Deck 5: Statement of Financial Position and Statement of Cash Flows

Question 1

Under IFRS non-cash activities are reported as either investing or financing activities in the body of the statement of cash flows.

Answer 1

False

Question 2

Collection of a loan is reported as an investing activity in the statement of cash flows.

Answer 2

True

Question 3

The equity section of an IFRS statement of financial position includes share capital, share premium, and retained earnings in that order.

Answer 3

True

Question 4

The primary purpose of a statement of cash flows is to report the cash effects of operations during a period.

Question 5

Under IFRS a company may use the term "reserve" to include items such as retained earnings, share premium, and accumulated other comprehensive income.

Question 6

Companies determine cash provided by operating activities by converting net income on an accrual basis to a cash basis.

Question 7

Companies frequently describe the terms of all long-term liability agreements in notes to the financial statements.

Question 8

Significant financing and investing activities that do not affect cash are not reported in the statement of cash flows or any other place.

Question 9

Under IFRS the statement of financial position is often referred to as the statement of changes in equity.

Question 10

The statement of financial position omits many items that are of financial value to the business but cannot be recorded objectively.

Question 11

Financial statement readers often assess liquidity by using current cash debt coverage.

Question 12

Financial flexibility measures the ability of an enterprise to take effective actions to alter the amounts and timing of cash flows.

Question 13

Financial flexibility is a company's ability to respond and adapt to financial adversity and unexpected needs and opportunities.

Question 14

Under IFRS the payment of dividends may be reported as either an investing activity or a financing activity.

Question 15

The account form and the report form of the statement of financial position are both acceptable under IFRS.

Question 16

Liquidity refers to the ability of an enterprise to pay its debts as they mature.

Question 17

Land held for speculation is reported in the property, plant, and equipment section of the statement of financial position.

Question 18

Free cash flow is net income less capital expenditures and dividends.

Question 19

On the statement of financial position the non-controlling interest account is reported as a long-term investment.

Question 20

The statement of cash flows reports only the cash effects of operations during a period and financing transactions.

Question 21

The statement of financial position can help assess all of the following except

A) Solvency.
B) Financial flexibility.
C) Profitability.
D) Liquidity.

Question 22

Which of the following is a limitation of the statement of financial position?

A) Many items that are of financial value are omitted.
B) Judgments and estimates are used.
C) Current fair value is not reported.
D) All of these choices are correct.

Question 23

On the statement of financial position, an adjunct account reduces either an asset, a liability, or an equity account.

Question 24

The correct order to present current assets is

A) cash, accounts receivable, prepaid items, inventories.
B) inventories, receivables, prepaid items, cash.
C) cash, inventories, accounts receivable, prepaid items.
D) inventories, prepaid items, accounts receivable, cash.

Question 25

Statement of financial position information is useful for all of the following except

A) assessing a company's risk
B) evaluating a company's liquidity
C) evaluating a company's financial flexibility
D) determining free cash flows.

Question 26

Under IFRS, companies may offset assets and liabilities; for example, accounts payable may be offset against cash to report net cash available for other expenses.

Question 27

Companies present a "Summary of Significant Accounting Policies" generally as the first note to the financial statements.

Question 28

IFRS requires specific note disclosures on inventories that are disaggregated into classifications such as merchandise, production supplies, work in process, and finished goods.

Question 29

IFRS requires that a complete set of financial statements be presented annually and that for comparative purposes, companies must include three complete sets of financial statements and related notes.

Question 30

Statement of financial position information is useful for all of the following except to

A) compute rates of return
B) analyze cash inflows and outflows for the period
C) evaluate capital structure
D) assess future cash flows

Question 31

Under IFRS an adjunct account on the statement of financial position increases an asset, liability, or equity account.

Question 32

The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in

A) inventory back into cash, or 12 months, whichever is shorter.
B) receivables back into cash, or 12 months, whichever is longer.
C) tangible fixed assets back into cash, or 12 months, whichever is longer.
D) inventory back into cash, or 12 months, whichever is longer.

Question 33

The accounting profession has recommended that companies use the word reserve only to describe amounts deducted from assets.

Question 34

The current assets section of the statement of financial position should include

A) machinery.
B) patents.
C) goodwill.
D) inventory.

Question 35

The statement of financial position is useful for analyzing all of the following except

A) liquidity.
B) solvency.
C) profitability.
D) financial flexibility.

Question 36

The net assets of a business are equal to

A) current assets minus current liabilities.
B) total assets plus total liabilities.
C) total assets minus total shareholders' equity.
D) none of these choices are correct.

