Accounting Chapter 12 + 13

A machine with a cost of $130,000, current year depreciation expense of $17,000 and accumulated depreciation of $85,000 is sold for $40,000 cash. The total amount that should be reported in the operating section of the statement of cash flow as per indirect method is:

22,000

A cash equivalent is:

An investment readily convertible to a known amount of cash.

The statement of cash flows reports:

Cash inflows and cash outflows for an accounting period.

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

Investing activities.

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

Net income (loss)

The appropriate section in the statement of cash flows for reporting the cash received from customers is:

Operating activities

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Operating activities.

Quick assets divided by current liabilities is the:

acid-test ratio

A statement of cash flows explains the differences between the beginning and ending balances of:

cash and cash equivalents

Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in both dollar amounts and percentages, are referred to as:

comparative statements

Current assets divided by current liabilities is the:

current ratio

The building blocks of financial statement analysis do not include: - External analyst services. - Solvency. - Profitability. - Market prospects. - Liquidity and efficiency.

external analyst services

Three of the most common tools of financial analysis are:

horizontal analysis, vertical analysis and ratio analysis

How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:

inventory turnover

Horizontal analysis:

is a method used to evaluate changes in financial data across time.

Investing activities do not include the:

issuance of common stock

The ability to meet short-term obligations and to efficiently generate revenues is called:

liquidity and efficiency

The ability to generate positive market expectations is called:

market prospects

Gains and losses that are normal and frequent are reported as:

part of continuing operations in before tax dollars

Guidelines (rules-of-thumb) are general standards of comparison developed from:

past experience

A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales, is the:

profit margin ratio

Use the following information about the current year's operations of a company to calculate cash provided by operations. Net income = $200,000 Increase in Accounts Payable = 5,000 Increase in Accounts Receivable = 7,000 Decrease in Merchandise Inventory = 10,000 Increase in Salaries Payable = 6,000 Depreciation Expense = 10,000 Loss on Sale of Equipment = 6,000

230,000

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its common-size percent for cash equals:

7.85%

Of the following, which one affects cash during a period? - The declaration of a stock dividend. - Writing off an uncollectible account receivable. - The declaration of a cash dividend. - An adjusting entry recognizing the expiration of prepaid insurance. - The payment of interest expense accrued in a previous accounting period.

The payment of interest expense accrued in a previous accounting period.

A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:

(60,000)

Financial statement analysis involves all of the following except: - The application of analytical tools to general-purpose financial statements and related data for making business decisions. - Transforming accounting data into useful information for decision-making. - Helping users to make better decisions. - Helping to reduce uncertainty in decision-making. - Assuring that the company will be more profitable in the future.

- Assuring that the company will be more profitable in the future.

Standards for comparisons in financial statement analysis do not include: - Intra-company standards. - Competitors' standards. - Industry standards. - Management standards. - Guidelines (rules of thumb).

- Management standards.

A machine with a cost of $130,000, accumulated depreciation of $85,000, and current year depreciation expense of $17,000 is sold for $40,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

40,000

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

50,000

A company's Inventory balance at the end of the year was $188,000 and $200,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $84,000 and $80,000 at the beginning of the year, and its cost of goods sold for the year was $720,000. The company's total amount of cash payments for merchandise during the year equals:

704,000

The statement of cash flows is:

A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.

The statement of cash flows helps analysts evaluate all but which of the following? - Ability of the company to generate profit. - Source of cash used for plant expansion. - Differences between net income and net operating cash flow. - Source of cash used to finance investing activities. - Source of cash used for debt repayments.

Ability of the company to generate profit

When using the indirect method to calculate and report the net cash provided or used by operating activities, net income is adjusted for all but which of the following? - Gains and losses from nonoperating items. - Revenues and expenses that did not provide or use cash. - Changes in noncurrent assets and noncurrent liabilities. - Changes in current liabilities related to operating activities. - Depreciation and amortization expense.

Changes in noncurrent assets and noncurrent liabilities.

The appropriate section in the statement of cash flows for reporting the cash received from the issuance of a long-term note payable is:

Financing activities

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

Operating activities.

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

Operating activity

Which of the following items is reported on the statement of cash flows under financing activities? - Declaration of a cash dividend. - Payment of a cash dividend. - Declaration of a stock dividend. - Payment of a stock dividend. - Stock split.

Payment of a cash dividend.

Which of the following is included in the cash flows from financing activities section of the statement of cash flows? - Interest revenue. - Sale of equipment. - Interest expense. - Purchase of treasury stock. - Purchase of stock in another company.

Purchase of treasury stock

Accounting standards:

Require that companies include a statement of cash flows in a complete set of financial statements.

External users of financial information:

are not directly involved in operating the company

Which one of the following is representative of typical cash flows from operating activities? - Proceeds from collecting the principal amounts of loans. - Repayment of principals on loans. - Proceeds from the issuance of bonds and notes payable. - Payments by a merchandiser to acquire equity securities of other companies. - Receipts of cash sales.

receipts of cash sales

Common-size statements:

reveal changes in the relative importance of each financial statement item to a base amount

The comparison of a company's financial condition and performance to a base amount is known as:

vertical analysis