1.

Question 1

Why do we have an allowance for doubtful accounts?

1 point

Your answer cannot be more than 10000 characters.

2.

Question 2

The Allowance for doubtful accounts is an

1 point

Liability account

Expense account

Asset account

Contra-asset account

3.

Question 3

Baz corp. is a jewelry company that sells custom rings. At the beginning of the year, their customers owed them $2,500,000 but they estimated about $300,000 would not actually be collected. At the end of the year, their customers owed them $2,550,000 and estimated $550,000 would not be collected. What amount would they present for accounts receivable on their year end balance sheet?

1 point

4.

Question 4

Continuing with Baz corp, recall at the beginning of the year, their customers owed them $2,500,000 and they had an allowance for doubtful accounts of $300,000. At the end of the year, their customers owed them $2,550,000 and they had an allowance for doubtful accounts of $550,000. What was bad debt expense for this year?

1 point

5.

Question 5

The bad debt expense for Baz for this year will be included in the income statement as:

1 point

It depends.

By reducing revenues for the period.

In cost of goods sold

In selling, general and administrative

As its own line item

6.

Question 6

Chacko corp is a distributor of exotic fruits and vegetables. At the beginning of the year they had an allowance for doubtful accounts of $1,100,000. At the end of the year they determined their balance in the allowance should be $900,000. They did not "write off" any accounts or make any other adjustments to the allowance during the during the year. How much would they recognize for bad debt expense during the year?

1 point

-$200,000

$200,000

$900,000

7.

Question 7

In the next year, Chacko finds out that one of its customers, Gula Inc, went bankrupt and will not pay. Gula owed Chacko $4,000. How would that impact the numbers reported on Chackos balance sheet and income statement?

1 point

It would not impact either statement.

It would reduce accounts receivable reported on the balance sheet, but not impact the income statement.

It would increase the bad debt expense on the income statement and decrease accounts receivable on the balance sheet.

It would increase the bad debt expense on the income statement, but have no impact on the balance sheet.

Question 8

A company's decision of whether to use LIFO or FIFO should be based on the physical flow of their inventory and their business model.

1 point

False

True

Question 9

If you are comparing two companies in the same industry, then they should follow the same rules in classifying costs as being "cost of goods sold" vs "selling, general and administrative expenses".

1 point

False

True

Question 10

While LIFO (Last In First Out) is allowed in the United States, it is not an acceptable way of accounting for inventory in most other countries.

1 point

False

True

Question 11

If we decide we have cost of goods sold in the current period, we will then recognize the related revenue.

1 point

False

True

Question 12

Your friend Nayana owns a bookstore. Last year was her first year of operations. At the end of the year she had 50 books, for which she had paid $15 each. During the year she purchased another 200 books, but they cost $20 each. At the end of the year she has 60 books left. What is her cost of goods sold if she applies FIFO for inventory accounting?

1 point

Question 13

Sticking with Nayana's book store, what amount would the balance sheet show for inventory if she applied FIFO as her accounting assumption?

1 point

Question 14

Using the same information from Nayana's bookstore, what would the cost of goods sold be if she decided to use LIFO as her inventory costing assumption?

1 point

Question 15

Using the same information from Nayana's bookstore, what would the ending inventory balance be if she decided to use LIFO as her inventory costing assumption?

1 point

Question 16

For an item to be an asset to a company it must

1 point

• Have a probable future economic benefit, be under the control of the firm and entirely paid for.

Be something the managers can physically touch

Have a probable future economic benefit, be under the control of the firm and be the result of a past transaction

Question 17

Stay Nation is a new hybrid hospitality business. They purchase units in condominium associations around the country. But instead of living in the units themselves, they rent them out to people who need relatively long-term accommodations (from one week to a year). They recently purchased a new unit for $100,000. The unit had holes in the walls and badly stained carpets. Stay Nation applied new paint throughout and they replaced carpets as well, spending $5,000 in total. The prior owners had built a storage shed in one of the two parking spaces. Stay Nation paid $1,000 to have it torn down. In addition, they spent $3,000 advertising the unit. Normally they would only spend $1,000, but this was their first unit in town and thus they felt they needed more visibility with customers.

