If a company purchases $3,000 worth of inventory with terms of 1/15, n30 and pays
within 15 days, then the amount paid to the seller would be
a. $3,030
b. $2,550
c. $2,970
d. $3,000
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
Collections on accounts receivable
The inventory costing method is applied after each sale of merchandise to update the
Inventory account.
a.True
b.False
For each item listed, select the section of the balance sheet in which the item would be
reported.
a.Current Assets
b.Property. Plant, and Equipment
c.Current Liabilities
d.Long-term Liabilities
e.Stockholders’ Equity
Capital stock
The investment in stock of another company is considered a significant activity and
thus is reported on the statement of cash flows.
a.True
b.False
Given the following list of methods of depreciation, select the method that is best for
the situation or purpose given. Some answers may be used more than once, while others
may not be used at all.
a.Straight-line
b.Units-of-production
c.Double-declining-balance
d.MACRS
Early in the life of the asset, this method maximizes net income.
Use the information below for Focal Point Corp. for 2015 and 2016 to answer the
following question.
Assume that there were no retained earnings transactions other than those dealing with
dividends and net income. How much dividends did Focal Point declare during 2016?
a. $ 95,000
b. $105,000
c. $140,000
d. $150,000
Identify which of the following would be recorded as external events, recorded as
internal events, or not recorded.
a.Internal event
b.External event
c.Not recorded
The company transfers work in process to finished goods inventory.
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
Net income
Under the indirect method, an increase in accounts payable is added to net income to
determine cash flow from operating activities.
a.True
b.False
From the list of accounts below, determine whether the account would be a nominal
account or a real account.
a.nominal account
b.real account
Prepaid Rent
For each transaction select the letter of the type of adjustment that would be required.
a.Deferred expense
b.Deferred revenue
c.Accrued liability
d.Accrued asset
Magazine subscriptions are delivered during the current period, although customers had
paid in a previous period
The quality of accounting information that allows a user to analyze two or more
companies and look for similarities and differences is known as understandability.
a.True
b.False
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
Increased the accounts payable balance.