HW quiz week 2 review

Assuming use of the indirect approach for preparing a statement of cash flows, which of the following would be most likely reported as a line item in the "operating activity" section?

A reduction in inventory levels.

A dividend received on an available for sale security would be debited to Cash and credited to:

Dividend Income

Mr. Bravo desired to borrow money to expand his business. In his loan application he included financial statements that combined his personal assets with the assets and liabilities of the business. This violates which of the following assumptions?

Entity assumption

Accumulated other comprehensive income is reported as an element of:

Equity

Which of the following financial ratios is not a measure of operating profitability?

Inventory Turnover Ratio.

Which of the following items is included in the statement of cash flows?

Issuance (sale) of common stock, purchase of treasury stock & retirement of long-term debt by issuance of preferred stock.

Which formula "calculates" the return on assets ratio?

Net Income/Average Total Assets.

Which of the following items represents a potential use of cash?

Net loss from operations.

A change in accounting principle:

None of the options presented.

The Financial Accounting Standards Board:

None of the options presented.

Which term is synonymous with face value:

Par value

To which organization has Congress given the power to set accounting principles for public companies?

Securities and Exchange Commission

Alpha Corporation wrote off a $100 uncollectible account receivable against the $1,200 balance in its allowance account. Compare the current ratio before the write-off (X) with the current ratio after the write-off (y).

X equals Y.

When preparing a statement of cash flows using the indirect approach, an increase in ending payables over beginning payables inventory will result in:

a addition to income in calculating operating cash flows.

In an effort to concentrate its resources in more profitable areas, Alpha Corporation recently sold its family pizza restaurant segment. The disposal constitutes:

a discontinued operation which should be disclosed net-of-tax effects.

The presence of a debit balance in Accumulated Other Comprehensive Income suggests that available for sale investments:

are worth less than their cost.

Financial statement ratio analysis may be undertaken to study liquidity, turnover, profitability, and other measures. What type of ratio is the quick ratio?

liquidity

In reporting discontinued operations:

operating results and the gain/loss on disposal can be segregated.

If a bond is purchased at a premium and the straight-line amortization method is used, then:

the amortization will remain constant over the life of the bond.

When interest income on a bond investment is less than the cash received:

the bond was likely purchased at a premium.

Bonds would likely be expected to be purchased a premium when:

their stated rate is greater than the market rate of interest.

Dividends received are recorded in the income statement for:

Available for Sale investments & Trading Securities.

Which of the following investments would be accounted for by adjusting to fair value, and reporting the change in value as a component of "other comprehensive income"?

Available for sale securities

Under which scenario will bond interest income exceed cash received for interest during each period?

Bond are purchased at a discount.

Intra-period tax allocation results in dividing tax expense among which of the following elements?

Both Discontinued operations & Prior period adjustments.

Which of the following ratios does not change as stock price changes?

Both Dividend Payout Ratio and Return on Equity Ratio.

When an error is discovered it should be reported by :

Both prior period adjustment and redoing erroneous data from prior periods that is being shown for comparison.

Using an indirect approach for preparing a statement of cash flows, which of the following must be reported as supplemental information?

Cash paid for interest, cash paid for taxes and noncash investing/financing activities.

Assuming use of the direct approach for preparing a statement of cash flows, which of the following would be most likely reported as a line item in the "operating activity" section?

Cash paid for taxes.

Which of the following is not a stated objective of financial reporting?

To provide information useful in preparing tax returns reports.

Reliable information is said to include which of the following ingredients?

Verifiable

Financial statement ratio analysis may be undertaken to study liquidity, turnover, profitability, and other measures. What type of ratio is the return on equity ratio?

profitability

On a statement of cash flows, depreciation is treated as an adjustment to income because depreciation:

reduces reported income but does not involve an outflow of funds.