Accounting207 Exam #3 Concept Questions

Which one of the following items is not generally used in preparing a statement of cash flows? A. Adjusted trial balance B. Comparative balance sheets C. Current income statement D. Additional information

A. Adjusted trial balance

The acquisition of land by issuing common stock is: A. a noncash transaction that is not reported in the body of a statement of cash flows B. a cash transaction and would be reported in the body of a statement of cash flows C. a noncash transaction and would be reported in the body of a statement of cash flows D. only reported if the statement of cash flows is prepared using the direct method

A. a noncash transaction that is not reported in the body of a statement of cash flows

The amount of stock that may be issued according to the corporation's charter is referred to as the: A. authorized stock B. issued stock C. unissued stock D. outstanding stock

A. authorized stock

If a company reports a net loss, it: A. may still have a net increase in cash B. will not be able to pay cash dividends C. will not be able to get a loan D. will not be able to make capital expenditures

A. may still have a net increase in cash

Stockholders' equity is: A. the amount of the company received for all stock when issued plus the amount of retained earnings minus treasury stock B. the amount the company received for all stock authorized plus the amount of retained earnings and treasury stock C. the par value the company received for all stock issued plus the amount of retained earnings minus treasury stock D. the amount the company received for all stock when issued minus the amount of retained earnings and treasury stock

A. the amount of the company received for all stock when issued plus the amount of retained earnings minus treasury stock

The effect of a stock dividend is to: A. decrease total assets and stockholders' equity B. change the composition of stockholders' equity C. decrease total assets and total liabilities D. increase the market value per share of common shares

B. change the composition of stockholders' equity

The acquisition of treasury stock by a corporation: A. increases its total assets and total stockholders' equity B. decreases its total assets and total stockholders' equity C. has no effect on total assets and total stockholders' equity D. requires that a gain or loss be recognized on the income statement

B. decreases its total assets and total stockholders' equity

Treasury stock: A. does not appear on the balance sheet B. is recorded as a contra-equity account C. is recorded as an asset account D. is recorded as paid-in capital

B. is recorded as a contra-equity account

The present value of a bond is also known as its: A. face value B. market price C. future value D. deferred value

B. market price

The statement of cash flows: A. must be prepared on a daily basis B. summarize the operating, financing, and investing activities of an entity C. is another name for the income statement D. is a special section of the income statement

B. summarize the operating, financing, and investing activities of an entity

When stock is issued in exchange for a noncash asset, the value recorded for the shares issued is best determined by: A. the book value of the noncash asset B. the market value of the shares C. the par value of the shares D. the contributed capital of the shares

B. the market value of the shares

If the market rate of interest is greater than the contractual rate of interest, bonds will sell A. at a premium B. at face value C. at a discount D. only after the stated rate of interest is increased

C. at a discount

If the market rate of interest is greater than the contractual rate of interest, bonds will sell: A. at a premium B. at face value C. at a discount D. only after the stated rate of interest is increased

C. at a discount

Investments in trading securities would be reported as: A. long term investments B. stockholders equity transaction C. current asset D. none of the above

C. current asset

The acquisition of treasury stock by a corporation: A. increases its total assets and total stockholders' equity B. decreases it total assets and total stockholders' equity C. has no effect on total assets and total stockholders' equity D. required that a gain or loss be recognized on the income statement

C. has no effect on total assets and total stockholders' equity

The authorized stock of a corporation: A. only reflects the initial capital needs of the company B. is indicated in its by-laws C. is indicated in its charter D. must be recorded in a formal accounting entry

C. is indicated in its charter

Unearned Rent Revenue is: A. a contra account to Rent Revenue B. a revenue account C. reported as a current liability D. debited when rent is received in advance

C. reported as a current liability

Stockholders' equity frequently includes which of the following: A. the present value of future dividends to be paid B. the total par value of common stock C. retained earnings D. B and C, but not A

D. B and C, but not A

The date of record for a dividend is the date on which the company: A. debits Dividends Declared and credits Dividends Payable for the amount of the dividend B. debits Dividend Expense and credits Cash for the dividend amount C. debits Dividends Payable and credits Cash for the dividend amount D. establishes who will receive the dividend payment

D. establishes who will receive the dividend payment

Very often, failure to record a liability means failure to record a(n): A. revenue B. asset conversion C. footnote D. expense

D. expense

Par value: A. represents what a share of stock is worth B. represents the original selling price for a share of stock C. is established for a share of stock after it is issued D. is the value assigned per share in the corporate charter

D. is the value assigned per share in the corporate charter

If the market rate of interest is higher than the face interest rate at the date of issuance, bonds will: A. Sell at a discount B. Sell at a premium C. Sell at face value D. Not sell until the face interest rate is adjusted

A. Sell at a discount

The incorporation of companies in the US is controlled by: A. state governments B. local governments C. the Federal government D. the courts

A. state governments

Which of the following statements about dividends is NOT true? A. Dividends represent a sharing of corporate profits with owners B. Both stock dividends and cash dividends reduce retained earnings C. Cash dividends paid to stockholders reduce net income D. Dividends are declared at the discretion of the board of directors

C. Cash dividends paid to stockholders reduce net income

Which of the following would not be a cash flow from financing activities? A. Issuance of common stock B. Borrowing on a long-term note payable C. Collection of a cash dividend D. Repayment of principal on a long-term note payable E. None of the above is correct

C. Collection of a cash dividend

Assume that the ABC Corp. uses the indirect method to depict cash flows. Indicate where, if at all, long-term debt retired with cash would be classified on the statement of cash flows. A. Operating activities section B. Investing activities section C. Financing activities section D. Does not represent a cash flow

