Resold treasury stock for cash.
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. (Choices may be used more than once.)
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
When a corporation pays a previously declared cash dividend, which of the following is
true?
a. cash increases
b. liabilities decrease
c. stockholders’ equity decreases
d. no entry is necessary
Method of accounting for investments where the investor possesses significant
influence (20% to 50% common stock ownership) over the operating and financial
policies of the investee
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Amounts funded by companies to provide benefits to fired workers. Match each of the
following current liabilities with its meaning.
a. Account payable
b. Note payable
c. Wages payable
d. Interest payable
e. Sales taxes payable
f. FICA taxes payable
g. Unemployment taxes payable
h. Unearned sales revenues
i. Estimated warranty liability
Which of the following ratios is the best measure for analyzing a company’s efficiency
in using assets to produce sales revenues?
a. current ratio
b. return on assets
c. asset turnover ratio
d. debt-to-total assets ratio
When using the direct method to determine operating cash flows, how is the sale of
long-term investments for cash reported on the Statement of Cash Flows?
a. operating activity
b. investing activity
c. financing activity
d. noncash investing and financing activity
e. not reported on the statement of cash flows
Failure to record accrued interest expense would result in which of the following?
a. Assets being overstated
b. Assets being understated
c. Liabilities being overstated
d. Liabilities being understated
Obligations that must be satisfied within a year
Match each statement to the item listed below.
a. Current assets e. Intangible assets
b. Current liabilities f. Long-term investments
c. Gross margin g. Long-term liabilities
d. Income from operations h. Net profit margin
Which of the following types of inventory accounts would be used by a wholesaler or
retailer?
a. merchandise inventory
b. raw materials inventory
c. work in process inventory
d. finished goods inventory
Refer to Kalahari Limited. What is the carrying value of the bonds after the first interest
payment is made on June 30, 2013?
Kalahari Limited
On January 2, 2013, this company issued 1,000,000, 10-year bonds for $1,150,000. The
bonds pay interest on June 30 and December 31. The stated rate is 10% and the market
rate is 8%. The company plans to use the effective interest method of amortizing bond
discounts and premiums. a. $1,154,000
b. $1,146,000
c. $1,142,400
d. $1,000,000
Another term for articles of incorporation
One effect of recognizing depreciation is to decrease net income.
A company that forgets to recognize depreciation for the year understates its income
and assets.
Investors who buy stock in a corporation expect to earn returns on their investment
from dividends and an increase in the value of the stock (a capital gain).
When a company estimates the amount of expected warranty expenses to be incurred in
the future pertaining to past product sales, the account to be credited is called the
____________________.