Question 1

A corporation prepared its statement of cash flows for the year. The following information is taken from that statement:

Net cash provided by operating activities	$ 14,500
Net cash provided by investing activities	4,200
Net cash flow used in financing activities	(12,400)
Cash balance, end of year	9,100

What is the cash balance at the beginning of the year?

Select one:

a. $5,600

b. $2,800

c. $15,400

d. $6,300

Question 2

Suppose a company generally records revenues and expenses before receiving or making cash payments. Which of the following statements is NOT true?

Select one:

a. If sales are falling, net losses could occur even though the company reports net cash inflows from operating activities

b. If sales are rising, net profits could occur even though the company reports net cash outflows from operating activities

c. When the indirect method is used, net cash flows from operating activities includes adjustments for non-cash expenses such as depreciation which would cause net cash from operating activities to be different from net income

d. Net income and cash flows will always agree because even though revenues and expenses can be recorded in different time periods than their related cash flows the differences will cancel out and the results will be the same.

Question 3

Which of the following statements regarding issued and outstanding stock is true?

Select one:

a. Outstanding stock includes stock in the hands of investors, as well as treasury stock in the hands of the corporation

b. Issued stock is equal to authorized stock.

c. Issued stock equals the sum of outstanding stock and treasury stock.

d. Outstanding stock includes all stock issued by a corporation.

Question 4

Which of the following would be included in cash flows from operating activities?

Select one:

a. Cash used for purchases of equipment

b. Dividends paid to stockholders

c. Cash received from an issuance of bonds

d. Cash proceeds from sales

Question 5

Which of the following would be included in cash flows from investing activities?

Select one:

a. Cash received from an issuance of bonds

b. Cash used to purchases of equipment

c. Cash proceeds from sales

d. Dividends paid to stockholders

Question 6

Which of the following would be included in cash flows from financing activities?

Select one:

a. Dividends paid to stockholders

b. Cash used to purchases of equipment

c. Cash proceeds from sales

d. Cash received from a sale of land

Question 7

Which of the following types of information is not provided by the statement of cash flows?

Select one:

a. Reliance on external financing

b. Current profitability as measured by specific revenues and expenses

c. Expenditures on long-term assets

d. Company management of current assets and liabilities

Question 8

The Apex Corporation sells one million shares of its $0.02 par value Common Stock for $15 per share. The effects of this transaction on Apex Corporations accounts are:

Select one:

a. Cash +$14,980,000, Common Stock ($20,000), Additional Paid-in-Capital +$15 million

b.

1. Cash +$15 million, Common Stock ($20,000), Additional Paid-in-Capital ($14,980,000).

c. Cash +$20,000, Common Stock +$20,000, No Effect on Additional Paid-in-Capital.

d. Cash +$15 million, Common Stock +$20,000, Additional Paid-in Capital +$14,980,000.

Question 9

The Harbinger Corporation reported net income of $6 million and total assets of $7 million in its current financial statements. During the year, their average number of common shares outstanding was 3 million. The current price of a share of its common stock is $5.

The Harbinger Corporations earnings per share for the current year is approximately:

Select one:

a. $0.40

b. $2.00

c. $1.67

d. $2.33

Question 10

A corporate charter specifies that the company may sell up to 20 million shares of stock. The company sells 12 million shares to investors and later buys back 3 million shares. The current number of outstanding shares after these transactions have been accounted for is:

Select one:

a. 15 million shares

b. 11 million shares

c. 8 million shares

d. 9 million shares

Question 11

Which of the following is true about stock splits and stock dividends?

Select one:

a. Only stock splits reduce the par value per share

b. Both reduce the market price per share and par value per share

c. Both increase the total amount of stockholders equity

d. They have opposite effects on the market price per share

Question 12

Treasury stock:

Select one:

a. does not appear on the balance sheet

b. is an asset account

c. is a contra-equity account.

d. is an additional paid-in capital account

Question 13

Which of the following is not a potential motivation for a firm to repurchase its own stock? Select one:

a. To increase the number of shares of outstanding stock

b. To demonstrate to investors that it believes its own stock is worth purchasing

c. To obtain shares to reissue to employees as part of an employee stock plan

d. To obtain shares that can be reissued as payment for purchase of another company

Question 14

Using Statement of Cash Flows Information to Assess Company Life-Cycle Stage For each of the following cash flows amounts ($ millions), identify whether the company is in the introduction, growth, maturity, or decline stage of its life cycle.

Question 15

Which of the following statements does not accurately describe the fair-value method of accounting?

Select one:

A. Investments for which current, reliable fair values exist are accounted for using this method.

B. Held-to-maturity investments are not accounted for using this method.

C. Dividends and interest received are recognized in current income.

D. The investment is recorded on the balance sheet at its fair value.

E. None of the above

Question 16

On its 2016 form 10-K, Bank of America Corporation reports marketable debt securities of $277,399 million. The footnotes disclose that these securities have an amortized cost of $279,307 million. Which of the following is true?

Select one:

A. These are available-for-sale securities.

B. These are trading securities.

C. There are net unrealized losses of $1,908 million on these securities.

D. Both A and C

E. Both B and C

Question 17

To forecast future performance, we should first create a set of financial statements that reflects items we expect to persist (continue).

Select one:

True

False

Question 18

Calculating sales estimates, derived from an estimate of the sales growth rate, is how the forecasting process begins.

Select one:

True

False

Question 19

Identifying and Analyzing Financial Statement Effects of Stock Transactions The stockholders' equity of Gaulin Company at the start of the current year follows:

Common stock, $ 5 par value, 350,000 shares authorized; 150,000 shares issued and outstanding	$ 750,000
Paid-in capital in excess of par value	600,000
Retained earnings	346,000

During the current year, the following transactions occurred: Jan. 5 Issued 10,000 shares of common stock for $12 cash per share. Jan. 18 Purchased 4,000 shares of common stock for the treasury at $14 cash per share. Mar. 12 Sold one-fourth of the treasury shares acquired January 18 for $17 cash per share. July 17 Sold 500 shares of the remaining treasury stock for $13 cash per share. Oct. 1 Issued 5,000 shares of 8%, $25 par value preferred stock for $35 cash per share. This is the first issuance of preferred shares from the 50,000 authorized shares. (a) Use the financial statement effects template to indicate the effects of each transaction.

Use negative signs with answers, when appropriate.

(b) Prepare the current year stockholders' equity section of the balance sheet assuming that the company reports net income of $72,500 for the year.

Use a negative sign with your answer for treasury stock.

Operating Investing Financing Company Cash Flow Cash Flow Cash Flow $(415) $(1,738) $(3,508) b 3,712 (2,450) 1,340 80 2,015 (805) d 15 (520) 886 (2,570) (4,190) 7,469 f (399) 5,591 (2,396) 2,291 (3,441) 1,917 e g h 6,344 3,230 (1,998) Company Life cycle stage ro b d e A f f g h Balance Sheet Income Statement Net Contributed Capital Earned Capital Liabilities + + Revenue Expenses = Income Transaction Cash Asset + Noncash Assets = Jan. 5 Jan. 18 Mar. 12 July 17 Oct. 1 LA Stockholders' Equity Paid-in capital 8% Preferred stock, $25 par value, 50,000 shares authorized, 5,000 shares issued and outstanding $ Common stock, $5 par value, 350,000 shares authorized; 160,000 shares issued Additional paid-in capital Paid-in capital in excess of par value-preferred stock Paid-in capital in excess of par value-common stock Paid-in capital from treasury stock Total paid-in capital Retained earnings Less: Treasury stock (2,500 shares) at cost (use a negative sign with your answer) Total Stockholders' Equity $