Test 4 Study Guide HMWRK

Which of the following transactions would be reported under investing activities in the statement of cash flows?

Cash paid for interest owed

A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:

$(60,000)

A machine with a cost of 130,000, current year depreciation expense of 17,000 and accumulated depreciation of 85,000 is sold for 40,000 cash. The total amount that should be reported in the operating section of the statement of cash flow as per indirect method is:

$22,000

A machine with a cost of $130,000 and accumulated depreciation of 85,000 and current year depreciation expense of 17,000 is sold for 40,000 cash. the amount that should be reported as a source of cash under cash flows from investing activities is:

$40,000

A company had a beginning balance in retained earnings of $430,000. It had net income of $60,000 and paid out cash dividends of $56,250 in the current period. The ending balance in retained earnings equals:

$433,750

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

$50,000

A company's board of directors votes to declare a cash dividend of $.75 per share of common stock. The company has 15,000 shares authorized, 10,000 issued, and 9,500 shares outstanding. The total amount of the cash dividend is:

$7,125.

A company's Inventory balance at the end of the year was $188,000 and $200,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $84,000 and $80,000 at the beginning of the year, and its cost of goods sold for the year was $720,000. The company's total amount of cash payments for merchandise during the year equals:

$704,000

During the period, a company reports Net Sales of $48,000, Cost of Goods Sold of $28,000, and Net Income of $2,500. Profit Margin is:

%5.2

Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share. Vanya sells 50 shares of stock at its initial offered for $10 per share. The journal entry to record this transaction will include which of the following entries?

- Credit to Common Stock for $50. - Credit to Paid-In Capital, in Excess of Stated Value for $450. - Debit to Cash for $500.

Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries?

- Debit to Cash for $200 - Credit to Common Stock, $1 par for $200

Identify the advantages of the corporate form of business.

- Ease of capital accumulation -Continuous life -Limited liability of stockholders

Three of the most common tools of financial analysis are:

- horizontal analysis - vertical analysis - ratio analysis

Three of the most common tools of financial analysis are:

- horizontal analysis- vertical analysis- ratio analysis

A company has 20,000 shares of $5 per-value common stock issued and outstanding. Earnings per share were $4, annual cash dividends per share were $0.90. Dividend yield is

1%

There are five important steps to preparing a statement of cash flows. Rank the steps in order from first to last.

1. Compute the net increase or decrease in cash 2. Compute and report the net cash provided or used by operating activities. 3. Compute and report the net cash provided or used by investing activities. 4. Compute and report the net cash provided or used by financing activities. 5. Compute the net cash flow by combining net cash provided or used by operating, investing, and financing activities and prove the change.

Rank the following group in order of authority

1. Stockholders 2. Board of Directors 3. President VP Officials 4. Employees

Brown Co. had current assets of $15,000, total assets of $30,000 and current liabilities of $9,000 at the end of the year. The current ratio for the period is:

1.67

A small stock dividend is a distribution of __________% or less of previously outstanding shares.

25%

The board of directors of Anchor, Inc. authorizes a $0.50 cash dividend to its 100,000 shares of common stock issued and outstanding. On the date of payment, a journal entry will include which of the following accounts? (Check all that apply)

3) Debit to Common Dividend Payable 4) Credit to Cash

The statement of cash flows is:

A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.

A proxy is:

A legal document that gives a designated agent of a stockholder the power to vote the stock

The statement of cash flows helps analysts evaluate all but which of the following?

Ability of the company to generate profit.

A loss from the sale of an investment would be (added/subtracted) to (from) net income when computing cash flows from operations, using the indirect method.

Added

An increase in wages payable would be (added/subtracted) to net income, when computing cash flows from operations using the indirect method.

Added

A cash equivalent is:

An investment readily convertible to a known amount of cash.

External users of financial information:

Are not directly involved in operating the company

The board of directors of a corporation:

Are responsible for and have final authority for managing corporate activities

________ stock is the number of shares that a corporation's charter allows it to sell.

Authorized

The number of shares that a corporation's charter allows it to sell is referred to as:

Authorized Stock

Return on common stockholders' equity is computed by taking (net income less preferred) divided by:

Average Common Stockholders' equity

Most users rely on general purpose financial statements, which include which of the following?

Balance Sheet Notes to financial statements Statement of stockholders' equity Statement of Cash Flows Income Statement

The statement of cash flows explains the difference between beginning and ending balances of cash and cash equivalents. A cash equivalent must exhibit all of the following criteria, except:

Be held at a local institution

A statement of cash flows explains the differences between the beginning and ending balances of:

Cash and cash equivalents

Which of the following items would be reported under financing activities on the statement of cash flows?

