Exam 3 Practice Questions

Accounts receivable from sales transactions were $51,000 at the beginning of the year and $64,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method would be a. $105,000 b. $118,000 c. $92,000 d. $169,000

c

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method? a. a gain on the sale of land b. a decrease in accounts payable c. an increase in accrued liabilities d. dividends paid on common stock

c

A 10-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under a. investing activities b. financing activities c. noncash investing and financing activities d. operating activities

b

A building with a book value of $54,000 is sold for $63,000 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as an increase of a. $54,000 from investing activities b. $63,000 from investing activities and a deduction from net income of $9,000 c. $9,000 from investing activities d. $54,000 from investing activities and an addition to net income of $9,000

b

In horizontal analysis, each item is expressed as a percentage of the a. base year figure b. retained earnings figure c. total assets figure d. net income figure

a

Land costing $140,000 was sold for $173,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land? a. $173,000 b. $140,000 c. $313,000 d. $33,000

a

Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land? a. $50,000 b. $71,000 c. $121,000 d. $21,000

a

Norris Company declared cash dividends of $60,000 during the year. Cash dividends payable were $20,000 at the beginning of the year and $25,000 at the end of the year. The amount of cash Norris Company used for payment of dividends during the year was a. $55,000 b. $80,000 c. $105,000 d. $65,000

a

Richards Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000. It had 50,000 shares of common stock outstanding during the entire year. Richards Corporation's common stock is selling for $35 per share. The price-earnings ratio is a. 7 b. 14 c. 2 d. 5

a

The following information is available from the current period financial statements: Net income $175,000 Depreciation expense 28,000 Increase in accounts receivable 16,000 Decrease in accounts payable 21,000 The net cash flow from operating activities using the indirect method is a. $166,000 b. $184,000 c. $110,000 d. $240,000

a

A corporation uses the indirect method for preparing the statement of cash flows. A fixed asset has been sold for $25,000 representing a gain of $4,500. The value in the operating activities section regarding this event would be a. $25,000 b. $(4,500) c. $29,500 d. $4,500

b

Harding Company Accounts payable $ 40,000 Accounts receivable 65,000 Accrued liabilities 7,000 Cash 30,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 110,000 Long-term liabilities 75,000 Notes payable (short-term) 30,000 Property, plant, and equipment 625,000 Prepaid expenses 2,000 Temporary investments 36,000 Based on the data for Harding Company, what is the amount of working capital? a. $238,000 b. $128,000 c. $168,000 d. $203,000

b

The independent auditor's report a. describes which financial statements are covered by the audit b. gives the auditor's opinion regarding the fairness of the financial statements c. summarizes what the auditor did d. states that the financial statements were presented on time

b

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method? a. depreciation expense b. gain on sale of land c. a loss on the sale of equipment d. dividends declared and paid

b

Balance sheet and income statement data indicate the following: Bonds payable, 10% (due in 2 years) $1,000,000 Preferred 5% stock, $100 par (no change during year) 300,000 Common stock, $50 par (no change during year) 2,000,000 Income before income tax for year 550,000 Income tax for year 80,000 Common dividends paid 50,000 Preferred dividends paid 15,000 Based on the data presented, what is the times interest earned ratio? (Round to one decimal place.) a. 1.5 times b. 6.4 times c. 6.5 times d. 5.5 times

c

If a gain of $11,000 is realized in selling (for cash) office equipment having a book value of $55,000, the total amount reported in the investing activities section of the statement of cash flows is a. $44,000 b. $11,000 c. $55,000 d. $66,000

d

Rogers Company reported net income of $35,000 for the year. During the year, accounts receivable increased by $7,000, accounts payable decreased by $3,000, and depreciation expense of $8,000 was recorded. Net cash flows from operating activities under the indirect method for the year is a. $53,000 b. $47,000 c. $33,000 d. $37,000

d

Which of the following should be added to net income in computing net cash flows from operating activities using the indirect method? a. an increase in inventory b. a decrease in accounts payable c. preferred dividends declared and paid d. a decrease in accounts receivable

d

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows? a. issuance of bonds payable b. issuance of capital stock c. purchase of treasury stock d. purchase of noncurrent assets

d

What section of cash follows would treasury stock fall?

financing

Where would you report this cash flow: issuance of bond payable

financing

Where would you report this cash flow: payment of dividends to c/s shareholders

financing

What's the only difference in the direct and indirect method (of reporting operating activities)?

how they do the operating section

Where would you report this cash flow: cash received from customers

operating

Where would you report this cash flow: purchase of equipment

investing