Accounting Review

Which of the following should be subtracted from net income in calculating net cash flow from operating activities using the indirect method? a.A loss on a sale of equipment b.A decrease in accounts receivable c.A gain on a sale of a building d.An increase in accounts payable

d.An increase in inventory

The __________ method records bad debt expense only when an account is determined to be worthless. a. allowance b. direct write-off c. gradual write-off d. factoring

b. direct write-off

Analysts often use free cash flow, rather than cash flows from _________ activities, to measure the financial strength of a business a. investing b. operating c. financing d. noncash investing and financing

b. operating

Which of the following should be subtracted from net income in calculating net cash flow from operating activities using the indirect method? a.A decrease in prepaid expenses b.A decrease in inventory c.An increase in accrued expenses payable d.An increase in inventory

b.A decrease in inventory

The expensing of intangible assets is called a.depreciation. b.amortization. c.replenishing. d.depletion.

b.amortization.

A gain or loss on the exchange of similar assets will be recorded if the transaction has a.boot. b.commercial substance. c.a high value. D.A trade-in allowance.

b.commercial substance.

All of the following are considered fixed assets except a.land. b.copyrights. c.land improvements. d.building

b.copyrights.

The purchase and resale of treasury stock is normally recorded using the a.equity method. b.cost method. c.direct method. d.indirect method.

b.cost method.

When completing the spreadsheet to prepare the statement of cash flows, an increase in retained earnings due to net income would require an entry in the transactions columns involving a a.debit to financing activities—net income. b.debit to operating activities—net income. c.debit to retained earnings. d.credit to operating activities—net income.

b.debit to operating activities—net income.

Under the allowance method for uncollectible accounts, the journal entry to record the estimate of uncollectible accounts would include a credit to a. Accounts Receivable. b. Bad Debt Expense. c. Allowance for Doubtful Accounts. d. Cash.

c. Allowance for Doubtful Accounts.

When preparing a bank reconciliation, a not sufficient funds (NSF) check is a. deducted from the bank balance. b. added to the bank balance. c. deducted from the company's cash balance. d. added to the company's cash balance.

c. deducted from the company's cash balance.

Cash received for preferred stock dividends should be shown on the statement of cash flows under __________ a. noncash investing and financing b. investing c. operating d. Financing

c. operating

Which of the following is used in calculating cash received from customers using the direct method? a.A decrease in inventory b.An increase in inventory c.A decrease in accounts receivable d.An increase in accounts payable

c.A decrease in accounts receivable

In preparing the cash flows from investing activities section of the statement of cash flows, which type of account is analyzed for changes? a.Stockholders' equity b.Current assets c.Long-term assets d.Current liabilities

c.Long-term assets

The date on which cash dividends are paid is on the a.last day of the fiscal year-end. b.date of record. c.date of payment. d.date of declaration.

c.date of payment.

When treasury stock is purchased, Treasury Stock is a.credited for the purchase price of the stock. b.credited for the par value of the stock. c.debited for the purchase price of the stock. d.debited for the par value of the stock.

c.debited for the purchase price of the stock.

Corporations whose stock is traded in a public market must report earnings per share on their a.Earnings per share is not reported on the financial statements. b.balance sheet. c.income statement. d.statement of stockholders' equity.

c.income statement.

The formula to calculate free cash flow is a. cash flows from operating activities − cash used to purchase property, plant, and equipment to maintain current production. b. cash flows from operating activities + cash used to purchase property, plant, and equipment to maintain current production. c. cash flows from financing activities − cash used to purchase property, plant, and equipment to maintain current production. d. cash flows from financing activities + cash used to purchase property, plant, and equipment to maintain current production.

a. cash flows from operating activities − cash used to purchase property, plant, and equipment to maintain current production.

When preparing a bank reconciliation, outstanding checks are a. deducted from the bank balance. b. added to the bank balance. c. deducted from the company's cash balance. d. added to the company's cash balance.

a. deducted from the bank balance.