What amount would they record on their balance sheet as an asset?

1 point

Question 18

Stay Nation purchased a truck to be used by their cleaning and greeting crews (the crews that clean units also meet customers when they first show up at a new rental. That allows Stay Nation to familiarize the customer with the unit and provides a personal touch). The truck cost $20,000 at the dealers. Stay Nation paid another $5,000 to have their fleet standard paint job applied. The truck has an economic life of 10 years, but Stay Nation intends to use it for five years as they believe it is important that their crews look professional. They believe they will be able to resell the truck for $10,000 at that point. They use a straight-line depreciation on all vehicles.

How much depreciation expense would Stay Nation have in year one?

2 points

Question 19

At the end of year three, what amount would Stay Nation show on the face of their balance sheet?

2 points

.

Question 20

Your friend Cristi purchased a sheep wool preparer to be used on her farm. It allows her to process the wool from her sheep so that she can sell it directly to yarn stores. That cuts out having to pay a processor and also will allow her to make higher quality yarn.

She paid $5,000 for the machine and spent another $1,000 to build a battery pack so should could use it in her barn that does not have electricity. While she has spoken with people who used a machine for 10,000 sheep, she has heard that the machine becomes very slow at that point. She expected that she can process 8,000 sheep wool with it before hitting that slow spot. There is not much market for an old wool preparer, but she knows she can drop it off at the local recycle center without paying a disposal fee. She has decided to depreciate by unit. If she processed 1,000 sheep in the first year, how much asset does she have left at the end of the year?

2 points

Question 21

Your friend Devon is considering buying a small business. He really just wants the land and building it is run out of (they have a great view of Lake Michigan). The only other assets of the business are items he will throw out and three trucks. The trucks are listed on the balance sheet as having a net book value of $48,000. They are only two years old and the notes to the financial statements indicate the company expected to use them for six years. Devon has told you he plans on selling them and expects he will get $48,000 to help finance his purchase. Which of the following is the best response to Devon?

1 point

The trucks are probably worth more than $48,000. They are only two years old.

The $48,000 is not meant to represent current market value for the trucks. It tells you how much of what the company spent is still listed as an asset. It could be above or below the actual market value.

The trucks are probably not worth $48,000. People have usually under depreciated assets in the first couple of years.

Question 22

For an item to be an asset to a company it must

1 point

• Have a probable future economic benefit, be under the control of the firm and entirely paid for.

Be something the managers can physically touch

Have a probable future economic benefit, be under the control of the firm and be the result of a past transaction

Question 22

Stay Nation is a new hybrid hospitality business. They purchase units in condominium associations around the country. But instead of living in the units themselves, they rent them out to people who need relatively long-term accommodations (from one week to a year). They recently purchased a new unit for $100,000. The unit had holes in the walls and badly stained carpets. Stay Nation applied new paint throughout and they replaced carpets as well, spending $5,000 in total. The prior owners had built a storage shed in one of the two parking spaces. Stay Nation paid $1,000 to have it torn down. In addition, they spent $3,000 advertising the unit. Normally they would only spend $1,000, but this was their first unit in town and thus they felt they needed more visibility with customers.

What amount would they record on their balance sheet as an asset?

1 point

Question 23

Stay Nation purchased a truck to be used by their cleaning and greeting crews (the crews that clean units also meet customers when they first show up at a new rental. That allows Stay Nation to familiarize the customer with the unit and provides a personal touch). The truck cost $20,000 at the dealers. Stay Nation paid another $5,000 to have their fleet standard paint job applied. The truck has an economic life of 10 years, but Stay Nation intends to use it for five years as they believe it is important that their crews look professional. They believe they will be able to resell the truck for $10,000 at that point. They use a straight-line depreciation on all vehicles.

How much depreciation expense would Stay Nation have in year one?

2 points

Question 24

At the end of year three, what amount would Stay Nation show on the face of their balance sheet?

2 points

Question 25

Your friend Cristi purchased a sheep wool preparer to be used on her farm. It allows her to process the wool from her sheep so that she can sell it directly to yarn stores. That cuts out having to pay a processor and also will allow her to make higher quality yarn.

