Choose the appropriate letter to match the term and the definition. Not all definitions
will be used.
Term
1> _____ Cash Inflow
2> _____ Property, Plant, and Equipment
3> _____ Comparative Balance Sheet
4> _____ Free Cash Flow
5> _____ Noncash Investing and Financing Activities
6> _____ Net Income
7> _____ Statement of Cash Flows
8> _____ Cash Outflow
Definition
A. A financial statement that tracks the flow of cash into and out of a company
according to the three types of activities that generate the flows.
B. Cash flows in excess of net income.
C. Reported as supplement disclosures or in the notes section to the financial statements
rather than within the body of the statement of cash flows.
D. Results from activities such as sales of goods and assets, receipt of cash dividends,
and receipts of interest.
E. Cash a company receives that is not subject to income tax.
F. Purchases and sales of this are classified as investing activities.
G. The starting point for calculating operating cash flows with the direct method.
H. Cash flows from operations in excess of amount paid to replace property, plant and
equipment and to pay cash dividends to stockholders.
I. The percent of a company’s net cash flow that comes from investing and financing
activities.
J. An adjustment made when using the indirect method of calculating cash flows from
operating activities.
K. The starting point for calculating operating cash flows with the indirect method.
L. Purchases and sales of this are classified as operating activities.
M. A balance sheet that shows the starting and ending balance of the different accounts;
it is used to calculate the net cash flow provided by operating activities.
N. Results from activities such as purchases of goods and assets, payment of debt,
payment of cash dividends, and payment of taxes.
Which type of analysis could reveal that a company is relying heavily on debt
financing?
A) Common size statements
B) Horizontal analysis
C) The fixed asset turnover ratio
D) Trend analysis
A corporation had a net increase in Retained Earnings of $65,000 for the year. The
corporation also paid $20,000 of cash dividends that had been declared in the previous
year. This year, the corporation declared $18,000 of dividends but has not paid them as
of year-end. Given this information, the net income for the current year must have been:
A) $63,000
B) $85,000
C) $65,000
D) $83,000
Choose the appropriate letter to match the term and the definition. There are more
definitions than terms.
Term
1>____ Bank Reconciliation
2>____ Cash
3>____ Cash Equivalents
4>____ NSF (Not Sufficient Funds) Check
5> ____ Restricted Cash
Definition
A. A process for approving and documenting all purchases and payments on account.
B. A process that controls the amount paid to others by limiting the total amount of
money available for making payments to others.
C. A set of regulations passed by Congress in 2002 in an attempt to improve financial
reporting and restore investor confidence.
D. Actions taken to promote efficient and effective operations, protect assets, enhance
accounting information, and adhere to laws and regulations.
E. An attempt to deceive others for personal gain.
F. An internal control designed into the accounting system to prevent an employee from
making a mistake or committing a dishonest act as part of one assigned duty and then
also covering it up through another assigned duty.
G. An internal report prepared to verify the accuracy of both the bank statement and the
cash accounts of a business or individual.
H. Another name for bounced checks. They arise when the check writer (your
customer) does not have sufficient funds to cover the amount of the check.
I. Money or any instrument that banks will accept for deposit and immediately credit to
a company ‘s account.
J. Not available for general use but rather restricted for a specific purpose.
K. Short-term, highly liquid investments purchased within three months of maturity.
L. Terms of a loan agreement that if broken, entitle the lender to renegotiate loan terms
or force repayment.
The Don’t Bite Me Pest Control Company has 10,000 gallons of insecticide supplies on
hand that cost $300,000; a bill from the vendor for $100,000 of these supplies has not
yet been paid. The company expects to earn $800,000 for its services when it uses the
insecticide supplies. The company’s balance sheet would include an asset, Supplies, in
the amount of:
A) $10,000.
B) $200,000.
C) $300,000.
D) $800,000.
Which of the following would not be reported as an asset on the balance sheet?
A. Accounts Receivable
B. Supplies
C. Retained Earnings
D. Cash
When a company issues stock to the public for the first time, the issuance is called a(n):
A) initial public offering (IPO).
B) first time issue (FTI).
C) seasoned new issue (SNI).
D) initial stock offering (ISO).
Choose the appropriate letter to match the term and the definition. (There are more
definitions than terms.)
TERM
1>_____ Investors
2>_____ Audit
3> _____ Balance Sheet
4> _____ Operating Activities
5> _____ Unit of Measure Assumption
6> _____ Retained Earnings
7> _____ Investing Activities
8> _____ Income Statement
DEFINITION
A. An example of an internal user of financial statements.
B. A financial statement showing a company’s assets, liabilities and stockholders’
equity.
C. When a company acquires money from investors.
D. A financial statement that summarizes a company’s past and current cash situation.
E. An example of external users of financial statements.
F. The idea that the financial statements of a company include the results of only that
company’s business activities.
G. Activities directly related to running the business to earn profit.
H. A financial statement that shows a company’s revenues and expenses.
I. Borrowing money from lenders.
J. The total amount of profits that are kept by the company.
K. The idea that a company should report its financial data in the relevant currency.
L. A procedure by which independent evaluators assess the accounting procedures and
financial reports of a company.
M. Transactions with lenders (borrowing and repaying cash) and stockholders (selling
company stock and paying dividends).
During 2015, Maverick Law Firm had the following transactions with it clients
(customers):
On February 1, 2015, the company received cash of $5,000 from clients in payment of
their account balances as of December 31, 2014.
On November 1, 2015, the company received $2,000 cash as payments in advance for
law services to be performed in 2016.
The company received a total of $13,000 in cash for law services that were performed
during 2015.
The company sent bills totaling $4,000 to clients for services performed during 2015;
this amount was unpaid as December 31, 2015.
Use the information above to answer the following question. What is the amount of
Law Services Revenue that will be reported on the income statement for the year 2015?
A) $19,000.
B) $22,000.
C) $24,000.
D) $17,000.
A company has gross profit of $58,300 and a gross profit percentage of 25%. What
were the company’s net sales?
A) $233,200.
B) $14,575.
C) $72,825.
D) $711,260
A declining inventory turnover ratio may mean that:
A) goods are not selling as fast as they were in the past.
B) the company is expecting to sell more in the future.
C) goods are selling, but it is taking longer to collect payment.
D) goods cannot be shipped fast enough.
Cost of goods sold divided by average inventory is the calculation for which of the
following ratios?
A) Net profit margin ratio
B) Current ratio
C) Inventory turnover ratio
D) Fixed asset turnover ratio
Which of the following would a company be most likely to overstate if the company
was trying to mislead potential creditors as to its ability to pay debts as they become
due?
A) Accounts Receivable
B) Notes Payable
C) Salaries Expense
D) Accounts Payable
The expense recognition principle indicates:
A) where expenses should be presented on the income statement.
B) how expenses should be split between the income statement and the balance sheet.
C) the ordering of current assets and current liabilities on the balance sheet.
D) when costs are recognized as expenses on the income statement.