FSA Test 2 - Chapter 7

QN=03 Beginning accounts receivable are $76,000. Sales for the period total $384,000, of which $40,000 was directly for cash. $418,000 was collected from making sales and collecting accounts receivable. What is the ending balance for accounts receivable? a. $42,000 b. $2,000 c. $82,000 d. $68,000

A

QN=04 A firm has net sales of $6,000, cash expenses (including taxes) of $2,800, and depreciation of $1,000. If accounts receivable increased in the period by $800, cash flows from operations equal a. $2,400 b. $3,200 c. $3,400 d. $4,200

A

QN=06 Which of the following statements are correct? I. A company's choice of accounting principles for financial reporting purposes does not affect net cash flow for the accounting period II. A company's choice of accounting principles for financial reporting purposes does not affect operating cash flow III. If a company sells its receivables this will increase operating cash flow IV. If a company sells its receivables this will increase financing cash flow a. I and III b. I, II and III c. II and IV d. I and IV

A

QN=07 An increase in accounts payable would be considered: a. a source of cash b. a use of cash c. an adjusting entry d. a noncash charge to income

A

QN=19 Cash flow from operations will often be negative for companies experiencing tremendous growth. a. TRUE b. FALSE

A

QN=20 Cash flow from investing when averaged over an extended period of time would normally be expected to be negative (i.e. net outflow). a. TRUE b. FALSE

A

QN=22 Over an extended period of time average cash flow from operations would be expected to be higher than average net income. a. TRUE b. FALSE

A

QN=24 Payment of a 5% stock dividend will not appear in the statement of cash flows. a. TRUE b. FALSE

A

QN=25 A gain on sale of an asset would require adjusting net income if preparing the statement of cash flows using the indirect method. a. TRUE b. FALSE

A

QN=26 An increase in assets would usually show as an outflow in the statement of cash flows. a. TRUE b. FALSE

A

QN=27 A decrease in liabilities would usually show as an outflow in the statement of cash flows a. TRUE b. FALSE

A

QN=29 Net cash flow is not affected by a company's choice of accounting principles for financial reporting purposes. a. TRUE b. FALSE

A

QN=02 Beginning and ending accounts receivable are $76,000 and $42,000, respectively. Sales for the period total $384,000, of which $40,000 was directly for cash. How much cash was collected from making sales and collecting accounts receivable? a. $344,000 b. $418,000 c. $378,000 d. $376,000

B

QN=02 Which of the following would require an adjustment in the computation of cash flow from operations using the indirect method? I. Depreciation expense II. Loss on sale of asset III. Sale of services to customers for cash IV. Utility bill received and paid in cash a. I b. I and II c. I and III d. IV

B

QN=03 Which of the following represents an investing activity in the statement of cash flows a. depreciation of plant assets b. sale of plant assets at a loss c. stock dividend d. purchase of inventory

B

QN=07 The balance for supplies is $41,000 and $27,000 for 12/31/05 and 12/31/06, respectively. During the 2006, the company recorded $30,500 of supplies expense was recorded. How much new supplies were purchased? a. $44,500 b. $16,500 c. $14,000 d. $30,500

B

QN=11 Compared with firms with capital leases, firms with operating leases generally report: a. higher cash flow from operations b. lower cash flow from operations c. identical cash flow from operations d. lower or higher cash flow from operations depending upon market interest rates

B

QN=14 Which of the following would be considered a use of cash? a. depreciation b. an increase in working capital c. sale of bonds d. an increase in wages payable

B

QN=17 Cash flow from operations is usually less volatile than net income. a. TRUE b. FALSE

B

QN=18 The only time a company experiences a negative cash flow from operations is when they are in trouble. a. TRUE b. FALSE

B

QN=21 Cash flow from financing is normally negative during the start-up phase for a company. a. TRUE b. FALSE

B

QN=23 Amortization of goodwill reduces net income and is a cash outflow. a. TRUE b. FALSE