She paid $5,000 for the machine and spent another $1,000 to build a battery pack so should could use it in her barn that does not have electricity. While she has spoken with people who used a machine for 10,000 sheep, she has heard that the machine becomes very slow at that point. She expected that she can process 8,000 sheep wool with it before hitting that slow spot. There is not much market for an old wool preparer, but she knows she can drop it off at the local recycle center without paying a disposal fee. She has decided to depreciate by unit. If she processed 1,000 sheep in the first year, how much asset does she have left at the end of the year?

2 points

.

Question 26

Your friend Devon is considering buying a small business. He really just wants the land and building it is run out of (they have a great view of Lake Michigan). The only other assets of the business are items he will throw out and three trucks. The trucks are listed on the balance sheet as having a net book value of $48,000. They are only two years old and the notes to the financial statements indicate the company expected to use them for six years. Devon has told you he plans on selling them and expects he will get $48,000 to help finance his purchase. Which of the following is the best response to Devon?

1 point

The trucks are probably worth more than $48,000. They are only two years old.

The $48,000 is not meant to represent current market value for the trucks. It tells you how much of what the company spent is still listed as an asset. It could be above or below the actual market value.

The trucks are probably not worth $48,000. People have usually under depreciated assets in the first couple of years.

Question 27

Bench and Zidane inc. is a manufacturer of sporting goods equipment. Three years ago they purchased a truck to be used for deliveries. They spent $25,000 on the truck. While the truck was expected to last for 10 years in total, B&Z originally planned to use the truck for 5 years and then sell it. They thought they would get $10,000 for it at that point.

At the beginning of the third year of owning the truck, B&Z decided they really liked it and thus would keep it for a total of 8 years (so for six more years). They believed it would still be worth $8,800 at that point because it was a really nice truck. How much would accumulated depreciation be at the end of the third year?

2 points

Question 28

A company has had an asset for 3 years. They purchased the asset for $8,000 and planned on using it for 10 years after which they believed the item would be scrapped (thrown away with no value). At the beginning of the 4th year they reevaluated all assets and now believe it will last 12 years before being scrapped. This change in estimate will cause depreciation in the first three years to:

1 point

Stay the same.

Decrease.

Increase

Question 29

AA Honey corp sold one of its honey harvesting trucks for $10,000. It had a net book value of $12,000 at the time of the sale. How would this impact their income statement for the current year?

1 point

No impact.

a $2,000 gain would be included in calculating net income.

a $2,000 loss would be included in calculating net income.

Question 30

AA Honey corp sold another one of its honey harvesting trucks for $8,000. They had accumulated $20,000 of depreciation on the truck and recognized a gain of $1,000 when they sold it.

How much did AA originally pay for this truck?

2 points

Question 31

Hunter Inc. makes light bulbs for industrial settings. They have a special machine that creates "high impact" bulbs that do not break. After bulbs are created in the normal process, they are put through this machine that encapsulates the bulbs in a special material. The machine has a useful life of 10 years. Its accumulated depreciation increased by $5,000. That $5,000 should be treated as:

1 point

An expense of this period.

A portion of inventory manufactured during this period.

Question 32

Chair World (CW) is a company that makes chairs (I know, shocking given their name). They are very proud that their factory is almost entirely automated. They need employees to load the raw material at the beginning of the process of making chairs, but then everything else is done by machines. To further reduce labor costs, they make chairs in big batches of single types and keep large amounts in inventory. While they do save on labor, they have significant depreciation due to the large amounts of equipment.

Their CFO thinks it is pain to put deprecation into the inventory account. Plus, he is sure he learned in accounting that depreciation needs to be an expense. He has come up with method of putting depreciation directly into cost of goods sold, which is where he says it would end up any way if he put it into inventory. And this has the added bonus of treating it as an expense.

This method is:

1 point

Incorrect and likely to misstate the financial statements.

Incorrect, but he is correct that it won't impact the financial statements.

Absolutely fine. It is the equivalent of debiting the depreciation into inventory.

Question 33

When do we create the asset called goodwill?

1 point

When we pay more than market price for an individual item.

