The following information was taken from the operating activity section of the 2014
statement of cash flows for Limited Corp:
Based on the information provided, which one of the following conclusions is correct?
a.Accounts payable decreased $2,000 in 2014.
b.Inventories increased $8,000 in 2014.
c.The direct method was used to prepare the operating section of the cash flow
statement.
d.Cash payments of merchandise exceeded cost of goods sold by $2,000.
Gallery Manufacturing purchased, for cash, three large pieces of equipment. Based on
recent sales of similar equipment, the fair market values are as follows:
Piece 1 $250,000
Piece 2 $350,000
Piece 3 $450,000 Required
1>What value is assigned to each piece of equipment if the equipment was purchased
for (a) $510,000, (b)
$710,000, and (c) $810,000?
2>How does the purchase of the equipment affect total assets?
See the transactions to Morton & Associates.
The journal entry to record the May 1 transaction will include an increase of $800 to
a.Accounts Payable
b.Accounts Receivable
c.Cash
d.Prepaid Expenses
Identify where each of the following accounts would be reported on CocaCola’s
financial statements
a.Balance Sheet – Property, Plant, and Equipment
b.Balance Sheet – Intangible Assets
c.Balance Sheet – Current Assets
d.Balance Sheet – Other Assets
e.Income Statement – Operating Section
f.Income Statement – Other Revenue and Expense Section
g.Statement of Cash Flows
Building
Match the following bond and long-term liability related terms to the appropriate
definition.
a.Long-term liability
b.Face value
c.Debenture bonds
d.Serial bonds
e.Callable bonds
f.Face rate of interest
g.Market rate of interest
h.Bond issue price
i.Premium
j.Discount
k.Effective interest method of amortization
l.Carrying value
m.Gain or loss on redemption
The interest rate that bondholders could obtain by investing in other bonds that are
similar to the issuing firm’s bonds.
Match the term with the statement that best defines it.
a.Accounting controls
b.Accounting system
c.Administrative controls
d.Audit committee
e.Board of directors
Provides direct contact between the shareholders and the independent auditing firm.
Payment for the acq
uisition of inventories is shown on the statement of cash flows as
a.An operating activity
b.An investing activity
c.A financing activity
d.Either an operating activity or a financing activity
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 takes a count of the raw materials inventory and finds that an adjustment
is needed.
Latahmer Corporation is reconciling its May bank account. For each item listed, state
how it would be handled on the bank reconciliation.
a.Addition to bank balance
b.Subtraction from bank balance
c.Addition to book balance
d.Subtraction from book balance
e.Would not appear on the May reconciliation
Interest earned on the checking account for May
Assuming the indirect method for preparing the statement of cash flows is used,
indicate whether these items should be added to net income (A), deducted from net
income (D), or not be reported in the operating section of the statement under the
indirect method (NR).
a.Added (A)
b.Deducted (D)
c.Not reported (NR)
Decrease in accounts payable
Finished goods are the equivalent of merchandise inventory for a retailer or wholesaler
in that both represent the inventory of goods held for sale.
a.True
b.False
Estimated Uncollectible Accounts
Refer to the data for Slammer Sports.
If bad debts are estimated at 1% of net sales, how much will Slammer Sports report as
bad debts expense for 2014?
Identify the accounting equation effects for the May 1, 2016 transaction to record the
payment of principal and interest.
Given the following items, what amount should be reported on the balance sheet as
Cash and cash equivalents?
The length of time a note is outstanding (that is, the period of time between the date it is
issued and the date it matures) is called the _________________.
The understatement of ending inventories in one period leads to a(n)of cost of goods
sold expense in the same period.
For each of the following sentences 133-140, select the word or group of words that
best completes the statement.
Theof accounting necessitates a number of adjustments at the end of an accounting
period.
If you were a banker considering loaning money to this company, why would you be
interested in knowing its cash flow adequacy ratio? Would you feel comfortable making
a loan based on the ratio you computed in part (1)? Explain your answer.
Under themethod, the amount of cash paid to suppliers of inventory is shown as a
deduction in the operating activities category of the cash flow statement.