Accounting

A corporate charter:

-Specifies the rights and characteristics of the stock -Is required before stock is issued -Specifies the number of shares authorized

Totito Inc. issues $100,000 face amount bonds at 98. The journal entry to record the issuance should include:

A credit to bonds payable for $100,000 A debit to discount on bonds payable for $2000

ABC Company issues a bond with a face value of $100,000 at par on Jan 1, ABC prepares financial statements only at Dec 31, so no adjusting entries are made during the year to accrue interest. If the bond carries a stated interest rate of 6% payable in cash in December 31 of each year, the journal entry to record the first bond interest payment includes ___________.

A credit to cash $6000 A debit to Interest expense of $6000

Decrease; operating

A(n) __________ in the accounts receivable from the prior period is added to net income in the ___________ activities section of the statement of cash flows

A formal debt instrument that obligates the borrower to repay a stated amount (referred to as the principle or face amount) at a specified maturity date is referred to as a(n)

Bond

Callable bonds can be redeemed at the choice of the

Bond issuer

Which of the following statements is correct?

Bonds may be retired at maturity or retired early

The mixture of debt financing and equity financing a company uses is referred to as the company's __________ structure

Capital

Sake of equipment

Cash inflow

Sale of equipment

Cash inflow

Financing

Cash inflows and outflows involving stockholders and creditors are classified on the statement or cash flows as _________ activities

Convertible bonds allow the lender to convert each bond into

Common stock

Werner issues bonds at a discount. The related Discount account should be classified as a(n) ______________ -______________

Contra liability

The journal entry to recognize the signing of an installment notes payable includes

Debit cash, credit notes payable

In order to expand its business, Mueller Inc. is borrowing $1 million from its bank. Mueller is utilizing this type of financing:

Debt

Financing ________ requires borrowing, whereas financing with ___________ requires issuing shares of stock

Debt; equity

Noncash

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ___________ reduction to net income

__________ financing refers to obtaining investment from stockholders

Equity

The carrying value at maturity is equal to the face amount of bonds issued at:

Face amount, discount, and premium

Long-term liabilities and stockholders' equity accounts

Financing activiriee

Non operating

Gains and losses on the sale of long-term assets represent common _____________ items needing adjustment under the indirect method

-A credit to Premium on Bond Payable of $10,000 -A credit to Bonds payable of $100,000 -A debit of Cash of $110,000

If ABC company issues 100 of its $1,000 bonds at a price of 110, the journal entry will include which of the following entries?

The change in the cash balance

In a statement of cash flows, the sum of cash inflows and outflows is equal to

Promissory notes requiring periodic payments of interest and principle are referred to as ____________ notes.

Installment

Debt is considered a lower cost method of financing than equity because

Interest on debt is tax deductible

___________ capital is the amount of money paid into a company by its owners

Invested

Long-term asset accounts

Investing activities

Financing

Issuing stock to owners is classified as a(n) ___________ activirt

A contract in which an owner provides a user the right to use an asset in return for periodic cash payments over a period of time is called a(n)

Lease

Bonds and leases are normally classified as _________ liabilities.

Long-term

Corporations may be ___________ held or _________ helf

Publicly; privately

Which of the following are included in the rights of common stockholders

Right to vote on certain matters

Purchase or investment

Sale of outflow

_____________ bonds are supported by a specific asset the issuer pledges as collateral

Secured

Corporate bonds most often pay interest _______________

Semiannually

Provide more complete information

Significant noncash investing and financing activities are disclosed because they

Bonds that require payment of full principle amount of the bond at the end of the loan term are referred to as

Term bonds

Direct

The __________ method prepares the operating activities statement of cash flows by restating each revenue and expense from the accrual basis to the cash basis. It shows the cash collected from customers and rye cash paid for operating expenses

Statement of cash flows

The financial statement that provides information about cash receipts and cash disbursements for the period is the

ABC Company is in the process of issuing bonds. The bonds have stated interest rate of 6%, which is 2% above the current market rate. What effect will the two interest rates have on the bond issue price?

The issue price will be above the bond's face value

Return on assets

The ratio that is calculated by dividing net income by average total assets is referred to as

-inflow -outflow

The statement of cash flows provides information about the cash flows and cash outflows of an entity. For financing activities, a cash ________ occurs when cash is borrowed from a creditor, and a cash ___________ occurs when a loan is repaid

-inflows -outflows

The statement of cash flows provides summary information about cash ___________ and cash ___________ outflows during the year

Direct, indirect

The two acceptable methods for U.S. GAAP for preparing the statement of cash flows are the _________method and the __________ method

Noncash

Transactions reported in the statement of cash flows that do not increase or decrease cash, but that result in significant investing and financing activities are referred to as ____________ activities

The contra account used to record a company's repurchase of its own common stock is the ________________ stock account.

Treasury

-Has a negative equity balance -Is contra-equity account -Is shares of stock no longer outstanding

Treasury stock

If a corporation reacquires its own common stock, the stock is referred to as

Treasury stock

Prepaid insurance

When the ____________ account decreases, it means the company paid less cash for insurance than it recorded as insurance expense

-issuance of common stock to investors -borrowing from bank

Which of the following are cash inflows from financing activities

-purchase of building -purchase of long-term investments -purchase or land

Which of the following are cash outflows from investing activities by activities

-interest received on notes receivable -collection on account

Which of the following are classified as cash flows from operating activities on the statement of cash flows

The journal entry to record the issuing of 100 bonds at their $1000 face value will include a debit to _______ and a credit to ______

Cash; bonds payable

Related cash may be higher or lower than the accrued amount included in net income

Changes to current assets and current liabilities require adjustment of net income under the indirect method because

Net income

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ________ _________

Pay dividends Repay borrowing from bank

Which of the following are cash outflows from financing activities

-purchase of available-for-sale securities -purchase of land

Which of the following are cash outflows from investing activities

-sale of held-to-maturity investments -sale of building -sale of equipment

Which of the following cash transactions are classified as cash inflows from investing activities

-Indirect method -Direct method

Which of the following describes the acceptance methods that may be used to prepare the statement of cash flows?

-collection on account -interest received on notes receivable

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows

Receipt of interest Collection from customers

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows

Purchase of a machine for cash

Which of the following would result in a cash outflows from investing activities

It is identical under the direct and indirect method

Which statement regarding the amount of cash from operating activities is correct

Operating

________________ activities include cash receipts and cash payments for transactions relating to revenue and expense activities

Purchase of investment

Cash outflow

-on the face of the statement of cash flows -in the notes to financial statements

In order to provide more complete information, significant noncash investing and financing activities are reported

1. Calculate the net cash flows from operating activities 2 determine the net cash flows from investing activities 3 determine the net cash flows from financing activities 4 combine operating, investing, and financing activities

List the four steps of a statement of cash flows in the correct order

Assets=liabilities+stockholders equity

What is the accounting equation

Amounts presented in the income statement

When cash from operating activities is presented using the indirect method, net income must be adjusted for increases and decreases in balance sheet accounts that relate to

Direct

When using the ________ method for determining cash flows from operations, noncash expenses are omitted from statement of cash flows

-purchase of an investment -purchase of land

Which of the following are classified as cash outflows from investing activities

-Retained earnings -Paid-in capital

Which of the following are sources if shareholders' equity