Provides several pieces of information needed to prepare the cash flow statement.
Match these terms with their correct definition.
a. Cash flow adequacy ratio
b. Cash flows from financing activities
c. Cash flows from investing activities
d. Cash flow from operating activities
e. Direct method
f. Free cash flow
g. Income statement
h. Indirect method
i. Noncash investing & financing activities
j. Statement of cash flows
A Discount on Bonds Payable account would appear on the balance sheet as
a. current liability.
b. long-term liability.
c. current asset.
d. contra-liability.
Salaries Payable
From the list of accounts, determine whether the account is a temporary or permanent
account. (Choices may be used more than once.)
Which of the following statements best describes the effects of recognizing revenue
earned by a business entity?
a. Assets increase only when cash sales are collected.
b. Stockholders’ equity increases only when credit sales are made.
c. Assets and stockholders’ equity increase when either cash or credit sales are made.
d. Assets increase and stockholders’ equity decreases when either cash or credit sales
are made.
Refer to Happy Heights Country Club. Assuming that there are no other transactions,
how much was owed to the country club by its members at the end of the month?
Happy Heights Country Club
Selected accounts at July 31 are provided below:
a. $3,600
b. $7,200
c. $1,800
d. $1,000
Which of the following statements about bond accounting under the effective interest
method is correct?
a. The cash interest paid is calculated as the bond face value x the yield rate.
b. The interest expense is calculated as the carrying value x the yield rate.
c. The difference between the cash interest paid and the interest expense is added to the
carrying value of bonds sold at a premium.
d. The difference between the interest expense and the interest paid is deducted from the
carrying value of bonds sold at a discount.
A company reported the following information:
How much cash was paid for salaries during 2014?
a. $60,000
b. $65,000
c. $75,000
d. $85,000
Which of the following is one of the elements of stockholders’ equity?
a. net income
b. dividends payable
c. retained earnings
d. loss on the sale of equipment
Unearned Revenue
From the list of accounts, determine whether the account is a temporary or permanent
account. (Choices may be used more than once.)
Total liabilities Select the ratio that would include each amount or account in its
calculation. (Choices may be used more than once.)
a. Times interest earned ratio
b. Operating cash flow ratio
c. Debt-to-equity ratio
d. Return on equity
Unemployment taxes For each of the types of payroll taxes and other payroll-related
items listed, indicate whether it is paid by the employee through a paycheck
withholding, by the employer, or both. (Choices may be used more than once.)
a. Employee
b. Employer
c. Both
Carnegie Jewelers accepted a 9-month, 9% note for $100,000 from a customer on July
1, 2013. The note is due on March 31, 2014. Assuming the company’s accounting
period ends on December 31, 2013, how much interest revenue should be recognized
during 2013 and 2014? 20132014
a. $2,250 $4,500
b. $4,500 $2,250
c. $9,000 $ -0-
d. $4,500 $4,500
A capital leased asset would appear on the balance sheet as
a. current liability.
b. capital Lease liability.
c. current asset.
d. prepaid lease expense.
Which one of the following statements is true?
a. Sound internal control practice dictates that disbursements should be made by check.
b. Good cash management practice dictates that large cash balances should be
maintained.
c. The person handling cash should also prepare the bank reconciliation.
d. Petty cash can be substituted for a checking account to expedite the payment of all
disbursements.
How should intangible assets be disclosed on the balance sheet?
a. as a reduction of stockholders’ equity
b. at cost in the current assets section
c. at the estimated market value at the balance sheet date
d. net of the costs already amortized
A credit memo appeared on the September bank statement. How should this amount be
treated on the September bank reconciliation?
a. Add it to the company’s balance.
b. Add it to the bank balance.
c. Deduct it from the company’s balance.
d. Deduct it from the bank balance.
Chattahoochee Excursions, a calendar year company, purchased supplies at a cost of
$12,215 during 2013. At January 1, 2013, supplies on hand were $10,31 During the
year, the company used $14,000 of supplies. A) What adjusting entry is prepared at
December 31, 2013?
B) Under the accrual basis of accounting, how much is Supplies Expense for 2013?
C) How much should be reported on the December 31, 2013, balance sheet for
Supplies?
D) What type of adjustment was made in part A?
Providing services to customers for cash
For each transaction provided, choose the appropriate account from the list that would
receive a debit entry as a result of the transaction. (Choices may be used more than
once.)
a. Cash
b. Accounts receivable
c. Supplies
d. Prepaid insurance
e. Land
f. Equipment
g. Accounts payable
h. Unearned revenues
i. Notes payable
j. Common stock
k. Retained earnings
l. Service revenue
m. Salary expense
n. Insurance expense
o. Utilities expense
p. Dividends
Return ratios are measures of the relationship between the
a. profit earned and the investment made in the company by the various groups of
creditors and investors.
b. revenue earned and the total equity of a company.
c. total equity of a company and its cash flows for the period.
d. profitability and liquidity aspects of a company.
The operating cycle of a retail company is the length of time between the
a. purchase of inventory and the sale of the inventory to customers.
b. sale of inventory and the collection of any outstanding receivables from those sales.
c. purchase of inventory and the collection of any outstanding receivables from the
sales of those items.
d. purchase of inventory and the time of sending sales invoices to customers.
When a bank pays interest on a company’s checking account balance, the bank will
likely issue a credit memo.
An investment in common stock is not considered to be a cash equivalent.
Employers withhold taxes from their employees’ gross pay and later pay these amounts
withheld to the taxing authority.
The cash ratio is calculated by dividing current liabilities by the total of cash and
marketable securities.
Under the ____________________ basis of accounting, revenues are recognized when
earned and expenses when incurred.