C. Financing activities section

Assume that the ABC Corp. uses the indirect method to depict cash flows. Indicate where, if it all, treasury stock purchased with cash would be classified on the statement of cash flows. A. Operating activities section B. Investing activities section C. Financing activities section D. Does not represent a cash flow

C. Financing activities section

Which of the following represent cash inflows from financing activities? A. Issuing stock in exchange for another company's shares B. Paying a bond's face value at maturity C. Issuing long-term bonds at a discount D. Receiving interest on promissory notes

C. Issuing long-term bonds at a discount

A cash inflow from financing activities includes: A. Proceeds from selling investments in equity securities of another company B. Proceeds from selling equipment C. Proceeds from issuance of bonds payable D. Receipt of interest payments E. None of the above is correct

C. Proceeds from issuance of bonds payable

The payment date for a dividend is the date on which the company: A. debits Dividends Declared and credits Dividends Payable for the amount of the dividend B. debits Dividend Expense and credits Cash for the dividend amount C. debits Dividend Payable and credits Cash for the dividend amount D. establishes who will receive the dividend payment

C. debits Dividend Payable and credits Cash for the dividend amount

The net effects on the corporation of the declaration and payment of a cash dividend are to: A. decrease liabilities and decrease B. increase stockholders' equity and decrease liabilities C. decrease assets and decrease stockholders' equity D. increase assets and increase stockholders' equity

C. decrease assets and decrease stockholders' equity

Which of the following would not be a cash flow from investing activities? A. Purchase of long-term investments B. Sale of a patent C. Collection of principal from a long-term note receivable D. Collection of interest revenue on a long-term note E. None of the above is correct

D. Collection of interest revenue on a long-term note

Assume that the ABC Corp. uses the indirect method to depict cash flows. Indicate where, if at all, land and building purchased with a mortgage would be classified on the statement of cash flows. A. Operating activities section B. Investing activities section C. Financing activities section D. Does not represent a cash flow

D. Does not represent a cash flow

If a corporation declares and distributes a 10% stock dividend on its common shares, the account debited is: A. Dividends Payable B. Common Shares C. Share Capital D. Retained Earnings

D. Retained Earnings

Cash dividends can be paid only when: A. the retained earnings account has a positive balance greater than the dividend B. the cash account has a balance greater than the amount of the dividend declared C. the board of directors has declared the dividend D. all of the above

D. all of the above

On the statement of cash flows, the cash flows from operating activities section would include A. receipts from the issuance of capital stock B. receipts from the sale of investments C. payments for the acquisition of investments D. cash receipts from sales activities

D. cash receipts from sales activities

Which of the following is not a current liability on December 31, 2014? A. A Notes Payable due December 31, 2015 B. An Accounts Payable due January 31, 2015 C. A lawsuit judgement to be decided on January 10, 2015 D. Accrued salaries payable from 2014

C. A lawsuit judgement to be decided on January 10, 2015

Which of the following is a cash flow from operating activities? A. Purchase of merchandise for resale B. Sale of a piece of land no longer used in operations C. Sale of long-term investments in common stock D. Payment of a note payable E. None of the above is correct

A. Purchase of merchandise for resale

The declaration date for a dividend is the date on which the company: A. debits Dividends Declared and credits Dividends Payable for the amount of the dividend B. debits Dividend Expense and credits Cash for the dividend amount C. debits Dividends Payable and credits Cash for the dividend amount D. establishes who will receive the dividend payment

A. debits Dividends Declared and credits Dividends Payable for the amount of the dividend

A current liability is a debt that can reasonably be expected to be paid: A. within one year, or the operating cycle, whichever is longer B. between 6 months and 18 months C. out of currently recognized revenues D. out of cash currently on hand

A. within one year, or the operating cycle, whichever is longer

Which of the following transactions would not create a cash flow? A. The company purchased some of its own stock from a stockholder B. Amortization of patent for the period C. Payment of a cash dividend D. Sale of equipment at book value (i.e. no gain or loss) E. None of the above is correct

B. Amortization of patent for the period

Which of the following information is not needed in calculating the value of a bond? A. Market interest rate B. Future value of periodic interest payments C. Face interest rate D. Present value of face (maturity) amount

B. Future value of periodic interest payments

Which of the following represent cash outflows from financing activities? A. Distributing a stock dividend B. Paying a bond's face value at maturity C. Issuing long-term bonds at a discount D. Paying interest on promissory notes

B. Paying a bond's face value at maturity

The interest expense recorded on an interest payment date is increased: A. by the amortization of premium on bonds payable B. by the amortization of discount on bonds payable C. only if the bonds were sold at face value D. only if the market rate of interest is less than the stated rate of interest on that account

B. by the amortization of discount on bonds payable

When stock is issued in exchange for a non-cash asset, the value recorded for the shares issued is best determined by: A. the book value of the non-cash asset B. the market value of the shares C. the par value of the shares D. the contributed capital of the shares

B. the market value of the shares

Cash transactions relating to the purchase and sale of which types of assets affect a company's cash flows from investing activities? A. All of a company's assets B. All of a company's assets except inventory C. All of a company's non-current assets D. Only property, plant and equipment

C. All of a company's non-current assets

Which of the following would be reported as a cash outflow from investing activities? A. Donating an old piece of equipment to charity B. Repaying the bond principal C. Buying another company's bonds with cash D. Paying for an investment asset by issuing company stock

C. Buying another company's bonds with cash