B

QN=28 Increases in working capital are a source of funds. a. TRUE b. FALSE

B

QN=01 Under the accrual basis of accounting, which of the following statements is true? I. Reported net income provides a measure of operating performance II. Revenue is recognized when cash is received, and expenses are recognized when payment is made III. Cash inflows are recognized when they are received, and cash outflows are recognized when they are made a. I only b. III only c. I and III d. I, II and III

C

QN=01 Which of the following would require an adjustment in the computation of cash flow from operations using the indirect method? I. Sale of machinery for $50,000 with a net book value of $35,000 II. Purchase of supplies for cash III. Remittance by customer in payment of goods purchased this accounting period IV. Acquisition of land with simultaneous issuance of long-term note a. I b. I and II c. I and III d. IV

C

QN=04 Which of the following is not a financing activity in the statement of cash flows? a. cash dividend b. repurchase of common stock c. payment of interest on debt d. issuance of new debt

C

QN=05 Beginning and ending plant assets are, respectively, $325,000 and $370,000. Beginning and ending accumulated depreciation is, respectively, $82,800 and $95,000. Depreciation expense for the period was $30,000, and new assets of $76,000 were purchased. Plant assets were sold at a $10,500 loss. What were the cash proceeds from the sale? a. $17,800 b. $3,100 c. $2,700 d. $31,000

C

QN=13 Which of the following is true? The choice of LIFO versus FIFO will: a. not affect net income or cash flow from operations b. not affect net income but will affect cash flow from operations c. affect both net income and cash flow from operations d. affect net income but will not affect cash flow from operations

C

QN=15 The cash flow adequacy ratio a. Measures a company's ability to generate sufficient cash flow from investing to cover debt repayments b. Measures a company's ability to generate sufficient cash flows from operations to cover capital expenditures and debt repayment c. Measures a company's ability to generate sufficient cash flows from operations to cover capital expenditures, inventory additions and dividends d. Measures a company's ability to generate sufficient cash flows from operations to cover capital expenditures, debt repayment and dividends

C

QN=05 On a statement of cash flows that uses the indirect approach, calculation of cash flow from operations treats depreciation as an adjustment to reported net income because: a. depreciation is a direct source of cash b. depreciation is an outflow of cash to a reserve account for the replacement of assets c. depreciation reduces net income and involves an outflow of cash d. depreciation reduces net income but does not involve an outflow of cash

D

QN=06 Beginning and ending prepaid insurance is, respectively, $36,000 and $26,500. During the period, $30,500 of insurance expense was recorded. How much new insurance was purchased? a. $2,500 b. $15,600 c. $49,000 d. $21,000

D

QN=08 The management of a company wishes to window-dress its cash flow from operations. Which of the following will improve cash flow from operations? I. factoring accounts receivable II. paying suppliers more quickly III. selling of some excess marketable securities IV. deferring payment of taxes a. IV only b. III and IV c. II, III and IV d. I and IV

D

QN=09 Which of the following items is deducted from net income to arrive at cash flow from operations when using the indirect method? a. depreciation expense b. amortization expense c. decrease in accounts receivable d. decrease in accounts payable

D

QN=10 Firms report payments for capital leases in the cash flow statement: a. only as financing cash flows b. only as investing cash flows c. partly as operating cash flows and partly as investing cash flows d. partly as operating cash flows and partly as financing cash flows

D

QN=12 Which of the following would affect cash flow from operations? a. Sale of land for a gain b. Payment of dividends c. Depreciation of fixed assets d. Capitalizing costs that were previously expensed

D

QN=16 A cash flow adequacy ratio, when measured over the last several years, of less than one: a. Indicates that a company's net income is too low relative to its sales level b. Indicates that a company should decrease its dividend payout ratio c. Indicates that a company needs to pay down its debt to decrease interest costs d. Indicates that a company's internally generated cash flows have not been sufficient to cover dividend payments and support past growth levels

D