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)
Decrease in prepaid insurance
Which method assigns the cost of the most recent items purchased to ending inventory?
a. Specific identification
b. Weighted average cost
c. FIFO
d. LIFO
The cost of goods sold is
a. Purchases less beginning inventory plus ending inventory
b. Reported on the balance sheet in the inventory account
c. Goods available for sale less ending inventory
d. Equal to the amount of inventory on hand at the end of the accounting period
In terms of the statement of cash flows, cash includes actual cash items plus certain
cash equivalents such as commercial paper, money market funds, and Treasury bills.
a. True
b. False
Not all recognizable events are supported by a standard source document.
a. True
b. False
Culinary Delights CompanyUse the financial statements for Culinary Delights
Company to answer the questions that follow.
Consolidated Statement of Earnings and Retained Earning
Refer to the financial statements of Culinary Delights Company. REQUIRED:
(A) Culinary Delights’ cash flow from operations for 2016 is $323,847 (in thousands).
Evaluate Culinary Delights’ short-term cash flow position during 2016. Is the company
in danger of problems? Explain. (B) Evaluate Culinary Delights’ inventory management
during 2016.
All of the following are examples of retailers except :
a. Sports Authority
b. Boeing
c. Home Depot
d. Best Buy
Typically, the lower the accounts receivable turnover ratio, the better.
a. True
b. False
Because market values are subjective, many assets are carried on the balance sheet at
their acquisition cost.
a. True
b. False
Three months before year-end, Billings Company signed a $100,000, 12%, 6-month
note. Principal and interest will be paid at maturity. No interest should be accrued at
year-end because the company has no obligation to pay the interest until the note
matures.
a. True
b. False
Costs incurred related to plant assets that are already in use are called revenue
expenditures if the cost increases the useful life or the asset’s productivity.
a. True
b. False
Eagle’s Nest sold equipment for $4,000 cash. This resulted in a $1,500 loss. What is the
impact of this sale on the working capital?
a. Reduces working capital
b. Increases working capital
c. Has no effect on working capital
d. The increases offset the decrease.
Times interest earned ratio
a. Total liabilities
b. Total stockholders’ equity
c. Net income
d. Interest expense
e. Income tax expense
f. Cash flow from operations before interest and tax payments
g. Cash paid for acquisitions
h. Cash flow from operations
Rent owed to the landlord is a balance sheet item for Generic Products Company. How
would it most likely be classified on the balance sheet?
a. Current liability
b. Long-term liability
c. Current asset
d. Owners’ equity
The change in the Deferred Taxes account is reflected in the Operating Activities
category of the statement of cash flows.
a. True
b. False
The following set of items describes activities completed by a company in purchasing
and paying for merchandise. For each activity, identify whether or not the activity
adheres to or violates sound internal control procedures. The receiving department
compares the quantity received with the quantity printed on the receiving report when
the purchase order was prepared.
a. Adheres to sound internal control procedures
b. Violates sound internal control procedures
c. Neither strengthens nor violates internal control
Which of the following is not a financing activity?
a. Issuing bonds for cash.
b. Selling an investment in IBM stock for cash.
c. Purchasing a company’s own stock (treasury stock) for cash.
d. Making a cash payment to repay a bank loan.
Which of the following statements is true regarding common law?
a. In common law countries, there are generally more statutes written into the laws.
b. In common law countries, there is less reliance on interpretation by the courts.
c. Because more details are written into U.S. law, FASB has shorter and more general
accounting standards than most countries.
d. The common law system has its roots in the United Kingdom.
When using the indirect cash flow method, a decrease in accounts receivable or notes
receivable must be
to net income to arrive at the increase or decrease in cash flows.
If an accounting firm provides services on account, bothand stockholders’ equity
increase.
Presented below are condensed data from the financial statements of Snap Factory for
2015 and 2014. The figures are expressed in thousands. Use this information to answer
the questions that follow.
Required: How much of Snap Factory is financed by owners at the end of December of
2015?
Assume that the Stockholders’ Equity section of Cherokee Company’s balance sheet on
December 31, 2015, appears as follows:
1> If on February 1, 2016, Cherokee buys 120 of its shares as treasury stock at $30 per
share, what journal entry will the company record? 2>How with the Stockholders’
Equity section of Cherokee’s balance sheet appear on February 1, 2016, after the
purchase of the treasury stock?
Fasoli, Inc. The following balance sheet items from Fasoli, Inc. are listed for December
31, 2015:
Read the information about Fasoli, Inc.Present the current liabilities section (including
the total) of a classified balance sheet.