Cash dividends paid to shareholders Cash paid to repay long-term debt Cash received from issuing notes

The statement of cash flows reports:

Cash inflows and cash outflows for an accounting period.

A company's cash receipts and cash payments are recorded in the cash account in its general ledger. Which of the following can be determined by analyzing the cash account?

Cash payments for equipment Cash receipts from customers Cash payments on notes

Which of the following would not be reported under financing activities on the statement of cash flows?

Cash received from sales of plant assets

When using the indirect method to calculate and report the net cash provided or used by operating activities, net income is adjusted for all but which of the following?

Changes in noncurrent assets and noncurrent liabilities.

Darby, Inc. has 25,000 shares of stock issued and outstanding. All the shares of stock have the same rights and characteristics; therefore, the stock is called __________ stock.

Common Stock

When a corporation has only one class of stock, the stock is called:

Common Stock

John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts:

Common Stock Paid in Capital of Excess Value

Cash flows from financing activities identifies cash receipts and cash payments related to which of the following types of accounts?

Common StockBonds Payable

J. Flores owns a business and is trying to decide whether to incorporate. While researching corporations, she has determined the following facts. Which of these is not correct?

Corporations dissolve when owners transfer rights.

Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, for $__________.

Credit $500

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) to the preferred stock account in the amount of $__________.

Credit; $100

Working capital can be computed by taking..

Current Assets - Current Liabilities

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

D. Net income.

The date the directors vote to declare and pay a dividend is called the:

Date of declaration.

Office Space, Inc. sold 30,000 shares of its no-par value common stock at a cash price of $10 per share. The entry to record this transaction would be:

Debit Cash $300,000; credit Common Stock $300,000.

Comfort Mattresses, Inc. sold 26,000 shares of its $1 par value common stock at a cash price of $12 per share. The entry to record this transaction would be:

Debit Cash $312,000; credit Common Stock $26,000; credit Paid-in Capital in Excess of Par Value, Common Stock $286,000.

_____ ______ is used to compare the dividend-paying performance of different investment alternatives. It is computed by taking annual cash dividends per share divided by market price per share

Dividend Yield

The amount of income earned per share of a company's outstanding common stock is known as:

Earnings Per Share

The length of time a company holds inventory before selling it.

Inventory Turnover

BLANK reporting refers to the communication of financial information useful for making investment, credit, and other business decisions.

Financial reporting

_________ activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners.

Financing

The appropriate section in the statement of cash flows for reporting the cash received from the issuance of a long-term note payable is:

Financing Activities

Retained earnings:

Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception

Which of the following items would be added to net income when reporting cash flows from operating activities, using the indirect method?

Increase in accounts payable and unearned fees

A company reported total assets at the end of 2017 of $95,000; including cash of $35,000, accounts receivable of $20,000, and inventory of $40,000. It reported total assets at the end of 2018 of $110,000; including cash of $44,000; accounts receivable of $29,000, and inventory of $37,000. Compute the net increase or decrease in cash in 2018.

Increase of $9000

The appropriate section in the statement of cash flows for reporting the cash received from customers is:

Investing Activities

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

Investing Activities

Which of the following statements about the statement of cash flows are correct?

It is a detailed disclosure of individual cash flows The purpose is to report cash receipts and cash payments during a period.

Return on total assets

It is computed by taking net income divided by average total assets for the period.

6 Sections that make up a good analysis report

Key Factors, Assumptions Executive Summary

Identify which of the following specific areas are considered the building blocks of financial statement analysis

Liquidity and Efficiency Marketing Prospects Solvency Profitability

The ability to meet short-term obligations and to efficiently generate revenues is called:

Liquidity and efficiency

Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method?

Loss on sale of investmentDepreciation expenseGain on sale of building

EPS Ratio

Net Income - Preferred Dividends _______________________ Weighted Average Common Shares Outstanding HIGHER BETTER

Total asset turnover is computed by taking

Net Sales/ average total assets

Both the direct and indirect methods of operating activities report which of the following items?

Net cash inflows (outflows)

A liability for dividends exists:

On the date of declaration

BLANK activities include those transactions and events that determine net income.

Operating

The purchase of merchandise, the sale of goods and services to customers, and expenditures to operate the business are all reported on the statement of cash flows under BLANK activities.

