1.Investments that do not normally change in value are disclosed on the balance sheet as cash and cash equivalents.

True

False

2.To record a bond investment made between interest payment dates, Investment in Bonds would be debited and Cash and Interest Revenue would be credited.

True

False

3.If the proceeds from the sale of bond investments exceed the carrying amount of the bonds, a gain is realized.

True

False

4.The equity method causes the investment account to mirror the proportional changes in book value of the investee.

True

False

5.Accounting for the sale of stock is the same for both the cost and the equity methods of accounting for investments.

True

False

6.The financial statements resulting from combining parent and subsidiary statements are called consolidated statements.

True

False

7.Held-to-maturity securities are reported on the balance sheet at fair market value.

True

False

8.Held-to-maturity securities maturing beyond a year are reported as noncurrent assets.

True

False

9.Held-to-maturity investments are recorded at their cost, which would include broker's commissions.

True

False

10.Investments in stocks that are expected to be held for the long term are listed in the Stockholders' equity section of the balance sheet.

True

False

11.In order to maintain a record of the original cost of a trading security, the fair value adjustments are debited or credited to the account Valuation Allowance for Trading Investments.

True

False

12.Comprehensive income is all changes in stockholders' equity during the period except those resulting from dividends and stockholders' investments.

True

False

13. Temporary investments

a. are reported as current assets

b. do not include equity securities

c. include cash equivalents

d. All of these choices are correct.

14.Foreign currency translation adjustment is an example of an item that would be included in other comprehensive income.

True

False

15.The cumulative effects of other comprehensive income items are included in retained earnings on the balance sheet.

True

False

16. Cash is used for all of the following activities except

a. expanding current operations

b. bribing government officials

c. supporting current operating activities

d. replacing worn-out machinery

17. Ruben Company purchased $100,000 of Evans Company bonds at 100 plus $1,500 in accrued interest. The bond interest rate is 8% and interest is paid semiannually. The journal entry to record the purchase would be

a. debit InvestmentsEvans Company Bonds, $101,500; credit Cash, $101,500

b. debit InvestmentsEvans Company Bonds, $100,000, and Interest Receivable $1,500; credit Cash, $101,500

c. debit InvestmentsEvans Company Bonds, $100,000; credit Cash, $100,000

d. debit InvestmentsEvans Company Bonds, $100,000; credit Interest Revenue, $1,500, and Cash, $98,500

18. Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the sale of land.

True

False

19. To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

True

False

20. The statement of cash flows reports a firm's major sources of cash receipts and major uses of cash for a period of time.

True

False

21. Cash flows from investing activities, as part of the statement of cash flows, would include any payments for the purchase of treasury stock.

True

False

22. A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.

True

False

23. Cash outflows from financing activities include the payment of cash dividends, the acquisition of treasury stock, and the repayment of amounts borrowed.

True

False

24. In preparing the statement of cash flows, the correct order of reporting cash activities is financing, operating, and investing.

True

False

25. Rarely will the cash flows from operating activities, as reported on the statement of cash flows, be the same as the net income reported on the income statement.

True

False

26. In preparing the Cash flows from operating activities section of the statement of cash flows by the indirect method, the net decrease in inventories from the beginning to the end of the period is added to net income for the period.

True

False

27. In preparing the Cash flows from operating activities section of the statement of cash flows by the indirect method, the amortization of bond discount for the period is deducted from the net income for the period.

True

False

28. Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400. There were no other changes in noncash current assets and liabilities. Under the indirect method, the cash flow from operations is $32,400.

True

False

29. Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section.

True

False

30. Under the direct method of preparing a statement of cash flows, the gain on the sale of land is not adjusted or reported as part of cash flows from operating activities.

True

False

31. There is no difference in the investing and financing sections of the statement of cash flows using the indirect and direct methods.

True

False

32. Sales reported on the income statement were $372,000. The accounts receivable balance declined $4,500 over the year. The amount of cash received from customers was $367,500.

True

False

33. Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity.

True

False

34. On the statement of cash flows, the Cash flows from operating activities section would include

a. payments for the acquisition of investments

b. receipts from the issuance of capital stock

c. receipts from the sale of investments

d. cash receipts from sales activities

35. A 10-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under

a. financing activities

b. investing activities

c. noncash investing and financing activities

d. operating activities

36. Which of the following should be shown on a statement of cash flows under the financing activities section?

a. the proceeds from the sale of a building

b. the purchase of a long-term investment in the common stock of another company

c. the payment of cash to retire a long-term note

d. the issuance of a long-term note to acquire land

37. On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

True

False

38. In a common-sized income statement, each item is expressed as a percentage of net income.

True

False

39. The excess of current assets over current liabilities is referred to as working capital.

True

False

40. Using measures to assess a business's ability to pay its current liabilities is called current position analysis.

True

False

41. The number of days' sales in receivables is one means of expressing the relationship between average daily sales and accounts receivable.

True

False

42. In computing the asset turnover ratio, long-term investments are excluded from average total assets.

True

False

43. When computing the return on common stockholders' equity, preferred stock dividends are subtracted from net income.

True

False

44. Analyzing a company's performance should take into account conditions peculiar to the industry and the general economic conditions.

True

False

45. The relationship of $325,000 to $125,000, expressed as a ratio, is

a. 2.5

b. 2.0

c. 0.45

d. 2.6

46. In a vertical analysis, the base for cost of goods sold is

a. total expenses

b. gross profit

c. total selling expenses

d. sales

47. The relationship of $377,125 to $119,296, expressed as a ratio, is

a. 4.7 to 1

b. 1.5 to 1

c. 3.2 to 1

d. 0.8 to 1

48. Use the information below for Harding Company to answer the question that follow.

Harding Company

Accounts payable $30,788

Accounts receivable 70,066

Accrued liabilities 6,027

Cash 20,019

Intangible assets 40,864

Inventory 84,845

Long-term investments 111,469

Long-term liabilities 75,602

Marketable securities 38,462

Notes payable (short-term) 29,564

Property, plant, and equipment 656,454

Prepaid expenses 1,718

Based on the data for Harding Company, what is the amount of quick assets?

a. $128,547

b. $799,780

c. $58,481

d. $1,608,567

49. Use the information below for Harding Company to answer the question that follow.

Harding Company

Accounts payable $37,874

Accounts receivable 74,235

Accrued liabilities 6,071

Cash 21,369

Intangible assets 42,920

Inventory 79,137

Long-term investments 112,819

Long-term liabilities 71,965

Marketable securities 32,085

Notes payable (short-term) 27,279

Property, plant, and equipment 606,732

Prepaid expenses 2,241

Based on the data for Harding Company, what is the amount of working capital?

a. $137,843

b. $604,491

c. $971,538

d. $209,067

50. Use the information below for Harding Company to answer the question that follow.

Harding Company

Accounts payable $25,511

Accounts receivable 68,009

Accrued liabilities 6,160

Cash 16,866

Intangible assets 35,927

Inventory 78,559

Long-term investments 98,346

Long-term liabilities 72,458

Marketable securities 33,851

Notes payable (short-term) 21,373

Property, plant, and equipment 669,248

Prepaid expenses 1,400

Based on the data for Harding Company, what is the quick ratio, rounded to one decimal point?

a. 1

b. 2.2

c. 3.7

d. 18.9