Question 37

The statement of financial position

A) Omits many items that are of financial value.
B) Makes very limited use of judgments and estimates.
C) Uses fair value for most assets and liabilities.
D) All of the choices are correct regarding the statement of financial position.

Question 38

Companies may use parenthetical explanations, notes, cross references, and supporting schedules to disclose pertinent information.

Question 39

The basis for classifying assets as current or noncurrent is conversion to cash within

A) the accounting cycle or one year, whichever is shorter.
B) the operating cycle or one year, whichever is longer.
C) the accounting cycle or one year, whichever is longer.
D) the operating cycle or one year, whichever is shorter.

Question 40

The IASB recommends disclosure for all significant accounting principles and methods that involve selection from among alternatives.

Question 41

Non-current liabilities include

A) obligations not expected to be liquidated within the next year or operating cycle.
B) obligations payable at some date beyond the next year or operating cycle.
C) deferred income taxes and most lease obligations.
D) All of these choices are correct.

Question 42

For Randolph Company, the following information is available:

A) R110,000.
B) R105,000.
C) R390,000.
D) R385,000.

Question 43

Stine Corp.'s trial balance reflected the following account balances at December 31, 2019:

A) R$101,000.
B) R$92,000.
C) R$87,000.
D) R$83,000.

Question 44

Olmsted Company has the following items: share capital-ordinary, €920,000; treasury shares, €85,000; deferred taxes, €100,000 and retained earnings, €363,000. What amount should Olmsted Company report as total equity?

A) €1,098,000.
B) €1,198,000.
C) €1,298,000.
D) €1,398,000.

Question 45

Kohler Company owns the following investments:

A) exactly £105,000.
B) exactly £117,000.
C) exactly £162,000.
D) £102,000 or an amount less than £102,000, depending on the circumstances.

Question 46

Which of the following should be excluded from long-term liabilities?

A) Obligations payable at some date beyond the operating cycle
B) Most pension obligations
C) Non-current liabilities that mature within the operating cycle and will be paid from a sinking fund
D) None of these choices are correct.

Question 47

Working capital is

A) capital which has been reinvested in the business.
B) unappropriated retained earnings.
C) cash and receivables less current liabilities.
D) none of these choices are correct.

Question 48

Equity or debt securities held to finance future construction of additional plants should be classified on a balance sheet as

A) current assets.
B) property, plant, and equipment.
C) intangible assets.
D) long-term investments.

Question 49

Each of the following are an intangible asset except

A) copyrights.
B) goodwill.
C) plant expansion fund.
D) trademarks.

Question 50

Which of the following is not a long-term investment?

A) Investments in ordinary shares
B) Franchise
C) Land held for speculation
D) A sinking fund

Question 51

For Grimmett Company, the following information is available:

A) ¥ 55,000.
B) ¥ 75,000.
C) ¥255,000.
D) ¥275,000.

Question 52

Which item below is not a current liability?

A) Unearned revenue
B) Share dividends distributable
C) The currently maturing portion of long-term debt
D) Trade accounts payable

Question 53

Houghton Company has the following items: share capital-ordinary, €820,000; treasury shares, €85,000; deferred taxes, €100,000 and retained earnings, €313,000. What amount should Houghton Company report as total equity?

A) €948,000.
B) €1,048,000.
C) €1,148,000.
D) €1,218,000.

Question 54

Which of the following is not an acceptable major asset classification?

A) Current assets
B) Investments
C) Property, plant, and equipment
D) Deferred charges

Question 55

The shareholders' equity section is usually divided into how many parts?

A) 6
B) 5
C) 4
D) 3

Question 56

An example of an item which is not an element of working capital is

A) accrued interest on notes receivable.
B) goodwill.
C) goods in process.
D) short-term investments.

Question 57

Which of the following should be reported for share capital?

A) The shares authorized
B) The shares issued
C) The shares outstanding
D) All of these choices are correct.

Question 58

Fulton Company owns the following investments:

A) €0.
B) exactly €70,000.
C) €70,000 or an amount greater than $70,000, depending on the circumstances.
D) exactly €105,000.

Question 59

Treasury shares should be reported as a(n)

A) current asset.
B) investment.
C) other asset.
D) reduction of equity.

Question 60

Which of the following is a current asset?

A) Cash surrender value of a life insurance policy of which the company is the bene-ficiary.
B) Investment in equity securities for the purpose of controlling the issuing company.
C) Cash designated for the purchase of tangible fixed assets.
D) Trade installment receivables normally collectible in 18 months.

