Accounting 2 Exam 3

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The statement of cash flows is not one of the basic financial statements.
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The statement of cash flows is not one of the basic financial statements.
This statement is False.
What is summary of the cash receipts and cash payments for a specific period of time, such as a month or a year called?
statement of cash flow
Which of the following methods of reporting cash flows from operating activities adjusts net income for revenues and expenses not involving the receipt or payment of cash?
indirect method
Analyze the truth of this statement: The indirect method of reporting cash flows from operating activities focuses on the differences between net income and cash flows from operating activities, and the data needed are generally not readily available and are more costly to obtain than is the case for the direct method.
This statement is False.
Analyze the truth of these statements: Assume a corporation issued $2,000,000 of common stock in exchange for $2,000,000 of fixed assets. When preparing the Statement of Cash Flows using the indirect method this would be recorded in the Cash Flows from Investing Activities section as a cash outflow.
These statements are False.
What is the section of the statement of cash flows that reports cash flows from transactions affecting the equity and debt of the business called?
cash flows from financing activities
Which of the following statements describes the statement of cash flows?
It reports a firm's major cash inflows and outflows for a period.
When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a increase in the Common Stock account of $150,000 and an increase in the Paid-In Capital in Excess Par - Common Stock of $25,000 for which cash of $175,000 was received for the issuance of additional common stock.
Add the $175,000 as Cash received from the issuance of common stock in the Cash flow from Financing Activities section of the Statement of Cash Flow.
Using the Exhibit below, assume that the amount of Net Income on the Income Statement for the year was $71,800. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of net income on the Cash flow from operating activities section?
Start the Cash Flow from Operating Activities section with the $71,800
Using the Exhibit below, assume that the balance of Accounts Receivable was $70,000 at the beginning of the current year. Furthermore, assume that the balance of Accounts Receivable is $60,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of accounts receivable on the Cash flow from operating activities section?
Add: Decrease in Accounts Receivable $10,000
Using the Exhibit below, assume that the balance of Accounts Receivable was $70,000 at the beginning of the current year. Furthermore, assume that the balance of Accounts Receivable is $75,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of accounts receivable on the Cash flow from operating activities section?Deduct: Increase in Accounts Receivable of $5,000Using the Exhibit below, assume that the balance of Accounts Payable was $50,000 at the beginning of the current year. Furthermore, assume that the balance of Accounts Payable is $55,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of accounts payable on the Cash flow from operating activities section?Add: Increase in Accounts Payable of $5,000Using the Exhibit below, assume that the balance of Accounts Payable was $50,000 at the beginning of the current year. Furthermore, assume that the balance of Accounts Payable is $35,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of accounts payable on the Cash flow from operating activities section?Deduct: Decrease in Accounts Payable of $15,000Using the Exhibit below, assume that the balance of Merchandise Inventory was $170,000 at the beginning of the current year. Furthermore, assume that the balance of Merchandise Inventory is $185,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of merchandise inventory on the Cash flow from operating activities section?Deduct: Increase in Merchandise Inventory $15,000Using the Exhibit below, assume that the balance of Merchandise Inventory was $170,000 at the beginning of the current year. Furthermore, assume that the balance of Merchandise Inventory is $150,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of merchandise inventory on the Cash flow from operating activities section?Add: Decrease in Merchandise Inventory $20,000What is the section of the statement of cash flows that reports cash flows from transactions affecting investments in non-current assets called?cash flows from investing activitiesWhat is the section of the statement of cash flows that reports the cash transactions affecting the determination of net income called?cash flows from operating activitiesWhen preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of an increase in the Equipment account of $150,000 which represented purchase of new equipment that required a payment of $150,000 cash?Less the $150,000 as Cash paid for the purchase of equipment in the Cash flow from Investing Activities section of the Statement of Cash Flow.When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a decrease in the land account of $200,000 due to sale of the land for cash of $200,000?Add the $200,000 as Cash received from the sale of land in the Cash flow from Investing Activities section of the Statement of Cash Flow.When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a decrease in the Investment account of $100,000 which occurred because of the sale of the Investment for cash of $125,000 ( a gain of $25,000)?Add the $125,000 as Cash received from the sale of investment in the Cash flow from Investing Activities section of the Statement of Cash Flow.When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a payment of $40,000 for cash dividends?Less the $40,000 as Cash paid for dividends in the Cash flow from Financing