Accounting Chapter 13-14 Exam

Step 4 of preparing a spreadsheet for the statement of cash flows is to

analyze the change during the year in each non cash account and classify the change.

Under the direct method of preparing the statement of cash flows, which of the following is not adjusted or reported as part of converting the income statement to cash flows from operating activities?

depreciation expense

In horizontal analysis, each item is expressed as a percentage of the

earliest year figure

The numerator in the computation of the ratio of fixed assets to long-term liabilities is

fixed assets at year end

A company's ratio of liabilities to stockholders' equity decreased from 0.6 to 0.4 during the year. This is a(n)

improvement in the margin of safety for creditors

Which of the following would be reported as a cash outflow in the financing activities section of the statement of cash flows?

increase in treasury stock account

If the free cash flow changed from $60,000 to $80,000, the change

is indicative of a favorable trend

Which of the following would be shown on a statement of cash flows under the financing activities section?

issuance of bonds

A company's ability to convert assets into cash is called

liquidity

In preparing the "Cash flows from (used for) investing activities" section of the statement of cash flows, which type of account is analyzed for changes?

long-term assets

Analysts often use free cash flow, rather than cash flows from (used for) _________ activities, to measure the financial strength of a business.

operating

Net income is reported in which of the following sections of the statement of cash flows?

operating activities

Which of the following would be reported as a cash outflow in the financing activities section of the statement of cash flows?

payment of dividends

Which of the following falls under the category of current position analysis?

quick ratio

Bondholders and other long-term creditors are most interested in which dimension of company analysis?

solvency

Cash received through the sale of long-term investments would be reported on the statement of cash flows in

the "Cash flows from (used for) investing activities" section.

Which of the following is used in computing cash received from customers using the direct method?

A decrease in accounts receivable

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

A decrease in inventory

Which of the following statements regarding the spreadsheet (work sheet) used to prepare the statement of cash flows is true?

A spreadsheet is not required to be used to prepare the statement of cash flows.

The formula for the dividend yield is

Dividends per Share of Common Stock ÷ Market Price per Share of Common Stock.

Which of the following would be shown on a statement of cash flows under the financing activities section?

Issuance of bonds

A mortgage incurred in the purchase of an office building would be reported on the statement of cash flows in

a separate section that appears at the bottom of the statement.

The formula to compute the asset turnover is

Sales ÷ Average Total Assets (excluding long-term investments).

Question Content Area Given the following information, what is the ratio of fixed assets to long-term liabilities? Fixed assets (net) at year-end $420,000 Average fixed assets 470,000 Total assets 520,000 Long-term liabilities 310,000 Total liabilities 360,000

1.4

Assume the following sales data for a company: Year 2: $791,000 Year 1: $700,000 What is the percentage increase in sales from Year 1 to Year 2 (rounded to the nearest whole percent)?

13%

Income tax was $250,000 for the year. Income tax payable was $34,000 and $39,000 at the beginning and end of the year, respectively. Cash payments for income tax reported on the cash flow statement using the direct method are

245,000

Based on the following data, what is the inventory turnover? Sales on account during year $450,000 Cost of goods sold during year 270,000 Accounts receivable, beginning of year. 50,000 Accounts receivable, end of year 35,000 Inventory, beginning of year 100,000 Inventory, end of year 80,000

3.0

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 $50,000 and $4,000, respectively. Balances of current asset and current liability accounts at the end and beginning of the year are as follows: end beginning Cash. $39,000. $50,000 Accounts receivable. 117,000. 113,000 Inventory 104,000 93,000 Prepaid expenses 4,500. 6,500 Accounts payable 74,000. 87,000 What is the amount of net cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

303,000

Dora Inc. reported the following on the company's cash flow statement: Sales $3,500,000 Net cash flows from operating activities 350,000 Net cash flows used for investing activities (130,000) Net cash flows used for financing activities (200,000) Free cash flow 287,000 What is the ratio of free cash flow to sales?

8.2%

The following selected data are from a recent statement of cash flows: Net cash flows from operating activities. $35,000 Net cash flows used for investing activities. (22,000) Net cash flows used for financing activities 80,000 Ending cash balance 56,000 What is the net change in cash for the period?

93,000

The formula used to compute inventory turnover is

Cost of Goods Sold ÷ Average Inventory.

Corporate annual reports typically do not contain which of the following?

Next year's budget

Which two reports on internal control are sometimes combined into a single report on internal control?

One report by management and one report by a public accounting firm regarding the adequacy of internal controls

Step 1 of reconciling net income to net cash flows from operating activities is to

add depreciation expense.

On the statement of cash flows, which of the following cash flow elements should be presented immediately after the net cash flows from operating activities?

cash flows from (used for) investing activities

Dividends declared during the year were $60,000. The dividends payable account increased by $4,000. Which of the following will appear in the financing activities section of the statement of cash flows? a. Change in dividends payable, $4,000

cash paid for dividends $(56,000)