Final Multiple Choice

42. Income tax was $175,000 for the year. Income tax payable was $30,000 and $40,000 at the beginning and end of the year, respectively. Cash payments for income tax reported on the statement of cash flows using the direct method is

b. $165,000

40. Cash dividends of $45,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year. The amount of cash for the payment of dividends during the year is

b. $40,000

44 The cost of merchandise sold during the year was $45,000. Merchandise inventories were $13,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $7,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

b. $44,000

24. The relationship of $325,000 to $125,000, expressed as a ratio, is

b. 2.6

21. Assume the following sales data for a company: Current year $1,025,000 Preceding year 820,000 What is the percentage increase in sales from the preceding year to the current year?

b. 25%

42. Which of the following is required by the Sarbanes-Oxley Act?

b. a report on internal control

25. On the statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include

b. amortization of premium on bonds payable

36. 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 follows:

b. an increase of $63,000 from investing activities and a deduction from net income of $9,000

21. The last item on the statement of cash flows prior to the schedule of noncash investing and financing activities reports

b. cash at the end of the year

20. A ten-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under

b. financing activities

17. What type of analysis is indicated by the following?

b. horizontal analysis

35. The number of times interest expense is earned is computed as

b. income before income tax plus interest expense, divided by interest expense

20. Horizontal analysis is a technique for evaluating financial statement data

b. over a period of time

25. The ability of a business to pay its debts as they come due and to earn a reasonable net income i

b. solvency and profitability

23. Percentage analyses, ratios, turnovers, and other measures of financial position and operating results are

b. useful analytical measures

41. The current period statement of cash flows includes the following:

c. $355,000

29. A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

c. $720,000

34. 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 is

c. $92,000

19. Assume the following sales data for a company: Current year $325,000 Preceding year 250,000 What is the percentage increase in sales from the preceding year to the current year?

c. 30%

22. Income statement information for Sadie Company is below: Sales $175,000 Cost of goods sold 115,000 Gross profit $ 60,000 Using vertical analysis of the income statement for Sadie Company, determine the gross profit margin

c. 34%

15. Preferred stock issued in exchange for land would be reported in the statement of cash flows in

c. a separate schedule

32. Which of the following increases cash?

c. borrowing money by issuing a six-month note

30. Which of the following measures a company's ability to pay its current liabilities?

c. current ratio

18. Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

c. discarding an asset that had been fully depreciated

29. Financing activities include

c. issuing debt

33. Which of the following would not be classified as an operating activity?

c. payment of dividends

17. Which of the following would not be found in a schedule of noncash investing and financing activities, reported at the end of a statement of cash flows?

c. purchase of treasury stock

16. Cash paid to purchase long-term investments would be reported in the statement of cash flows in

c. the cash flows from investing activities section

35. The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

d. $296,000

37. 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 cash flows from investing activities section of the statement of cash flows is

d. $66,000

31. Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

d. a decrease in accounts receivable

26. The statement of cash flows is not useful for

d. calculating the net worth of a company

43. Free cash flow is

d. cash flow from operations less cash used to purchase fixed assets to maintain productive capacity

14. On the statement of cash flows, the cash flows from operating activities section would include

d. cash receipts from sales activities

18. A balance sheet that displays only component percentages is a

d. common-sized balance sheet

27. Cash receipts received from the issuance of a mortgage notes payable would be classified as a(n)

d. financing activity

22. Which of the following is a noncash investing and financing activity?

d. issuance of common stock to acquire land

19. Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows?

d. issuance of long-term debt

40. Which of the following is not a characteristic evaluated in ratio analysis

d. marketability

24. Cash flow per share is

d. not required to be reported on any statement

30. Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in

d. the cash flows from operating activities section

38. 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

13. Which of the following can be found on the statement of cash flows?

a. cash flows from operating activities

39. Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would

a. increase by $48,000

23. A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under

a. investing activities

28. The order of presentation of activities on the statement of cash flows is

a. operating, investing, and financing

34. Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

a. ratio of fixed assets to long-term liabilities

16. The percent of fixed assets to total assets is an example of

a. vertical analysis