Use the following codes to indicate how the cash flow effect, if any, of each transaction
or event would be reported on a statement of cash flows if the operating activities
section is prepared using the indirect method.
a.Operating activity-add to net income
b.Operating activity-deduct from net income
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.
From the following choices, select the answer that describes the effect on working
capital as a result of the transaction.
a.Working capital will increase
b.Working capital will decrease
c.Working capital will not change
Collected an account receivable
Identify which inventory costing method (LIFO or FIFO) achieves the effect listed in
the following items:
a.LIFO
b.FIFO
Prices are rising; cost of goods sold is lower with this method
If your bank gives you a $2,000 loan at 8% per year, but deducts the interest in advance,
is 8% the “real” rate of interest that you will pay?
a.There is not enough information to answer this question accurately.
b.Yes.
c.No. The interest rate is actually higher than 8 percent.
d.No. The interest rate is actually lower than 8 percent.
Long-term assets are $800, current liabilities are $500, and long-term liabilities are
$600. If the current ratio is 2.5 to 1, then current assets are
a.$ 625
b.$1,250
c.$2,000
d. $ 200
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
Payment of research and development costs
The following information was obtained from the 2016 and 2015 financial statements
Better Books and Tenacious Texts. Assume all sales are on credit for both companies.
REQUIRED:
1)Using the information provided, compute the following for each company for
2016(rounded to two decimals):
a.Accounts receivable turnover ratio
b. Number of days’ sales in receivables
c. Inventory turnover ratio
d. Number of days’ sales in inventory
e. Cash-to-cash operating cycle
2)Comment briefly on the liquidity of each of these two companies.
Match the following choices to the listed situation.
a.a deferred expense
b.a deferred revenue
c.an accrued liability
d.an accrued asset
The cost of salaries earned by employees, but not paid at the end of the accounting
period is recorded
Which of the following statements is false with respect to bonds?
a.Firms issue bonds in very large single issues.
b.Bonds must be held until maturity by the initial investor.
c.The denomination of the bond is usually referred to as the face value.
d.Bonds that are not backed by specific collateral of the issuing company are known as
debenture bonds.
Use the selected data from the comparative financial statements for Auto Designs, Inc.
to answer the questions that follow.
Refer to the account information for Auto Designs, Inc.
Compute the total current liabilities for the years 2015 and 2014. Calculate the
percentage change in the total current liabilities.
Describe how the gain or loss would be reported on the income statement and in the
notes to the financial statements.
The following list of accounts was taken from the general ledger of Bassett Corporation
on December 31, 2015.
The bookkeeper thought it would be helpful if the accounts were arranged in
alphabetical order. Each account contains the balance that is normal for that type of
account; for example, Cash normally has a debit balance. Prepare a trial balance as of
this date with the accounts arranged in the following order: (1) assets, (2) liabilities, (3)
stockholders’ equity, (4) revenues, (5) expenses, and (6) dividends.
Sales returns and allowances is a contraaccount.
Ultra-lite Corp. began operations on January 1, 2015. The statement of cash flows for
the first year reported dividends paid of $180,000. The balance sheet at the end of the
first year reported $60,000 in dividends payable and
$600,000 in ending retained earnings. Determine Ultralite’s net income for its first year
of operations.
For the buyer, ais an amount deducted by customers for payment within the discount
period.
For each of the following sentences 133-140, select the word or group of words that
best completes the statement.
A(n) creates an increase in income for the period.