When we buy multiple assets one at a time, but with the goal of creating a company that will be very valuable.

When we purchase a company where the value we gave up is greater than the value that accountants can identify we received.

When we internally create value that cannot be identified as a specific asset. For example, when our advertising is very successful so people want to buy our brands more than our competitors.

Question 34

When assigning a "fair value" to assets acquired in a purchase, we consider their value when combined with all of the assets in the purchase as well as the assets in our existing company.

1 point

False

True

Question 35

DOF company purchases all of FOG company from FOG's sole owner, Ayse. DOF gives her $200,000 in cash and also assumes FOG's current liabilities. Ayse tells them she believes she owes $12,000, but DOF's auditors calculate a fair value of $15,000. FOG's balance sheet lists assets of $126,000, which DOF believe have a fair value of $185,000. How much goodwill should DOF show on their balance sheet at the end of the year?

1 point

Question 36

JTM purchased WAA corp. The owners of WAA received $900,000 in cash. WAA owed a bank $400,000 and their employees $14,000 (that was for payroll and would be paid within a week of the purchase). JTM agreed to pay the employees, but told WAA they would have to pay the bank out of their own money. JTM assets that WAA had on their books for $800,000. JTM assigned a fair value of $840,000 to those assets. What goodwill should JTM recognize for this transaction?

1 point

Question 37

The use of goodwill is recognized on the income statement by

1 point

A systematic amortization of the amount over the useful life of the goodwill. This results in an equal charge each year.

A systematic amortization over some time period no greater than 40 years.

Annual assessments of whether it has been "impaired".

Question 38

When a firm reports an impairment, it implies the prior book value violated the following component of the definition of an asset:

1 point

From a past transaction

Under the firm control

Probable future economic benefit

Question 39

Monika is a brand manager for an art supply company. Glowing paint has been one of their most popular products. They have built up a large inventory in several colors. It has recently come out that their "glowing pink" causes some young children to become very high energy and unable to sleep for several days after exposure. As such, many customers with younger children no longer will purchase the paint. However, customers without younger children still will.

Monika has determined they will have to drop the price to $15 per gallon given their current demand, but that no additional costs will be incurred since the paint is already in the warehouses and ready to distribute (paint stores pay for shipping etc.). The paint currently has a bookvalue of $19 per gallon and there are 1,000 gallons in stock. How much (if any) of an impairment must Monika recognize?

1 point

Question 40

Monika is also the brand manager for "spin kits". They have been a very popular product among middle school kids. Given the popularity, it has been hard to keep them in stock. Thus, they have been priced at $35 a kit. That has made a nice profit as the cost of producing one (the bookvalue) is only $16. Unfortunately, a number of competing products have emerged and the initial excitement is also wearing off, so Monika is dropping the price to $20 a kit. How much (if any) impairment must Monika recognize?

1 point

Question 41

Choose all that are part of the definition of a liability

1 point

Under our control

To be paid in cash

As a result of past transactions or events

Probable future economic sacrifices arising from present obligations

Question 42

Which of these are proper combinations of the balance sheet equation?

1 point

Assets - Owners Equity = Liabilities

Assets = Liabilities + Owners Equity

Liabilities = Assets + Owners Equity

Assets - Liabilities = Owners Equity

Assets + Liabilities = Owners Equity

Question 43

Gamze gets a paycheck every four weeks. Her salary is $20,000 for the four week period. This year her company's year end is two weeks into Gamze's pay cycle. How much (if any) liability should the company show on it's year end financial statements?

1 point

Question 44

Stefan runs a sports wholesale company. One of his customers orders $10,000 worth of swim equipment. It is not yet summer, so they ask Stefan to hold on to the gear for two months. However, they pay him the $10,000 so that he will not sell the items to other people (or at least will make sure he gets more in stock by the time they need the items). Stefan thinks this is a great deal since the equipment only cost him $1,000. How should this be reflected on his month end financial statements?

1 point

$1,000 of deferred revenue and $9,000 of revenue.

$10,000 of deferred revenue

$10,000 of revenue

No entry. We will recognize this when we ship the goods, but nothing has happened yet.

