Situation A True or False

1. Each partner is personally and individually liable for all partnership liabilities. ________

2. A partnership has a limited life. __________

3. A partnership is an association of no more than two personas to carry on as co-owners of a business for profit. ___________

4. Once assets have been invested in the partnership, they are owned jointly by all partners. __________

5. The articles of partnership are a written partnership agreement that contains such basic informacion as the name, principal location of the firm and the share participations for partners, among other important aspects for the entities. _________

6. The withdrawals of a partner legally dissolves the partnership. ________

7. The death of a partner causes the assets to be restored to their fair value. _________

8. In a liquidation, the final distribution of cash to partners should be on the basis of their income ratios. ___________

9. Cash outflows to pay employees for services rendered are an operating activity. ______

10. Financing activities include the obtaining of cash from issuing bonds, debt and stock. ________

11. The primary purpose of the statement of cash flows is to provide information about cash receipts (inflows) and cash payments (outflows) of an entity during a period. ________

12. Investing activities include inflows from the sales of debt securities of other entities. ________

13. In the Akon Co., net income is $85,000. If accounts receivable increased $35,000 and the accounts payable decreased $10,000 net cash provided by operating activities using the indirect method is $40,000. __________

14. In converting net income to net cash provided by operating activities, under the indirect method: decreases in accounts receivables and increase in prepaid expenses are added. __________

15. In the Almanic Co., machinery with a book value of $8,000 is sold for $5,000 cash. In the statement of cash flows, the cash proceeds are reported in the investing section and the loss is added to net income in the financing activities. ________

16. The statement of cash flows classifies cash receipts and cash payments in two categories: investing activities and nonoperating activities. ________

17. Under the direct method, the formula for computing cash collections from customers is sales revenues plus the increase in accounts receivable or minus the decrease in accounts receivables. ___________

18. Under the indirect method, noncash changes in the income statement are added back to the net income.__________

19. Under the direct method of determining net cash provided by operating activities, cash revenues and cash expenses (cost of goods sold, operating expenses and other expenses) are computed. __________

20. Financing activities involve cash receipts form sales of goods and services. __________

Situation B Matching

The Bennis Co. had the following transactions. In the space provided, classify each transactions by using the following code letters:

O+ operating section inflows I+ investing section inflows

O- operating section outflows I- investing section outflows

F+ financing section inflows F- financing section outflows

N significant noncash investing or financing activities

Transactions or Activities	Code Letter
Payment of cash dividends to stockholders.
Receipts of cash dividends from another company or entity.
Sales land for cash at cost.
Sales of treasury stock for cash.
Issuance of long-term bonds for cash.
Sales of equity securities of another entity at book value for cash.
Collection cash from customers for sales of goods.
Collection of loan made to a Bank Popular.
Purchases of land for cash.
Exchange equipment for machinery.
Purchases of land for cash.
Conversion of bonds to common stock.
Issuance of bonds payable for cash.
Cash payments to the IRS for income taxes.
Cash payments to employees for services.
Cash payments to suppliers for inventory.
Exchange of land for equipment.
Payment of cash to lenders for interest.
Issuance of preferred stock for cash.
Issuance of common stock for equipment.