Generally accepted accounting principles (GAAP) require companies with a large amount of receivables to use a. the allowance method. b. the direct write-off method. c. the estimated method. d. the sales factor method.

a. the allowance method.

Earnings per share is calculated as a.(Net Income - Preferred Dividends)/Average Number of Common Shares Outstanding. b.Retained Earnings/Average Number of Common Shares Outstanding. c.Net Income/Average Number of Common Shares Outstanding. d.Net Income/Retained Earnings.

a.(Net Income - Preferred Dividends)/Average Number of Common Shares Outstanding.

Which of the following is the starting point in calculating net cash flow from operating activities using the direct method? a.Cash received from customers b.Cash at the beginning of the year c.Cash payments for merchandise d.Net income

a.Cash received from customers

The depletion rate is calculated as a.Cost of Resource/Estimated Total Units of Resource. b.Estimated Total Units of Resource/Cost of Resource. c.Estimated Useful Life of Resource/Cost of Resource. d.Cost of Resource/Estimated Useful Life of Resource.

a.Cost of Resource/Estimated Total Units of Resource.

The journal entry to record the sale of treasury stock might include all of the following except for: a.a credit to common stock. b.a credit to Paid-In Capital from Sale of Treasury Stock. c.a credit to Treasury Stock. d.a debit to Paid-In Capital from Sale of Treasury Stock.

a.a credit to common stock.

Allowance for Doubtful Accounts will have a.an unadjusted credit balance at the end of the period if the write-offs during the period were less than the beginning balance. b.an unadjusted debit balance at the end of the period if the write-offs during the period were less than the beginning balance. c.an unadjusted credit balance at the end of the period if the write-offs during the period were more than the beginning balance. d.an unadjusted debit balance at the end of the period if the write-offs during the period were equal to the beginning balance.

a.an unadjusted credit balance at the end of the period if the write-offs during the period were less than the beginning balance.

The bank section of the bank reconciliation a.ends with the adjusted balance. b.includes interest collected by the bank. c.begins with the cash balance according to the company's records. d.ends with the unadjusted bank balance.

a.ends with the adjusted balance.

The purpose of the __________ is to maintain public confidence and trust in the financial reporting of companies. a. Sherman Antitrust Act b. Sarbanes-Oxley Act c. Accounting Reformation Act d. Internal Control Act of 2002

b. Sarbanes-Oxley Act

The allowance for doubtful accounts is reported as a(n) __________ on the balance sheet. a. addition to accounts receivable b. deduction from accounts receivable c. addition to notes receivable d. deduction from trading investments

b. deduction from accounts receivable

When completing the spreadsheet to prepare the statement of cash flows, a decrease in retained earnings due to net loss would require an entry involving a a. debit to Financing Activities—Net Loss. b. debit to Operating Activities—Net Loss. c. credit to Retained Earnings. d. credit to Operating Activities—Net Loss.

d. credit to Operating Activities—Net Loss.

When no-par stock is issued, a.Paid-In Capital in Excess of Par is credited for the full amount of the proceeds. b.Common Stock is credited for an assumed par value. c.Common Stock is credited for a standard $10 value. d.Common Stock is credited for the full amount of the proceeds.

d.Common Stock is credited for the full amount of the proceeds.

A bank reconciliation has a.a company section only. b.a specific cash section. c.a bank section only. d.a bank section and a company section.

d.a bank section and a company section.

All of the following assets will be included as intangible assets on the balance sheet except a.goodwill. b.copyrights. c.patents. d.buildings.

d.buildings.

The expensing of a natural resource is called a.amortization. b.depreciation. c.replenishing. d.depletion.

d.depletion.

Cash dividends are paid on __________ stock. a.treasury b.issued c.authorized d.outstanding

d.outstanding

In the calculation of earnings per share, preferred stock dividends are a.subtracted in the denominator. b.added to net income. c.not used in the calculation. d.subtracted from net income.

d.subtracted from net income.