Question 45

Allison has a customer order 100 of her educational acceleration packages for a total of $5,000. The customer has already paid her. It is the last day of the quarter, but she only has 70 in stock. She gets the customer to agree to taking a partial delivery of all 70 that she has in stock. It will take her about a week to get the other thirty made. How much (if any) deferred revenue should she show on her financial statements at the end of the year?

1 point

Question 46

Contingent liabilities are not like other liabilities because they are not based on a past event

1 point

True

False

Question 47

Your company has had a chemical spill. Everyone agrees that there will be clean up costs and that the amounts will be very large. You have spoken with people across the company and estimates range from $100,000 to several billion. You hired an outside consulting firm, but they said they could not provide you with a reasonable estimate (other than really, really big). How should you reflect this on your financial statements for this year?

1 point

You should provide a note to the financial statements explaining the situation and stating that you could not estimate an amount.

You should choose the smallest amount predicted ($100,000) and reflect that as a liability on the balance sheet and a charge to the period's income statement.

You should choose the largest amount predicted (several billion) and reflect that as a liability on the balance sheet and a charge to the period's income statement. Being conservative always makes users of the financial statements happy.

Question 48

Your company is in a legal dispute over a patent. You lost the first round in court, but have appealed. Despite the appeal, your attorneys tell you that you will most likely end up paying $500,000. They say if things go really well you may only pay $25,000, but things could also go really poorly and you would end up paying $1,000,000. What amount, if any, should you record on your balance sheet and income statement for this period?

1 point

Question 49

In the prior year your company recorded a contingent liability for $400,000. This year you satisfied the obligation and it actually costs $550,000. You should:

1 point

Record the extra $150,000 as an expense in the current year. It should be classified as an "accounting adjustment expense".

Restate last year's earnings to properly reflect the $550,000 expense in the year the economic event occurred.

Record the extra $150,000 as an expense in the current year. It should be classified as the same expense as the initial $400,000.

Question 50

Ava had $5,000 in a bank account, but recently invested the money in a company her neighbor had started. Ricardo owned part of an existing company. His share was worth $2,000, but the company just paid a large dividend. Ricardo received $1,000 for his share of the dividend.

Which of the following best explains the changes in value owned by Ava and Ricardo?

1 point

Eva has the same value, but Ricardo has $1,000 more.

Eva has $5,000 less value, but Ricardo has the same amount.

Both Eva and Ricardo have exactly the same amount of value as they had before.

Eva now has $5,000 less and Ricardo has $1,000 more.

Question 51

Contributed capital is:

1 point

The sum of all value created by the firm less any distributions.

The amount invested in the firm directly by shareholders.

Question 52

Elena invested in company A and B at the same time. She invested $10,000 in company A, which is a no par stock. She also invested in Company B, which has $1 per share par value. She received 5,000 shares of each stock. In looking at the balance sheet, she noticed her investment is presented differently across the companies. This difference means:

1 point

She has more rights in company B due to also having some par value.

She can get back all of her investment in company A any time she wants it, but in company B she will always have to leave $1 in the firm.

Not much really. Just that one had par value and the other did not. It has very little impact on the economics of the firm.

Question 53

Catalina invested $3,000 and received 6,000 shares of class A no-par stock in company K. She was the only person who purchased or sold stock during the period. During the year, the company made $100,000 of net income. How much has company K's additional contributed capital for class A shares change this year?

1 point

Question 54

Catalina also invested $6,000 and received 3,000 shares of class A stock in company Z. She was the only person who purchased or sold stock during the period. The stock has a $.10 par value per share. During the year, the company made $100,000 of net income. How much has company Z's additional contributed capital for class A shares change this year?

1 point

Question 55

Shivi inc. had retained earnings of $1,100,000 at the beginning of the year. They had net income of $115,000 during the period and paid dividends of $10,000. How much is retained earnings at the end of the year?

1 point

Question 56

When a firm pay dividends it impacts:

1 point

The balance sheet only.

The income statement only.

The balance sheet and the income statement.

Neither the balance sheet nor the income statement.

