Given below is a list of items that may be reported on a statement of cash flows.
Identify each as one of the following using the indirect method:
a.Operating
b.Investing
c.Financing
d.Not separately reported on a statement of cash flows
Cost incurred to acquire a patent
A firm is required to estimate a liability for repairs for products sold with a warranty. If
the firm’s accountants later find that the estimated amount for repairs has been
overstated, the correct accounting procedure is to
a.show the amount of overstatement on the income statement as a loss.
b.do nothing for the year in question and modify the next year’s estimate.
c.make a correcting entry because the overstatement is an error.
d.make an adjusting entry to reduce the amount of estimate.
Given below are several ratios. Select the accounts or amounts that would be used in
order to calculate the ratio. You will have more than one response to each ratio. Some
accounts or amounts may not be used at all. (Select all that apply.)
Dividend yield ratio
a.Market price per share
b.Net sales
c.Average inventory outstanding
d.Interest expense, net of tax
e.Common dividends per share
f.Preferred dividends per share
g.Weighted average number of common shares outstanding
h.Total stockholders’ equity
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)
Increase in accounts receivable
Match the action with the category of internal control procedures
a.One department should check on another
b.Internal audit staff ensure all is working as intended
c.Accounting and cash collection is properly separated
d.Blank checks are locked at all times when not in use
e.Origination of initial entry into accounting system
f.Specific authority is given by management for the performance of activities.
Design and use of business documents
On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a
1-year, 6% note. If the company keeps its records on a calendar year, an adjustment is
needed on December 31 to increase
a.Interest Payable, $900.
b.Interest Expense, $600.
c.Interest Payable, $1,200.
d.Interest Expense, $1,800.
Match each of the following terms related to interest and time value of money
calculations to their appropriate definition.
a.Time value of money
b.Simple interest
c.Compound interest
d.Future value of a single amount
e.Present value of a single amount
f.Annuity
g.Future value of an annuity
h.Present value of an annuity
Interest that is earned or paid on the principal amount only.
If a company has a number of day’s sales in inventory equal to 60, that means that it
takes about two months on
average to sell its inventory.
a.True
b.False
Select the ratio that each statement below most properly satisfies.
a.Dividend yield ratio
b.Cash flow from operations to capital expenditures ratio
c.Debt service coverage ratio
d.Return on common stockholders’ equity ratio
e.Times interest earned ratio
f.Asset turnover ratio
g.Debt-to-equity ratio
h.Dividend payout ratio
i.Price/earnings ratio
An income statement measure of the ability of a company to make its interest payments
The income statement tells the reader about the actual cash inflows during a period of
time.
a.True
b.False
Sliders Company sells its merchandise only on credit. The following data is available at
December 31, 2014:
Refer to the data for Sliders Company.
Assume the company estimates bad debts using an aging analysis and the aging
schedule indicates that $3,600 of the end of the year Accounts Receivable will be
uncollectible.
A)What amount will Sliders Company recognize as bad debt expense for the year?
B)If the ending balance of Accounts Receivables is $38,700, what is the net realizable
value of Accounts Receivable reported on December 31, 2014?
The most liquid of all assets is cash.
a.True
b.False
Refer to the transactions for Krenshaw Rentals.
Based on the October 8 transaction, Krenshaw will record which of the following in its
accounting records?
a.A credit in Rental Receivables for $75.
b.A credit in Rental Revenue for $75.
c.A credit in Tools for $75.
d.A credit in Unearned Deposit Payable for $75.
Choose from the following list of account titles the one that most accurately fits the
description of that account or is an example of that account. An account title may be
used more than once or not at all.
a.Cash
b.Prepaid Asset
c.Investments
d.Taxes Payable
e.Preferred Stock
f.Accounts Receivable
g.Land
h.Accounts Payable
i.Retained Earnings
j.Notes Receivable
k.Buildings
l.Notes Payable
m.Common Stock
Ownership in a company that allows the owner to receive dividends before common
shareholders receive any distributions
Use the selected data from the consolidated statements of cash flows for College
Corporation for the years ended December 31, 2016 and 2015, to answer the questions
that follow.
REQUIRED:
(A) What is the significance of the positive amounts shown above, for both years, for
accounts payable and accrued liabilities?
(B) At the end of each year, College’s cash balance was approximately $5 to $7 million.
What does this indicate about College’s cash management techniques?
Various organizations publish summaries of selected ratios organized by industry for a
sample of U.S. companies.
a.True
b.False
For each of the following accounts, indicate whether it is a balance sheet account or an
income statement account.
a.Balance sheet account
b.Income statement account
Utilities Expense
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