Activities section of the Statement of Cash Flow.When preparing the statement of cash flows, to make sure that the statement 'balances,' the final figure (cash at the end of the time period) should be compared to what amount?Cash balance shown on the balance sheet as of the same dateWhen preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a decrease in the Bonds Payable account of $75,000 for which cash of $75,000 was paid to reduce this long-term liability?Less the $75,000 as Cash paid for the reduction of Bonds Payable in the Cash flow from Financing Activities section of the Statement of Cash Flow.Which of the following is an example of a cash flow from an investing activity?payment of cash to purchase landWhich of the following is an example of a cash flow from an investing activity?receipt of cash from the sale of equipmentWhich of the following is an example of a cash flow from an operating activity?receipt of cash from customers on accountWhich of the following is an example of a cash flow from a financing activity?receipt of cash for issuance of bonds payableWhich of the following is an example of a cash flow from a financing activity?payment of cash to retire bonds payableWhich of the following is an example of a cash flow from financing activity?payment of cash to repurchase common stockWhich of the following is an example of a cash flow from a financing activity?payment of cash for dividendsWhat is the ability of a business to meet its financial obligations (pay its debts) called?solvencyA company reports earnings per share on common stock of $2.00 when the market price of per share of common stock is $50.000. What is the company's price-earnings ratio?25.0A leverage ratio that measures the margin of safety of long-term creditors, calculated as the net fixed assets divided by the long-term liabilities is called what?ratio of fixed assets to long-term liabilitiesA measure of the profitability of assets, without regard to the equity of creditors and stockholders in the assets is called what?rate earned on total assetsAssume that total liabilities are $50,000 and that total stockholders' equity is 200,000 on December 31, 2006. What is the ratio of liabilities to stockholders' equity on that date?.25Based on the following data for the current year, what is the earnings per share on common stock? Net income $24,500; Preferred dividends $4,000; Interest expense $10,500; Shares of common stock outstanding 5,000.$4.10If the cash account balance on the balance sheet is $25,000, total current assets is $150,000, and total assets equals $500,000, using vertical analysis determine the percentage for cash.5%If the accounts receivable balance at December 31, 2005, was $30,000 and at December 31, 2006, was $28,000, using horizontal analysis, what would be the percentage increase (decrease)?(6.7%)The formula for determining ratio of net sales to assets is Net Sales/Average Total Assets (Excluding Long-Term Investments). Assume that the Net Sales for Rain Co. for the Year Ended December 31, 2008, is $500,000. Assume further that the Average Total Assets Excluding Long-Term Investmenst for Rain Co. for the Year Ended December 31, 2008 is $327,050, what is the ratio of net sales to assets?1.5The formula for determining the number of times interest charges earned is Income before Income Tax + Interest Expense/Interest expense. Assume that the Interest Expense for Rain Co. for the Year Ended December 31, 2008, is $10,500. Assume further that Income before Income Taxes is $54,500, Income Taxes is $30,000 and Net Income is $24,500. What is the number of times interest charges are earned for Shine, Inc. for the Year Ended December 31, 2008?5.2The formula for determining the rate earned on total assets is Net Income + Interest Expense/Average Total Assets. Assume that the Interest Expense for Rain Co. for the Year Ended December 31, 2008, is $10,500. Assume further that Income before Income Taxes is $54,500, Income Taxes is $30,000 and Net Income is $24,500. If the Average Total Assets for Shine, Inc. for the Year Ended December 31, 2008 is $350,080, what is the rate earned on total assets?10.0%The profitability ratio of net income available to common shareholders to the number of common shares out-standing is called what?earnings per share (EPS)What are cash and other current assets that can be quickly converted to cash, such as temporary investments and receivables called?quick assetsWhat is a financial statement called in which all items are expressed only in relative terms (percentages)?common-size statementWhat is an analysis that compares each item in a current statement with a total amount within the same statement called?vertical analysisWhat is the ability of a firm to earn income called?profitabilityWhat is the financial analysis that compares an item in a current statement with the same item in prior statements called?horizontal analysisWhat is the ratio called that is determined by dividing total current assets by total current liabilities?current ratioWhat is the ratio called that is the ratio of the quick assets to current liabilities, which indicates the "instant" debt-paying ability of a firm?quick ratioWhich of the following measures indicates the ability of a firm to pay its current liabilities?working capital, current ratio and quick ratioThe formula for determining the number of times interest charges earned is Income before Income Tax + Interest Expense/Interest expense. Assume that the Interest Expense for Rain Co. for the Year Ended December 31, 2008, is $10,500. Assume further that Income before Income Taxes is $54,500, Income Taxes is $30,000 and Net Income is $24,500. What is the number of times interest charges are earned for Shine, Inc. for the Year Ended December 31, 2008?6.2Based on the following data for the current year, what is the quick ratio (acid-test ratio)? Cash $27,000; Temporary Investments $23,000; Receivable $90,000; Inventory $105,000; Current liabilities, $70,0002.0