Question 57

Treasury stock is an

1 point

Asset

Liability

Contra-liability

Contra-equity

Contra-asset

Question 58

Gal is the treasurer of Katz corp. They repurchased stock last year for a total of $120,000. This year they resold the stock for $140,000. Gal is pleased to have raised $20,000 extra with this transaction. How should Gal reflect this on their financial statements?

1 point

The $20,000 is an increase to paid in capital.

The $20,000 is a gain to be shown on the income statement. The higher net income will increase retained earnings.

The $20,000 is a loss to be shown on the income statement. The lower net income will decrease retained earnings.

Question 59

Fatoumata is reviewing the financial transactions of a firm she has invested in. She noticed that the firm had repurchased stock last year for $900,000. They sold it this year for $850,000. She is projecting the impact of the $50,000 difference on this year's financial statements.

1 point

The $50,000 will be shown as a loss on this year's income statement. It will then reduce retained earnings due to the lower net income.

The $50,000 will reduce the retained earnings account.

The $50,000 will be shown as a gain on this year's income statement. It will then increase retained earnings due to the higher net income.

Question 60

Tobi runs a film and design company. They are planning for a big project in Vancouver. The project will not occur until next fiscal year. They have contacted several hotels and made reservations for rooms as well as set up dining reservations. They are not sure exactly when they will be there, but all reservations can be canceled and this way they have the option to stay if needed. Tobi just summed all the reservations and realized it will cost her $12,500. How much, if any, liability should Tobi's company show on the financial statements at year end?

(Note - for all questions asking for numerical answers, write the number only, no dollar sign ($))

1 point

Question 61

Caitlin owns a pet store, Caitlin's Critters (CC). Recently an employee failed to properly secure the cages for their rats, gerbils and hamsters properly. When Caitlin came in the next morning, there were animals all over her store. They had also spread into other stores in the mall. She and her employees spent the day capturing animals. They know they did not catch some of them.

The mall had an exterminator come in and set traps. The exterminator said they would have to monitor for 30 days to determine if the animals had begun to breed, which would require a more extensive program. The exterminator believes it is likely they will have to go to midlevel program, which would cost $15,000. However, it is possible that the animals are so spread out that they will not need further treatment. In that case, Caitlin will just be billed $2,000 for the first treatment and monitoring. There is also a small possibility that the rats will mix with domestic rats and create large infestation problem. In that case, Caitlin would have to pay $50,000 or more.

The escape occurred in the last three days of the fiscal year. Choose the option that best describes the impact on Caitlin's financial statements in the current year.

1 point

$2,000 liability and expense.

$50,000 liability, $2,000 expense.

$50,000 liability and expense.

$15,000 liability, no expense this year.

$15,000 liability and expense.

Question 62

Caitlin had a customer come in the last day of the year who purchased a large saltwater tank and fish for $750. They also ordered several exotic snails for their salt water aquarium. Since these snails are not commonly requested, Caitlin required the customer to pay the entire $100 for the snails in advance. They will cost Caitlin $30, so it is a nice profit. She has ordered the snails and they should be delivered within a few days.

Caitlin has:

1 point

Revenue of $850 and a liability of $100.

Revenue of $850 and a liability of $30.

Revenue of $750 and a liability of $100.

Revenue of $920 and a liability of $30.

A liability of $850 and no revenue.

Revenue of $850 and no liability.

Question 63

Ignacio has been reviewing his company's financial situation. He has been monitoring a chemical spill that happened two years ago. The long-term impact is still not clear. While he does not think it is probable that they will have to do more clean up, it is possible. He is trying to decide if he should include this in his report to his shareholders in some way.

1 point

Yes, he should estimate the amount he would have to spend if a cleanup is required and reflect that on his income statement and balance sheet for this year.

He should include the amount on his balance sheet, but he does not have to include it on his income statement until he is more sure that it will happen.

Yes, he should include an explanation in the footnotes to his financial statements.

No, there is nothing that needs to be done.

Question 64

During the current year, Warren's company sold 10,000 shares of no par value common stock for $20,000. They also had a net income of $40,000 and paid dividends of $8,000. By how much, if any, did their shareholder's contributed capital change?

