendar year end.
Interest Receivable 80 Interest Revenue 80
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
Investing activities include
collecting cash on loans made
If the cost method is used to account for a long-term investment in common stock, dividends received should be
credited to the dividend revenue account
equity method
debit investment when recording income, credit investment for cash dividend
The statement of cash flows should help investors and creditors assess each of the following except the
entity's ability to generate future income.
Corporations invest excess cash for short periods of time in each of the following except
equity securities.
Each of the following are particularly interested in the statement of cash flows except
government agencies.
When an investor owns between 20% and 50% of the common stock of a corporation, it is generally presumed that the investor
has significant influence on the investee and that the equity method should be used to account for the investment.
Under the equity method, the Stock Investments account is increased when the
investee company reports net income.
Financing activities involve
issuing debt
Short-term creditors are usually most interested in evaluating
liquidity
A typical investment to house excess cash until needed is
low-risk, highly liquid securities
If a company reports a net loss, it
may still have a net increase in cash
Of the items below, the one that appears first on the statement of cash flows is
net increase (decrease) in cash.
Cash receipts from interest and dividends are classified as
operating activities.
Long-term creditors are usually most interested in evaluating
profitability and solvency
Stockholders are most interested in evaluating
profitability and solvency.
The primary purpose of the statement of cash flows is to
provide information about the cash receipts and cash payments during a period.
The statement of cash flows
summarizes the operating, financing, and investing activities of an entity.
At the time of acquisition of a debt investment,
the historical cost principle applies
In addition to the three basic financial statements, which of the following is also a required financial statement?
the statement of cash flows
