FIN 350 M3 A

The Tom Smith Corporation has the following items: Cash, $5,000; Machinery, $50,000; Building, $150,000; Note payable bank, $10,000; Savings, $10,000; Long-term debt, $50,000; Accounts payable, $30,000; Taxes payable, $5,000; Accounts receivable, $30,000; Inventory, $10,000; Depreciation Building, $35,000; Depreciation Machinery, $25,000; Land $50,000. Fixed assets for this Corporation are

$190,000.

The Tom Smith Corporation has the following items: Cash, $5,000; Machinery, $50,000; Building, $150,000; Note payable bank, $10,000; Savings, $10,000; Long-term debt, $50,000; Accounts payable, $30,000; Taxes payable, $5,000; Accounts receivable, $30,000; Inventory, $10,000; Depreciation Building, $35,000; Depreciation Machinery, $25,000; Land $50,000. Owner's equity for this Corporation are

$155,000

T/F A refund of the purchase price, increased warranty, or partial credit on the next purchase would be listed on the income statement as cost of goods sold.

False

T/F An increase in accounts receivables is a cash inflow.

False

T/F Every business, regardless of its size, requires a full-time accountant.

False

T/F In order to create a statement of cash flows, depreciation must be subtracted from net income.

False

T/F Joan has a $100,000 mortgage on her commercial building. This would be carried on her balance sheet as a current liability.

False

T/F Partnerships have the ability to raise large quantities of cash by selling stocks and bonds.

False

T/F The business form that is equivalent to the personal cash flow statement is the balance sheet.

False

T/F The business form that is equivalent to the personal statement of financial position is the income statement.

False

T/F The first section of the statement of cash flows is cash flow from financing activities.

False

T/F The general ledger uses a chart of accounts that lists only those transactions which are liabilities.

False

T/F U.S. government savings bonds are the most liquid asset that we can own because they can be converted to cash at any bank.

False

Public corporations require independent audits due to requirements established by the

Securities and Exchange Commission (SEC).

T/F A refund of the purchase price, increased warranty, or partial credit on the next purchase would be listed on the income statement as returns and allowances.

True

T/F An increase in accounts receivable from last year's balance sheet to this year's balance sheet indicates that the business experienced a cash outflow.

True

T/F An increase in inventory is a cash outflow.

True

T/F Cash flow from operating activities is the first item on the statement of cash flows.

True

T/F Every business, regardless of its size, should hire an accountant to help it set up its books.

True

T/F Free cash flow is cash flow from operations minus estimated capital expenditures.

True

T/F How owner's equity is shown on the balance sheet for a partnership is based on the partnership agreement.

True

T/F Joan has a $100,000 mortgage on her commercial building. This would be carried on her balance sheet as long-term debt.

True

T/F Liquidity is how fast an asset can be converted to cash.

True

T/F The business form that is equivalent to the personal cash flow statement is the income statement.

True

T/F The business form that is equivalent to the personal statement of financial position is the balance sheet.

True

T/F The employer's contribution to Social Security is 6.20% of the employee's salary.

True

T/F The general ledger uses a chart of accounts that lists every transaction of the business.

True

Which of the following is a cash outflow? a decrease in accounts receivable an increase in accounts receivable a decrease in inventory an increase in accounts payable

an increase in accounts receivable

Alex bought $50,000 worth of computers for his firm; he will pay the vendor for these computers on the fifteenth of next month. These items would be carried on the ________ and listed as ________.

balance sheet; accounts payable

Current assets include all of the following EXCEPT accounts receivable. buildings. cash. inventory. savings.

buildings

Variable expenses include all of the following EXCEPT: automobile maintenance. clothing. food. gas. insurance.

insurance

Depreciation expense

is added to the statement of cash flows because it is not an expenditure.

The income statement shows net profit, which is equal to

earnings before taxes minus taxes.

Expenses that are contractual in nature and are normally paid every month are

fixed expenses

For a retail firm that sells clothing, which of the following would be considered part of the cost of goods sold?

freight and price paid for dresses to be sold

The normal accounting period for a business is one

year

Which of the following fixed assets are always carried on the business books at the price paid for the asset, and cannot be depreciated?

land

A company's net cash from operating activities is lower than its net income indicating that

the company had less available funds than its net income.

The Tom Smith Corporation has the following items: Cash, $5,000; Machinery, $50,000; Building, $150,000; Note payable bank, $10,000; Savings, $10,000; Long-term debt, $50,000; Accounts payable, $30,000; Taxes payable, $5,000; Accounts receivable, $30,000; Inventory, $10,000; Depreciation Building, $35,000; Depreciation Machinery, $25,000; Land $50,000. Total assets for this Corporation are

$245,000.

The Tom Smith Corporation has the following items: Cash, $5,000; Machinery, $50,000; Building, $150,000; Note payable bank, $10,000; Savings, $10,000; Long-term debt, $50,000; Accounts payable, $30,000; Taxes payable, $5,000; Accounts receivable, $30,000; Inventory, $10,000; Depreciation Building, $35,000; Depreciation Machinery, $25,000; Land $50,000. Current liabilities for this Corporation are

$45,000.

The Tom Smith Corporation has the following items: Cash, $5,000; Machinery, $50,000; Building, $150,000; Note payable bank, $10,000; Savings, $10,000; Long-term debt, $50,000; Accounts payable, $30,000; Taxes payable, $5,000; Accounts receivable, $30,000; Inventory, $10,000; Depreciation Building, $35,000; Depreciation Machinery, $25,000; Land $50,000. Current assets for this Corporation are

$55,000.

The Tom Smith Corporation has the following items: Cash, $5,000; Machinery, $50,000; Building, $150,000; Note payable bank, $10,000; Savings, $10,000; Long-term debt, $50,000; Accounts payable, $30,000; Taxes payable, $5,000; Accounts receivable, $30,000; Inventory, $10,000; Depreciation Building, $35,000; Depreciation Machinery, $25,000; Land $50,000. Total liabilities for this Corporation are

$95,000.

The primary objective of Sarbanes-Oxley is to protect investors by: 1. Improving the accuracy of corporate disclosures 2. Loosening the reins on how information is reported 3. improving the reliability of corporate disclosures 4. holding executive officers liable for the accuracy of corporate financial statements

1, 3, 4

Which of the following is true for free cash flow? 1. Free cashflow is easier to calculate than operating cashflow 2. estimated capital expenditures are subtracted from operating cash flow 3. estimated capital expenditures are added to operating cash flow 4. a negative cash flow indicates that a company needs additional financing

II, IV

Which of the following would be considered to be an operating expense for a computer manufacturing firm?

accountant's wages

Cash paid in the acquisition of land, buildings, or equipment; loans to other companies; and the proceeds from the sale of land, buildings, or equipment will show up on the cash flow statement under the category of

cash flows from investing activities.

Cash payments made to employees for wages and salaries; payments made to vendors for the purchase of merchandise; taxes paid to government agencies; payments for rent, utilities, and insurance will show up on the statement of cash flows under the category of

cash flows from operating activities.

Net income on the income statement is obtained after subtracting taxes for the

corporation

Fixed assets are listed on the business balance sheet at the ________ and on the individual's statement of financial position at the ________.

price paid for the asset; current market value

For most businesses, operating expenses include

salaries for executives and administrative personnel, rent, insurance, utilities, and advertising expenses.