Assuming the indirect method for preparing the statement of cash flows is used,
indicate whether these items should be added to net income (A), deducted from net
income (D), or not be reported in the operating section of the statement under the
indirect method (NR).
a. Added (A)
b. Deducted (D)
c. Not reported (NR)
Exchange of a note for equipment
Occasionally, companies engage in important investing and financing activities which
do not affect cash. If the amount of the transaction is significant, how should it be
disclosed when financial statements are prepared?
a. In the investing section if the amount of investing activities are greater than the
financing activities amount.
b. In the financing section if the amount of financing activities are greater than the
investing activities amount.
c. In a note to the financial statements or in a supplemental schedule.
d. The transaction does not need to be disclosed.
At December 31, 2015, Marley Company has the following:
Common Stock, $10 par, 10,000 shares authorized, 9,000 issued, 8,000 outstanding
REQUIRED: Indicate whether the following would increase, decrease, or have no
effect on (a) assets, (b) retained earnings, and (c) total stockholders’ equity.
1> A company declares and pays a cash dividend of $25,000.
2> A company declares and issues a 10% stock dividend.
Given below are three ratios calculated for Lantana, Tera, and Bake Companies for
2016 and 2015.
A) Which company has the best inventory management? Explain. B) Which company
has the best short-term financial health? Explain.
Select the financial statement on which the user would most likely find the answer to
the question given. (Select all that apply.) How much depreciation expense did the
company report during the year?
a. Income statement
b. Balance sheet
c. Statement of cash flows
d. Statement of retained earnings
Which of the following is a measure of the time that it takes to convert current assets
into cash?
a. accounts receivable turnover ratio
b. cash to cash operating cycle
c. number of days’ sales in inventory
d. working capital
Which of the following should be considered when a company decides to declare a cash
dividend on common stock?
a. The retained earnings balance only
b. The amount of authorized shares of common stock
c. The book value of the company’s stock
d. The cash available and the retained earnings balance
The solution to this problem requires time value of money calculations. Reference to
Tables 9-1 through 9-4 in the text is necessary to complete the calculations. A company
will have to pay a $50,000 liability in 4 years. How much must be deposited now into a
bank account earning 8% compounded semiannually to fully fund the future payment?
a. $34,000
b. $35,500
c. $36,523
d. $36,550
Venture Enterprises’ accountant determined the following: Common stock, $0.01 par
value $50,000 Where would this item be reported on Venture’s financial statements?
a. In the Stockholders’ Equity section of the balance sheet
b. In the Treasury Stock section of the balance sheet
c. On the statement of retained earnings
d. On both the balance sheet and statement of retained earnings
If the balance on the bank statement does not equal the balance in the cash account,
then it can be assumed that:
a. The company has no errors in its records concerning the cash account.
b. The bank has made errors in preparing the statement.
c. The company has made errors in is records concerning the cash account.
d. There will be items reconciling the difference.
An advantage of the current ratio is that it considers the makeup of the current assets.
a. True
b. False
On the reporting of liabilities where a range of values exists as a possible outcome,
IFRS requires which of the following points to be recorded as a provision, if the
outcome is probable?
a. Low end of the range.
b. High end of the range.
c. Midpoint of the range.
d. IFRS presents no specific guidance as to this point.