Chapter 16 Understanding Corporate Annual Reports: Basic Financial Statements

37) Which of the following assets is NOT classified as a short-term investment?

A) corporate stocks

B) corporate bonds

C) debt securities issued by governments

D) checking account balance

38) The net amount a company expects to collects on Accounts Receivable is equal to ________.

A) gross Accounts Receivable

B) Allowance for Doubtful Accounts

C) gross Accounts Receivable minus Allowance for Doubtful Accounts

D) gross Accounts Receivable plus Allowance for Doubtful Accounts

39) Which of the following is NOT a current asset?

A) Inventories

B) Prepaid Insurance

C) Supplies

D) Land

40) The purpose of depreciation is to ________.

A) establish the current replacement cost of a fixed asset

B) accumulate funds to replace a fixed asset

C) set aside cash to replace a fixed asset

D) allocate the original cost of a fixed asset to the periods that benefit from the use of the fixed asset

41) Which of the following is NOT a tangible asset?

A) inventories

B) land

C) equipment

D) goodwill

42) Land is not depreciated. (T / F )

43) Deferred tax liabilities are ________.

A) expected increases in future income taxes due to past transactions

B) expected decreases in future income taxes due to past transactions

C) expected increases in future income taxes due to future transactions

D) expected decreases in future income taxes due to future transactions

44) Assume you are preparing a balance sheet dated December 31, 2014. Which of the following is NOT a long-term liability?

A) bonds payable due June 30, 2016

B) bonds payable due June 30, 2015

C) bonds payable due December 31, 2016

D) bonds payable due December 31, 2020

45) The inventory method a company uses does not affect its income statement. (T / F)

46) Lantern Company reported sales of $200,000, an increase in accounts receivable of $5,000, and a decrease in cash of $20,000. How much cash was collected from customers?

A) $185,000

B) $195,000

C) $200,000

D) $220,000

47) Benson Company's income statement showed rent expense of $16,000. The beginning balance in Prepaid Rent was $5,000. The ending balance in Prepaid Rent was $3,000. The cash paid for rent was __.

A) $14,000

B) $16,000

C) $19,000

D) $24,000

48) Why do accountants add Depreciation Expense to net income when determining net cash provided by operating activities? Assume the indirect method is used.

A) because depreciation expense is a source of cash

B) because depreciation expense requires the outflow of cash

C) because depreciation expense is an investing activity that should be reported in the investing section of the cash flow statement

D) because it cancels the earlier deduction when calculating net income

49) On January 1, 2014, a company had 100 units of inventory. A company acquired 100 units of inventory on January 31, 2014 and 100 units on December 1, 2014. The company sold 100 units on December 31, 2014, which was the company's only sale. Under FIFO, the cost of goods sold would come from ________.

A) the purchase cost of beginning inventory

B) the purchase cost on January 31, 2014

C) the purchase cost on December 1, 2014

D) an average of the cost over the two purchase dates

50) LIFO uses the ________ costs to measure the cost of goods sold.

A) latest

B) earliest

C) average

D) weighted-average