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Accouting 2 final test prep
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Terms in this set (45)
A plant assets useful life to an entity extends from its acquisition date to its disposal date
Depreciation is the recognition of the change in fair market value of a plant asset over time
The asset turnover ratio relates finanical data from the balance sheet with financial data from the
What are the estimates recquired when calculating depreciation expense?
A revenue expenditure
Increases an expense account
Periodic depreciation for accounting purposes is the decrease in a plant assets fair market value from the beginning of the period to the end of the period
Which of the following plant assets is not depreciated?
Land for site use
The purpose of depreciation accounting is to
allocate a plant asset's cost, less its salvage value, to expense over the asset's useful life
Example of a capital expenditure
cost to add air conditioning to a company car (increase the book value of long lived assets)
No gain or loss is recorded when a plant asset is sold for an amount equal to tis book value
The price of a bond is equivalent to
Projected interest payments discounted to the present
The present value of the principle payment
Which of the following corporate bond ratings are listed in an increasing level of risk?
AAA, A, BB, C
Bond ratings specify the amount at which investors can buy bonds from companies
Which of the following does not represent a current liability
Current liabilities are limited to those obligations that require the payment of cash within the coming year or the operating cycle, whichever is longer
The employer firm's total expenses for employing an employee is less than the related employee's gross earnings
The times interest ratio reflects the number of times that the company earned during the year
Working capital is defined as
current assets minus current liabilities
Which of the following is not a contingent liability?
Discount notes payable
Once sold, bonds can be traded in the market place similar to shares of stock
Contingent liabilities that a company considers to be reasonably possible and for which a company is able to reasonably estimate the amount of a loss are recognized on the balance sheet and the income statemen
What statement will disclose a corporation's year-end retained earnings?
Statement of retained earnings
Statement of stockholders equity
For a corporation, the shares of outstanding stock plus the shares of treasury stock equals the shares of issued stock
Cash dividends are paid to those stockholders who own the shares of stock on the dividend payment date
eturn on common stockholders' equity is computed by dividing the net income available to common stockholders b
Average common stockholders equity
In what section of the stockholders' equity portion of the balance sheet can preferred stock, common stock, and additional paid-in capital be found?
The par value of a stock represents the market value of the stock on the date it is first issued
Preferred stockholders compose the basic, residual ownership class in a corporation
In October 2019, Illini Corporation distributed profits to its preferred shareholders before its common shareholders. What is the name of the preference that allows this?
Which of the following rights allows a shareholder of a corporation to maintain his or her proportionate interest in the corporation?
Which best describes par value for stock?
An arbitrary amount set by the company for each share of stock
Return on common stockholders' equity is computed by dividing the annual net income available to common stockholders by the average common stockholders' equity for the year.
Which of the following items is disclosed in a statement of retained earnings?
Retained earnings balance at the beginning of the period
A firm's cash flow from financing activities includes
Cash paid to reacquire treasury stock
In a statement of cash flows, interest paid to creditors is classified as a cash flow from
Information about noncash investing and financing activities must be disclosed in a schedule that is separate from the statement of cash flows
The statement of cash flows includes a firm's cash equivalents such as money market funds, in addition to cash
Which of the following is listed separately in a statement of cash flows using the indirect method?
Which of the following is not a cash equivalent for purposes of preparing a statement of cash flows?
investment in common stock of other companies
he operating activities section of the statement of cash flows shows a reconciliation of net income to the net cash provided by operating activities amount under the direct method.
Cash received from the sale of one of a company's warehouses is classified as a cash flow from investing activities in a statement of cash flows.
Depreciation expense is deducted from net income in determining cash flows provided by operating activities under the indirect method.
Which of the following is a cash equivalent for purposes of preparing a statement of cash flows?
Investment in money market fund
A firm's net cash flow from operating activities includes
Cash recieved from sale of eqiupment
With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?
Indirect method because it is less expensive to prepare
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