Operating

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Operating Activities

Receipts from dividend revenue

Operating Activities

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

Operating Activities

Philip's Inc. reports stockholders' equity on its financial statements. The two items reported in the stockholders' equity section of Philip's balance sheet are __________ Capital and Retained Earnings.

Paid-In Capital

Stockholders' equity consists of the following:

Paid-In Capital and Retained Earnings

Guidelines (rules-of-thumb) are general standards of comparison developed from:

Past experience

Which of the following items is reported on the statement of cash flows under financing activities?

Payment of a cash dividend

PE Ratio (PE)

Price-Earnings Ratio, it is equal to: (Market Value per Share) / (Earnings per Share)

Corporations can be separated into two types. A __________ held corporation does not offer its stock for public sale and usually has few stockholders. A __________ held corporation offers its stock for public sale and can have thousands of stockholders.

Privately and Publicly

Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

Purchase of a Treasury stock

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:

Referred to as paid-in capital

Identify which of the following items is not a noncash investing and financing activity that must be reported in a note to the statement of cash flows.

Repayment of a note with cash Purchase of a plant asset with cash

Accounting standards:

Require that companies include a statement of cash flows in a complete set of financial statements.

__________ is an account that consists of a company's cumulative net income less any losses and dividends declared since its inception.

Retained Earnings

BLANK refers to a company's long run financial viability and its ability to cover long term obligations

Solvency

Vernon's inc. did not assign a par value to its authorized stock. However it did assign ___

Stated Value

A ________ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.

Stock

Which of the following items would not be a correct adjustment to net income to arrive at cash flows from operating activities, using the indirect method?

Subtract increase in taxes payable.

Of the following, which one affects cash during a period?

The payment of interest expense accrued in a previous accounting period.

Par value of a stock refers to the:

Value assigned to a share of stock by the corporate charter

The formula for accounts receivable turnover is computed as net sales divided by average

accounts receivable

Profit margin is computed by taking:

net income / net sales

Dividend Yield

annual cash dividends per share/market value per share

Financial statement analysis involves all of the following except:

assuring that the company will be more profitable in the future

The formula for the acid-test ratio is computed as...

cash+short term investments+current receivables/current liabilities.

Major Parts of the complete income statement

continuing operations discontinued segments earnings per share

Inventory Turnover

cost of goods sold/average inventory

On June1, the board of directors of Dylan, Inc. declare a cash dividend of $1 per share. On June 1, there are 1,000 shares of stock issued and outstanding. The journal entry required on the date of declaration will include a (debit/credit) to the Common Dividend Payable account.

credit

3 important dates for dividends

declaration, record, payment

The (direct/indirect) method separately lists each major item of operating cash payments. The cash payments are subtracted from cash receipts to determine the net cash provided (used) by operating activities.

direct

An investor in Kora inc is interested in how productive Kora is in using its assets. This is known as an... efficiency/liquidity

efficiency measure

the building blocks of financial statement analysis do not include

external analyst services

Carol Co. prepares a statement of cash flows starting with net income and then adjusting for items necessary to obtain net cash provided or used by operating activities. Carol Co. must be using the (direct/indirect) method of reporting the statement of cash flows.

indirect

Cash outflows operating activities

interest on loans

Collecting money for notes receivable would be reported on the statement of cash flows as a(n) BLANK activity.

investing

Standards for comparisons in financial statement analysis do not include:

management standards

The ability to generate positive market expectations is called:

market prospects

A(n) ----- occurs when the receipts in a category exceed the payments.

net cash inflow

The indirect method of computing and reporting net cash flows from operating activities involves adjusting ---- ----- to obtain the net cash provided or used by operating activities

net income

A net cash ______ occurs when the payments in a category exceed the receipts.

outflow

Gains and losses that are normal and frequent are reported as:

part of continuing operations in before-tax dollars

A(n) BLANK expresses a mathematical relation between two quarantines. It can be expressed as a percent, rate, or proportion. It is a simple arithmetic operation, but its interpretation is not.

ratio

Liquidity

refers to a company's ability to pay for its near-term obligations

Discontinued Segments

reports income from operating and selling or closing down a segment

Earnings Per Share

reports info for each of its three subcategories

_____ measures the amount of net income earned for its owners. It is computed by taking net income less preferred dividends by average common stockholders' equity

return on common stockholder' equity

continuing operations

shows revenue, expenses, and income from ongoing operations

The debt to equity ratio is computed by taking..

total liabilities divided by total liabilities

The comparison of a company's financial condition and performance to a base amount is known as:

vertical analysis