Washington Corp. reported the following information for 2015 and 2016.
If Washington uses the indirect method to prepare the operating activities section of the
statement of cash flows, what amount will be reported as net cash inflow from
operating activities for 2016?
a. $ 73,000
b. $ 83,000
c. $ 95,000
d. $105,000
Which of the following would not be included in inventory costs?
a. Freight costs incurred by the buyer in shipping inventory to its place of business.
b. The cost of insurance taken out during the time that inventory is in transit.
c. The cost of storing inventory before it is ready to be sold.
d. Shelving to hold the inventory.
The benefits of a single set of accounting standards used around the world would
include all of the following except :
a. They would eventually save companies considerable money in accounting fees.
b. They would prevent competitors from acquiring each other.
c. They would allow easier comparisons by analysts and investors.
d. They would facilitate access to foreign capital markets.
For each of the following items, indicate whether it would appear on a statement of
cash flows prepared using the Direct method (a) or the Indirect method (b).
a. Direct
b. Indirect
Decrease in accounts payable
Wind Chime and Fire Hut Companies purchased identical equipment having an
estimated useful life of ten years. Wind Chime uses the straight-line depreciation
method and Fire Hut uses the double-declining-balance method of depreciation.
Assuming the two entities are similar in all other respects, which of the following
statements is correct?
a. Wind Chime’s depreciation expense will be greater in the second year than Fire Hut’s
depreciation expense.
b. Fire Hut’s book value will be greater than Wind Chime’s book value at the end of
year one.
c. Wind Chime’s net income will be greater than Fire Hut’s net income in year nine.
d. Fire Hut’s book value will be less than Wind Chime’s book value at the end of year
two.
Select the term below most properly satisfies each statement.
a. total assets
b. horizontal analysis
c. vertical analysis
d. net sales
A comparison of financial statement items within a single period
a. A liability resulting from the signing of a promissory note.
b. A measure of how long it takes to collect receivables.
c. A written promise to repay a definite sum of money on demand or at a fixed or
determinable date in the future.
d. The length of time a note is outstanding, that is, the period of time between the date it
is issued and the date it matures.
e. The party that will receive the money from a promissory note at some future date.
f. The process of selling a promissory note.
g. The date the promissory note is due.
h. The amount of cash the maker is to pay the payee on the maturity date of the note.
i. The difference between the principal amount of the note and its maturity value.
j. An asset resulting from the acceptance of a promissory note from another company.
k. Securities issued by corporations and governmental bodies as a form of borrowing.
l. Securities issued by corporations as a form of ownership in the business.
m. The party that agrees to repay the money for a promissory note at some future date.
n. The amount of cash received, or the fair value of the products or services received,
by the maker when a promissory note is issued.
Equity securities
A liability is a future economic benefit to a business.
a. True
b. False
Which of the following is true regarding the relationship of the current ratio to the quick
ratio?
a. The current ratio is based on a more conservative measure of liquidity.
b. Both focus on the relationship between part or all of the firm’s current assets and all
of its current liabilities.
c. Both focus on the relationship between all of the firm’s current assets and part or all
of its current liabilities.
d. For a company in the service industry, the current ratio and quick ratio will be
significantly different.
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. Denise
wants to help pay for her niece’s college tuition. Her niece will begin college in one
year. How much would Denise need to put into a savings account today at 6% so that
her niece can withdraw $10,000 per year for 4 years, and reduce the account balance to
zero at the end of the 4 years?
a. $31,680
b. $34,650
c. $37,600
d. $37,720
Use the following codes to indicate how the cash flow effect, if any, of each transaction
would be reported on a statement of cash flows if the operating activities section is
prepared using the direct method.
a. Inflow from operating activity
b. Outflow from operating activity
c. Inflow from investing activity
d. Outflow from investing activity
e. Inflow from financing activity
f. Outflow from financing activity
g. Noncash investing and financing activity
h. Not reported on statement of cash flows
Declared cash dividends.
Double-entry accounting is best characterized as:
a. The number of debit entries posted to the ledger equals the number of credit entries.
b. The number of ledger accounts with debit balances is equal to the number with credit
balances.
c. Every transaction affects both an asset account and either a liability account or a
stockholders’ equity account.
d. The total dollar amount of debit entries posted to the ledger is equal to the dollar
amount of the credit entries.
Which one of the following is not an accurate description of Allowance for Doubtful
Accounts?
a. Contra account
b. Balance sheet account
c. Income statement account
d. Current asset account
Cargo Corporation Listed below is information from the financial records of Cargo
Corporation at December 31, 2015:
Read the information about Cargo Corporation.Prepare the long-term asset section of
Cargo Corp.’s balance sheet at December 31, 2015. You may omit the heading. Why are
these amounts classified as “long-term”?
is a rise in the general level of prices in the economy and results in a decrease in
purchasing power.
Prepare journal entries without explanations for the following transactions involving
notes payable for Marcus Company whose fiscal year ends September 30. Round all
numbers to the nearest penny. Sept. 10 Received cash for a 60-day, 12 percent, $10,000
note payable. Interest is in addition to the face value.
30 Made end-of-year adjusting entry to accrue interest expense for the note.
Nov. 9 Paid amount due on the note plus interest.
Select the best answer from the list below to complete statements 131-141 that follow.
The number of shares sold or distributed to stockholder are.
Mill Valley Corporation was organized on January 1, 2014, with the investment of
$225,000 in cash by its stockholders. The company immediately purchased an office
building for $300,000, paying $201,000 in cash and signing a three-year promissory
note for the balance. Mill Valley signed a five-year, $50,000 promissory note at a local
bank during 2014 and received cash in the same amount. During its first year, Mill
Valley collected $93,000 from its customers. It paid $60,600 for inventory, $22,400 in
salaries and wages, and another $5,100 in taxes. Mill Valley paid $5,300 in cash
dividends.1> Prepare a statement of cash flows for the year ended December 31, 2014.
2> What does this statement tell you that an income statement does not?
What is the significance of the timing in which cash is paid or received as it relates to
the adjusting process?
Dallas Company uses the indirect method of preparing the statement of cash flows and
has the following current liabilities at the beginning of the period: Accounts Payable,
$35,000; Taxes Payable, $15,000. At the end of the period, the balances of the account
are as follows: Accounts Payable, $25,000; Taxes Payable, $20,000. What amounts will
appear in the cash flow statement? In what category of the statement will they appear?
On January 2, 2014, Viva Stores decided to set up a petty cash fund. The treasurer
established the fund by writing and cashing a $250 check and placing the coin and
currency in a locked petty cash drawer. Conrad Boswell was designated as the
custodian for the fund. During January, the following receipts were given to Boswell in
exchange for cash from the fund:
A count of the cash in the drawer on January 31 revealed a balance of $53.25. The
treasurer wrote and cashed a check on the same day to restore the fund to its original
balance of $250. REQUIRED:
Prepare the necessary journal entries, with explanations, for January. Assume that all
stamps and office supplies were used during the month.
Utah Corp. Use the following selected data and additional information from the records
of Utah Corp. to answer the questions that follow. Balance Sheet Data
2016 2015
Additional information:
(1) Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000
during 2016.
(2) Common stock was issued to retire bonds payable during 2016.
(3) The only items affecting retained earnings in 2016 were net income and dividends
declared and paid.Review the data for Utah Corp.REQUIRED:Prepare the operating
activities section of statement of cash flows for Utah Corp. for 2016 if the direct
method is used to determine net cash flow from operating activities.
Read the information about Fasoli, Inc.Prepare the Liabilities section of the classified
balance sheet, including total liabilities balance.
