1) Fixed budgets are also known as flexible budgets.
2) Accounting is an information and measurement system that identifies, records, and
communicates relevant, reliable, and comparable information about an organization’s
business activities.
3) Accounting standards require companies to include a statement of cash flows in a
complete set of financial statements.
4) The net method for recording purchases records the purchase invoice at its net
amount of any cash discount.
5) A liability is a probable future payment of assets or services that a company is
presently obligated to make as a result of past transactions or events.
6) A company borrowed $6,000 by signing a 4-month promissory note at 12%. The total
interest on the note is $720.
7)
Short Answer Questions
8) ____________________ bonds reduce a bondholder’s risk by requiring the issuer to
create a fund of assets set aside as specified amounts and dates to repay the bonds at
maturity.
9) The acid-test ratio reflects the ___________ of a company.
10) A _________________ cost does not change in proportion to changes in the volume
of activity within the relevant range.
11) Based on the following income statement and balance sheet for Rashid Corporation,
determine the cash flows from operating activities using the indirect method.
12) For each of the following separate cases, use the information provided to calculate
the missing cash inflow or cash outflow using the direct method.
13) A company reported average total assets of $496,000 in Year 1 and $604,000 in
Year 2. Its net operating cash flow in Year 1 was $41,150 and $55,500 in Year 2.
Calculate its cash flow on total assets ratio for both years. Comment on the results.
14) Leonard Matson completed these transactions during December of the current year:
Prepare general journal entries to record these transactions.
15) Discuss the differences in the special journals between a company using a perpetual
inventory system and one using a periodic inventory system.