Question 61

Within the statement of financial position where should the account non-controlling interest (minority interest) be reported?

A) Non-current assets.
B) Non-current liabilities.
C) Equity.
D) Current liabilities.

Question 62

Making and collecting loans and disposing of property, plant, and equipment are

A) operating activities.
B) investing activities.
C) financing activities.
D) liquidity activities.

Question 63

In a statement of cash flows, proceeds from issuing equity instruments should be classified as cash inflows from

A) lending activities.
B) operating activities.
C) investing activities.
D) financing activities.

Question 64

Presented below are data for Antwerp Corp.

A) € 504.
B) € 560.
C) €1,220.
D) €1,724.

Question 65

In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for

A) operating activities.
B) borrowing activities.
C) lending activities.
D) financing activities.

Question 66

In preparing a statement of cash flows, sale of treasury stock at an amount greater than cost would be classified as a(n)

A) operating activity.
B) financing activity.
C) extraordinary activity.
D) investing activity.

Question 67

In preparing a statement of cash flows, which of the following transactions would be considered an investing activity?

A) Sale of equipment at book value
B) Sale of merchandise on credit
C) Declaration of a cash dividend
D) Issuance of bonds payable at a discount

Question 68

In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from

A) operating activities.
B) financing activities.
C) investing activities.
D) selling activities.

Question 69

Rosalie Corporation is located in London but does business throughout Europe. The company builds and sells equipment used in manufacturing pharmaceuticals. On December 31, 2019, Rosalie has trading securities valued at £63,000; goodwill valued at £450,000; prepaid insurance valued at £36,000; patents valued at £210,000; and a customer list valued at £390,000. On Rosalie Corporation's statement of financial position at December 31, 2019, what amount should be reported as intangible assets?

A) £1,113,000
B) £1,149,000
C) £1,050,000
D) £660,000

Question 70

The financial statement which summarizes operating, investing, and financing activities of an entity for a period of time is the

A) retained earnings statement.
B) income statement.
C) statement of cash flows.
D) statement of financial position.

Question 71

On the statement of cash flows, which of the following items will affect both financing activities and operating activities?

A) Issuance of equity securities.
B) Collection of loans to other entities.
C) Payment of dividends.
D) Redemption of debt.

Question 72

Caroline, Inc. hired a new controller in late 2019. The controller has not prepared financial statements using IFRS before and needs your assistance. In compiling a complete set of financial statements under IFRS, in what order should the following items be reported in the equity section on the statement of financial position at December 31, 2019? If an item is not reported in the equity section, omit it from your answer.

A) I, VI, IV, II, V, III
B) VI, I, II, V, IV
C) VI, I, IV, II, V
D) III, VI, I, II, IV, V

Question 73

Within the statement of financial position companies should separately report all of the following except

A) Assets and liabilities with different general liquidity characteristics.
B) Assets and liabilities that have been financed with different types of instruments.
C) Assets that differ in their expected function in the company's central operations.
D) Liabilities that differ in their amounts, timing, and nature.

Question 74

On the statement of financial position all of the following are reported as investments except

A) Bonds, ordinary shares, and long-term notes.
B) Non-controlling interest.
C) Pension funds.
D) Non-consolidated subsidiaries.

Question 75

The statement of cash flows provides answers to all of the following questions except

A) where did the cash come from during the period?
B) what was the cash used for during the period?
C) what is the impact of inflation on the cash balance at the end of the year?
D) what was the change in the cash balance during the period?

Question 76

Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?

A) Cash purchases of equipment.
B) Cash purchases of bonds issued by another company.
C) Cash received as repayment for funds loaned.
D) Cash purchase of treasury stock.

Question 77

Presented below are data for Bandkok Corp.

A) Rp1,690.
B) Rp1,798.
C) Rp2,932.
D) Rp2,986.

Question 78

Using IFRS, which of the following items is matched correctly with its basis of valuation for purposes of reporting on the statement of financial position?

A) I and A
B) II and C
C) III and B
D) II and B

Question 79

The statement of cash flows reports all of the following except

A) the net change in cash for the period.
B) the cash effects of operations during the period.
C) the free cash flows generated during the period.
D) investing transactions.

Question 80

Preparing the statement of cash flows, using the indirect method, involves all of the following except determining the

A) cash provided by operations.
B) cash provided by or used in investing and financing activities.
C) change in cash during the period.
D) cash collections from customers during the period.