ch. 9 reading Qs

Under the cost of goods sold model, which of the following representations are correct?

Beginning inventory + Net purchases = Cost of goods available for sale Cost of goods sold + Ending inventory = Cost of goods available for sale Cost of goods available for sale - Ending inventory = Cost of goods sold

Starting with gross sales and arriving at net sales, which of the following statements are true?

Sales discounts are subtracted. Sales returns and allowances are subtracted.

The financial statement effects of recognizing cost of goods sold include:

a decrease to net income. an increase to expenses. a decrease to current assets.

If Interest expense = $800, Cost of goods sold = $7,000, Depreciation expense = $1,200, Net sales = $10,000, and Operating income = $600, calculate gross margin.

$10,000 - $7,000 = $3,000

When revenues are earned, the effects on the financial statements typically include:

an increase to net income an increase to current assets an increase to net income an increase to Sales or Service Revenues

Investing activities in the statement of cash flows:

include the purchase and sale of long-term investments in debt and equity securities of other companies. include the receipt of cash from the sale of land, buildings, and equipment.

Financing activities in the statement of cash flows:

include the purchase and sale of treasury stock. include the issuance of bonds and common stock. relate primarily to changes during the year in nonoperating liabilities and stockholders' equity accounts.

Investing activities in the statement of cash flows:

include the use of cash to acquire land, buildings, and equipment. relate primarily to the purchase and sale of noncurrent assets.

Financing activities in the statement of cash flows:

include the use of cash to retire bonds. include the use of cash to pay dividends.

Multiple-step income statements commonly report subtotals for:

income from operations gross profit

Investing activities in the statement of cash flows:

relate primarily to the purchase and sale of noncurrent assets. include the use of cash to acquire land, buildings, and equipment. include the purchase and sale of long-term investments in debt and equity securities of other companies. include the receipt of cash from the sale of land, buildings, and equipment.

Some of the key interpretations to be made from the statement of cash flows include the determination of:

whether net cash flows provided by operations are sufficient to pay adequate dividends to the company's shareholders. whether the relative totals of operating, investing, and financing cash flows were similar to those observed in the prior year. whether the company has generated positive net cash flows from operations.

Identify the correct statements about a perpetual inventory system.

In a perpetual inventory system, inventory counts are still required on a periodic basis. In a perpetual inventory system, more data processing is required than in a periodic inventory system.

Identify the correct statements about a perpetual inventory system.

In a perpetual inventory system, the Cost of Goods Sold account is debited as sales transactions are recorded. In a perpetual inventory system, cost is determined when the item is sol

The following accounting data is obtained from the financial statements of Synergy Company for the year ended December 31, Year 1: Net income $560,000 Depreciation and amortization expense 340,000 Income tax expense 150,000 Loss on sale of machinery 1,200 Increase in accounts receivable 14,000 Decrease in inventories 9,000 Increase in accounts payable 3,500 Proceeds from sale of land 40,000 Using the indirect method of cash flow presentation, calculate the net cash flow provided by (used in) operations for Synergy Company for the year ended December 31, Year 1.

Net cash flow provided by operations = (Net income + Depreciation and amortization expense + Loss on sale of machinery - Increase in accounts receivable + Decrease in inventories + Increase in accounts payable = ($560,000 + $340,000 + $1,200 - $14,000 + $9,000 + $3,500) = $899,700

The following accounting data is obtained from the financial statements of Excellent Company: Net income $560,000 Depreciation expense 340,000 Cash dividends paid 409,000 Gain on sale of machinery 1,200 Decrease in accounts receivable 14,000 Increase in inventories 9,000 Decrease in accounts payable 3,500 Proceeds from sale of land 40,000 Using the indirect method of cash flow presentation, calculate the net cash flow provided (used) by operations for Excellent Company for the period.

Net cash provided by operating activities amounts to $900,300.

Starting with gross sales and arriving at net sales, which of the following statements are true?

Sales returns and allowances are subtracted. Sales discounts are subtracted.

Identify the correct statements about matching principle.

Some expenses (administrative salaries, for example) are recognized in the period in which they are incurred. Expenses are measured by the cash or other asset used up to obtain the economic benefit they represent.

Which of the following statements are true regarding the time orientation of financial statements?

The heading of a statement of cash flows might read "For the year ended December 31, 2018." The income statement is prepared for a period of time.

Concerning the direct method presentation of the statement of cash flows, which of the following statements are true?

The operating activity transactions include cash paid to employees, cash payments of interest, and cash payments for taxes. The FASB encourages companies to use the direct method.

Which of the following statements are true regarding the time orientation of financial statements?

The statement of cash flows is prepared for a period of time. The balance sheet is prepared at a point in time.

Identify the correct statements about matching principle.

Some expenses (cost of goods sold, for example) are recognized concurrently with the revenues to which they relate. Some expenses (depreciation, for example) are an allocation of the cost of an asset to the periods expected to benefit from its use. Expenses are measured by the cash or other asset used up to obtain the economic benefits they represent.

Concerning the direct method presentation of the statement of cash flows, which of the following statements are true?

The FASB encourages companies to use the direct method. The operating activity transactions include cash paid to employees, cash payments of interest, and cash payments for taxes.

A firm has a 20 percent gross profit ratio, Net sales = $100,000, and Cost of goods available for sale = $88,000. Based on this information, which of the following statements are correct?

Ending inventory = $8,000 Gross profit = $20,000 Cost of goods sold = $80,000