FE 788 | Course Paper

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1) Which of the following categories on a statement of cash flows is used to report the

cash flow effects of transactions involving a company’s stock?

A.Operating Activities

B.Investing Activities

C.Financing Activities

D.Profit Activities

2) 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.$2,550

B.$2,970

C.$3,000

D.$3,030

3) When a company declares a 2-for-1 stock split,

A.stockholders’ equity is doubled

B.there is no effect on total stockholders’ equity

C.a shareholder who previously held 100 shares will have 300 shares after the split

D.the price of each share will be one third of what it was before the stock split

4) As a general rule, revenue is recognized at the point of sale. Which one of the

following situations illustrates this rule?

A.Products are sold to customers on credit with payment due in 30 days

B.Employees are paid wages the week after the wages are earned

C.Products are purchased for resale purposes

D.Interest is collected from amounts loaned to employees

5) Which one of the following procedures is not part of preparing a bank reconciliation

of a checking account

A.Tracing deposits listed on the bank statement to the books to identify deposits in

transit

B.Arranging canceled checks in numerical order and tracing them to the books to

identify outstanding checks

C.Identifying items added on the bank statement which have not been recorded as cash

receipts by the company

D.Preparing adjustments to reverse the transactions recorded for checks that are still

outstanding

6) When using the indirect method, where is the gain from selling a long-term

investment recognized? (The proceeds from selling the investment are considered

separately.)

A.Operating activity

B.Investing activity

C.Financing activity

D.Noncash investing or financing activity

7) 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.

The table factor for the future value of an annuity for 4 annual deposits at 8% is

A.the same as for the future value of $1 multiplied by 4

B.the reciprocal of the future value of $1 factor for n = 4 and 8%

C.the cumulative total of the future value of $1 factors for 4 deposits at 8%

D.the same as using the future value of $1 factors at 8% for 3, 2, 1 and 0 periods

8) When using the indirect method, how is depreciation expense recorded on the

statement of cash flows?

A.Operating activity

B.Investing activity

C.Financing activity

D.Noncash investing and financing activity

9) Sliders Company

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.

10) Which of the following statements is false regarding how the cash flow effects of

the changes in the equipment and accumulated depreciation accounts would be reported

on a statement of cash flows if the indirect method is used to prepare the operating

activities section?

A.Cash proceeds from the sale of the equipment would be reported as a cash inflow in

the investing activities section

B.The cash paid to purchase equipment would be reported as a cash outflow in the

investing activities section

C.Depreciation expense would be added to net income in the operating activities section

D.A loss on the sale of the equipment would be subtracted from net income in the

operating activities section

11) Liquidity analysis is required

A.in order to evaluate the profitability over past accounting periods.

B.to assess the nearness to cash of a company’s assets and liabilities.

C.to be reported in the financial statements for all companies publicly traded.

D.when a company reports nonrecurring items in its financial statements.

12) Why are adjustments often necessary after the reconciliation of a bank account?

13) Slammer Sports

The following information is for Slammer Sports at the end of 2014:

Refer to the data for Slammer Sports.

Determine the effect on Slammer Sports accounting equation of the year-end

adjustment of bad debts using the aging approach.

14) The ratio of net income to net sales is the relationship presented by the

______________ ratio.

15) What is the difference between simple interest and compound interest? Is the

amount of interest higher or lower when the interest is simple rather than compound?

16) ____________________ is the name given to balance sheet accounts because they

are permanent in nature.