intermediate final pt 2

When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities?

A change in dividends payable

Which of the following best characterizes the difference between a financial forecast and a financial projection?

A forecast attempts to provide information on what is expected to happen, whereas a projection may provide information on hypothetical assumptions.

The first step in the preparation of the statement of cash flows requires the use of information included in which comparative financial statements?

Balance sheets

Which of the following is true concerning the statement of cash flows?

The FASB requires companies to classify all income taxes paid as operating cash outflows.

Which of the following statements about the statement of cash flows is correct?

The direct method is more consistent with the primary purpose of the statement of cash flows.

All of these are limitations of ratio analysis, except for:

These all are limitations

How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?

These noncash transactions are not to be incorporated in the statement of cash flows. They may be summarized in a separate schedule at the bottom of the statement or appear in a separate supplementary schedule to the financials.

Xanthe Corporation had the following transactions occur in the current year:1. Cash sale of merchandise inventory.2. Sale of delivery truck at book value.3. Sale of Xanthe common stock for cash.4. Issuance of a note payable to a bank for cash.5. Sale of a security held as an available-for-sale investment.6. Collection of loan receivable.How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year?

Three items

Of the following questions, which one would not be answered by the statement of cash flows?

Were all the cash expenditures of benefit to the company during the period?

When should an average amount be used for the numerator or denominator?

When a ratio consists of an income statement item and a balance sheet item

In a statement of cash flows, the cash flows from investing activities section should report

a major repair to machinery charged to accumulated depreciation

The primary purpose of the statement of cash flows is to provide information

about the cash receipts and cash payments of an entity during a period

The accounting profession requires disaggregated information in all of the following ways except:

all of these answers are correct.

A financial forecast presents to the best of the responsible party's knowledge and belief,

an entity's expected financial position, results of operations, and cash flows.

The payout ratio is calculated by dividing

cash dividends by net income less preferred dividends

A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash flows (indirect method), this event would be reflected as a(n)

cash inflow from financing activities.

When preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

cost of goods sold on an accrual basis is lower than on a cash basis.

All of the following information about each operating segment must be reported except

cost of goods sold.

An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n)

deduction from net income in arriving at net cash flow from operating activities.

Equipment which cost $435000 and had accumulated depreciation of $241000 was sold for $221000. This transaction should be shown on the statement of cash flows (indirect method) as a(n)

deduction from net income of $27000 and a $221000 cash inflow from investing activities.

The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n)

deduction from net income.

To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by

eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash.

An example of an inventory accounting policy that should be disclosed in a Summary of Significant Accounting Policies is the

method used for pricing inventory.

The return on common stockholders' equity is calculated by dividing

net income less preferred dividends by average common stockholders' equity.

The calculation of the times interest earned involves dividing

net income plus income taxes and interest expense by annual interest expense.

The numerator of the accounts receivable turnover should include

net sales.

Companies should disclose all of the following in interim reports except

post-balance-sheet events.

The general approach for handling advertising costs which benefit future quarters in interim reports is to

prorate them over the current and remaining quarters.

An objective of the statement of cash flows is to

provide information about the operating, investing, and financing activities of an entity during a period.

If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be

qualified.

In determining net cash flow from operating activities, a decrease in accounts payable during a period

requires an increase adjustment to cost of goods sold under the direct method

Revenue of a segment includes

sales to unaffiliated customers and intersegment sales.

A statement of cash flows typically would not disclose the effects of

stock dividends declared.

APB Opinion No. 28 indicates that

the same accounting principles used for the annual report should be employed for interim reports.

A segment of a business enterprise is to be reported separately when the revenues of the segment exceed 10 percent of the

total revenues of all the enterprise's industry segments.

The focus of APB Opinion No. 22 is on the disclosure of accounting policies. This information is important to financial statement readers in determining

whether accounting policies are consistently applied from year to year.

Which of the following post-balance-sheet events would require adjustment of the accounts before issuance of the financial statements?

Loss on a lawsuit, the outcome of which was deemed uncertain at year end

Which of the following is shown on a statement of cash flows?

None of these answers are correct.

Cash equivalents are

All of these answers are correct.

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities?

Amortization of patent.

Which of the following would be classified as a financing activity on a statement of cash flows?

Payment of a bond payable

Which of the following ratios measures long-term solvency?

Debt to assets

Which of the following should be disclosed in a Summary of Significant Accounting Policies?

Depreciation method followed

The full disclosure principle, as adopted by the accounting profession, is best described by which of the following?

Disclosure of any financial facts significant enough to influence the judgment of an informed reader.

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is deducted from net income to compute cash provided by/used by operating activities?

Gain on sale of land.