1 point

Question 65

During the current year, Warren's company sold 10,000 shares of no par value common stock for $20,000. His friend Milen's company also sold 10,000 shares of common stock for $20,000, but those shares had a $.50 per share par value. The difference between the two is that:

1 point

There really is no difference. Milen's company would break out the amounts received on their balance sheet to show par value, but that is it.

Warren's company can invest the entire amount as they see fit, but Milen's company must keep $5,000 in liquid cash or some other very liquid investment.

Warren's company would have to return the entire investment to owners whenever they ask for it, but Milen's company can keep the $5,000 for as long as they like.

Question 66

During the year, Fabian's company sold some treasury stock it had. They had paid $240,000 for the stock two years ago. They resold it for $290,000. What, if any, would the impact be on the current year net income?

1 point

Question 67

During the year, Jessica's firm had net income of $700,000. It was a record year, but most of the sales were on credit and have not yet been paid. In fact, there are still $400,000 waiting for collection. Management believes they will be paid, but some of the terms allow almost a year before that occurs. The firms also paid a dividend of $4,000. How much, if at all, did retained earnings change this year?

1 point

Question 68

Treasury stock is the term used to describe investments in other firm's stock. It is called that because it is one of the investments that firm's use to manage their wealth.

1 point

False

True

Question 69

Which of these are reasons we have a cash flow statement (pick all that apply)?

1 point

It provides an alternative view of economic reality that is useful when combined with accrual accounting

Cash liquidity is necessary for shorter-term survival

Cash is the asset most likely to be misappropriated.

Cash is King!

It is a tradition that has never gone away. It is not very useful now that we have accrual accounting.

Question 70

Brenda has been tasked with creating the cash flow statement for her company. She had decided to start by putting items into cash categories. During the year, her company borrowed $30,000 from a bank, paid $100,000 to suppliers, invested $40,000 in new machinery, collected $250,000 from customers and received $2,000 for dividend payments from shares in other companies. What would total cash from operations be for the year?

1 point

Question 71

When I see an accrual accounting number, I should assume it could represent (select all options that fit).

1 point

Managerial bias

Economic reality

Measurement error

Randomly chosen rules

Question 72

If the change in cash in total is -$5,000, the cash from financing is +$30,000 and the cash from investing is -$75,000, how much is cash from operations?

1 point

Question 73

During the year a company made sales of $75,000. All sales are made on credit and only $10,000 had been paid by year end. They collected $40,000 from customers for sales from prior years . They also recognized $3,000 in interest expense, but will pay the bank next year. What is the net impact on the cash flow statement for the current year for all of these transactions.

1 point

Question 74

Select all of the items that are the same on the direct and indirect methods of presenting the cash flow statement.

1 point

Details of the investing section.

Net cash from all three sections (operating, investing and financing).

Details of the operating section.

Details of the financing section.

Change in cash

Question 75

In the indirect method of presenting the cash flow statement, you begin with net income and make adjustments to it in order to calculate cash from operations.

1 point

True

False

Question 76

Which of these items would not be shown in the operating section of an indirect cash flow statement:

1 point

Gains from sales of property, plant and equipment.

Prepayment of rent.

Depreciation for the year.

Cash sales made during the period.

Question 77

Vered just got off the phone with an old classmate who was very excited. That classmate had purchased a business with low operating cash flow, just $1,000 last year. However, they had just made a big investment and thus depreciation would be increasing by $50,000 next year. The investment had cost $300,000. They expect to use it for five years and then sell the item for $50,000. They said that would be very helpful since the large increase in depreciation would increase cash from operations. They are thinking of taking this information to a bank for a loan, but have asked Vered to check their numbers. By how much should Vered tell them this will increase cash from operations?

1 point

Question 78

Alex was looking over a set of financial statements that had been torn when he put them in the overhead bin on a flight. He had most of the cash flow statement, but was missing the other statements. Even the cash flow statement was torn at the top, so he did not have net income.

Cash from operations was $250,000. Reconciling items included credit sales of $200,000, depreciation of $70,000 and an unpaid wage expense of $5,000. How much was net income?

1 point

Question 79

DB 2 Corp, issued debt of $500,000 during the current year. Which section of the cash flow statement would this impact ?

