Quiz 5

Executive Inc. reported the following balances in its December 31, 2019 financial statements. Calculate the current ratio for Executive Inc. Net income $474,500 Total current assets 382,700 Total assets 1,242,650 Total current liabilities 292,400 Total liabilities 445,000 Total stockholders' equity 797,650

1.31

Alaina Company reported negative net cash flow from investing activities on its statement of cash flows. Which of these events could cause the negative investing cash flows? Alaina Company paid dividends to shareholders. Alaina Company purchased equipment. Alaina Company paid off a loan to the bank. Alaina Company sold investments.

Alaina Company purchased equipment.

Which method for preparing the statement of cash flows presents a more transparent operating section?

Direct method

Lawson Corporation bought shares of its own stock during 2019. Where will this appear in the 2019 statement of cash flows?

Financing section

Negative cash flows in which section of the statement of cash flows present concern for a potential investor?

Negative operating cash flows are concerning.

Alaina Company collected $1,000 in interest on a note receivable during 2019. The interest will be included in which section of the 2019 statement of cash flows?

Operating section

Under the indirect method, in which section of the statement of cash flows does depreciation expense appear?

Operating section

Lawson Corporation calculated a current ratio of 0.94 for 2019. A competitor had a current ratio of 1.25. What can you conclude?

The competitor has a stronger current ratio than Lawson.

Which statement is true regarding the statement of cash flows? The beginning cash balance on the statement of cash flows is pulled from the income statement. Net income from the income statement appears in the operating section of the direct method statement of cash flows. The ending cash balance on the statement of cash flows matches cash on the balance sheet. The financing section is different under the two methods for preparing the statement of cash flows.

The ending cash balance on the statement of cash flows matches cash on the balance sheet.

Which account is a current liability in the classified balance sheet? Accumulated depreciation Note payable due in 18 months Note receivable due in 9 months Unearned revenue

Unearned revenue