FE 534 Quiz 2 | Course Paper

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When using the indirect method to determine operating cash flows, how is the receipt of

cash from the sale of long-term investments treated on the statement of cash flows?

a. operating activity

b. investing activity

c. financing activity

d. noncash investing or financing activity

e. not reported on the statement of cash flows

Which of the following would appear only in the footnotes accompanying the financial

statements?

a. A probable loss in the amount of $4 million from a pending lawsuit.

b. A loss that is likely to occur in the amount of $4 million related to a pending lawsuit.

c. A probable loss from a pending lawsuit, the amount of which is not yet determinable.

d. A liability resulting from a recent lawsuit settlement.

Which of the following items would be added to the company’s cash balance on a bank

reconciliation?

a. outstanding checks

b. deposits in transit

c. bank service charges

d. interest earned on the bank account

Upon review of a statement of cash flows, the following was noted:

From this information, it is likely that the company is

a. using cash from operations and selling long-term assets to pay back debt

b. using cash from operations and borrowing to purchase long-term assets.

c. using its profits to expand growth.

d. using cash from investors to provide for operations.

The rate that reflects the provisions of the debt instrument, the credit standing of the

borrowing business, and the current conditions in the credit markets and the economy

as a whole. Match these terms with their definitions.

a. Bond i. Lessor

b. Contract, coupon, stated rate j. Leverage

c. Discount k. Long-term debt

d. Effective interest rate method l. Market rate, yield

e. Face value, par value, principal m. Maturity

f. Interest amortization n. Premium

g. Lease o. Straight-line method

h. Lessee

The number of shares the corporation has sold to stockholders. Match the terms to the

definitions.

Given below are costs incurred during 2012 and 2013 by a company that follows the

policy of decreasing the intangible asset account directly as amortized. Research was

conducted to discover a new product and costs of $400,000 in 2012 and $800,000 in

2013 were incurred. After several months, a product was created and a patent secured

for a cost of $180,000, effective as of July 1, 2013. The company expects to have

increased revenues of $500,000 over the next several years. The patent is expected to be

useful for the next 10 years.

Which of the following documents is used in the control of cash receipts?

a. canceled checks

b. outstanding checks

c. bank deposit slips

d. bank debit memos

The principal amount of a note receivable plus the interest due is referred to as the

note’s

a. face valve.

b. promissory value.

c. expected value.

d. maturity value.

Equipment with an estimated residual value at acquisition of $15,000 was sold on

December 31, 2013, for $20,000 cash. The following data were available at the time of

sale:

When this transaction is recorded, it should include a

a. debit of $80,000 to the Loss on Disposal account.

b. credit of $20,000 to the Equipment account.

c. credit of $5,000 to the Gain on Disposal account.

d. debit of $20,000 to the Accumulated Depreciation account.

Under the LIFO method of inventory costing, the units in the ending inventory

represent the most recent purchase(s).

Stockholders equity is composed of contributed capital and retained earnings.

Refer to Atlantis Tropicals. Assume that the net realizable value is $210,000 after the

adjustment for bad debts in 2013. How much is the net realizable value of accounts

receivable after a customer’s account of $15,000 is written off? Explain why.

Atlantis Tropicals

The following information was taken from the company’s records at the end of 2013.

The three forms of business organizations are ____________________,

____________________, and ____________________.

If a company uses the same depreciation method as other firms in the same industry,

investors will have enhanced comparability of the financial reporting results.

If no reasonable estimate of the loss can be made, then a contingent liability should be

recognized in the ____________________.

Dividends that are paid out of contributed capital because retained earnings have been

reduced to zero.

Increases in Cash = Increases in Liabilities – Increases in Stockholders’ Equity –

Decreases in Noncash Assets.

The two items that must be estimated with respect to a plant asset in order to properly

allocate cost to the affected accounting periods are ____________________ and

____________________.

If the stated cash dividend on cumulative preferred stock has been unpaid for a period

of one year or more, it is referred to as a dividend ____________________.