2 points

It would not impact the cash flow statement

Financing

Investing

Operating

Question 80

DB 2 corp also had depreciation expense of $1,200,000 this period. Which section of the indirect cash flow statement would this impact?

2 points

It would not impact the cash flow statement.

Financing

Investing

Operating

Question 81

DB 2 corp. purchased a large machine for $80,000. Which section of the cash flow would this impact?

2 points

Investing

It would not impact the cash flow statement.

Financing

Operating

Question 82

DB 2 corp had $40,000 in credit sales during the year that were not paid by the end of the period. How would this impact cash from operations?

(Note - for all questions asking for numerical answers, write the number only, no dollar sign ($))

1 point

Question 83

Shailly is reviewing a cash flow statement to determine whether a company appears to be able to fund itself in the long run. Which category is more important to her?

1 point

Financing

Investing

Operations

Question 84

Olga's boss is really excited. His company is doing an acquisition and the new company will add $2,000,000 in depreciation. He is looking at this year's cash flow statement and trying to figure out how much more cash they would have had if they already had the $2,000,000 in depreciation. He has asked Olga to calculate how much cash from operations would have increased.

1 point

Question 85

Which type of cash flow statement is normally provided by public companies?

2 points

Indirect

They are about equal in use.

Direct

Question 86

Spencer is reviewing his company's accounts so he can prepare their indirect cash flow statement. They use the changes in working capital approach. He noticed that accounts receivable increased during the period. All transactions involved working capital items. This would be listed as:

1 point

It would not impact the cash flow statement

A negative reconciling item

A positive reconciling item

Question 87

Spencer also noticed an increase in accounts payable. That account also only had transactions that involved working capital items. It would be listed as,

1 point

A negative reconciling item

It would not impact the cash flow statement

A positive reconciling item

Question 88

Francesco was given a cash flow statement to analyze, but some of the accounts were smudged and could not be read. He could see that total change in cash was $12,000, cash from operations was positive $450,000 and cash from investing was negative $490,000. How much was cash from financing?

2 points

Question 89

Angela was given a direct cash flow statement prepared by a small company that her boss was considering acquiring. The cash from operations was $470,000, cash used in investing was $330,000 and cash from financing showed a use of $100,000. In addition, the balance sheet showed the accounts receivable had increased by $70,000, the accounts payable had decreased by $10,000 and inventory had increased by $15,000. Net income was $510,000. Her company uses the indirect method of cash flow statements, so her boss wanted to know how much cash from operations would be using that format.

1 point

Question 90

A ratio is used to:

1 point

Remove the impact of differences in industry, size or other firm characteristics

Provide more insight

Avoid having to understand accounting

Question 91

If your boss asks you to calculate a specific ratio by name you should:

1 point

Make sure you are both thinking of the same calculation by checking with your boss or checking how your boss has had it done in the past.

Google the ratio name to make sure you are doing the correct calculation.

Use the calculation that you learned in this course or while in school. Professors know the theoretically correct way of calculating ratios.

Question 92

When using numbers that are reported several time during a year, you should always:

1 point

Use the beginning balance.

Use the beginning and ending balances to calculate an average.

Use the ending balance.

Make sure your choice of averaging (or not) is consistent with the question you are trying to answer.

Question 93

The most important thing when using a ratio is

1 point

make sure you have comparable units in the numerator and denominator.

to think!

Consistency with other people

Question 94

Ratios should always combine information from multiple financial statements or information from one financial statement with non-financial information.

1 point

False

True

Question 95

Which of the following are skills you need to be able to build your ratio?

1 point

A list of the approved ratio components that can be used.

A structure for thinking about how to combine information into a meaningful ratio.

An understanding of the question

A large set of comparison firms from the same industry for benchmarking.

Knowledge of how accounting works, what it means and what it does not mean

The ability and willingness to carefully think as you move through the process.

Question 96

Which type of ratio is most useful?

1 point

flow over stock

flow over flow

stock over flow

stock over stock

It depends on the question

Question 97

Stock over flow and flow over stock ratios are equivalent. Thus, it does not matter which one you choose.

1 point

False

True

please solve this mcqs hope you will be do it expert.....