Deck 6: Statements of Financial Position and Cash Flows and the Annual Report

Question 1

Which of the following is not a cash equivalent?

A)commercial paper maturing in 75 days
B)bond sinking fund
C)money market funds
D)treasury bill maturing in 30 days

Answer 1

B

Question 2

Prepaid expenses are normally considered as current assets.

Answer 2

True

Question 3

The balance sheet reflects the financial position of an entity over a period of time.

Answer 3

False

Question 4

List three areas in which the balance sheet provides important information to financial statement users.

Question 5

IFRS specifies that biological assets be reported on the balance sheet.

Question 6

A firm that responds quickly to unexpected circumstances exhibits a high level of financial flexibility.

Question 7

Which of the following is a current asset?

A)treasury bill maturing in 2 months
B)land held for investment
C)equipment
D)goodwill

Question 8

The relevance of the balance sheet is limited because many assets are recorded at historical costs.

Question 9

Solvency is a measure of a firm's ability to pay its obligations as they mature.

Question 10

If an entity can borrow funds to meet an unexpected financial crisis,it exhibits high ________.

A)liquidity
B)solvency
C)stability
D)financial flexibility

Question 11

Which of the following is not a current liability?

A)income tax payable
B)accounts payable
C)subscriptions collected one year in advance
D)bond sinking fund

Question 12

Current assets are those that a firm expects to convert into cash within one year or its operating cycle,whichever is longer.

Question 13

The portion of long-term debt that matures during the coming year is classified as a current liability.

Question 14

The IFRS definition of current liabilities differs from the definition of current liabilities under GAAP.

Question 15

List and explain three common cash flow measures based upon balance sheet information.

Question 16

Land held for resale is classified as property,plant,and equipment.

Question 17

What are three limitations associated with the balance sheet?

Question 18

Accumulated other comprehensive income appears on an entity's income statement.

Question 19

Which of the following is not a cash flow measure?

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

Question 20

In order to be a cash equivalent,an investment must have a maturity date of three months or less.

Question 21

What are total assets for San Marcos Corporation?

A)$2,573
B)$2,618
C)$2,628
D)$2,673

Question 22

When preparing a balance sheet using GAAP,the term "net assets" is used.

Question 23

The account format lists assets on the left side and liabilities and stockholders' equity on the right side of the statement.

Question 24

When preparing a balance sheet using IFRS,a company may choose to list noncurrent assets first.

Question 25

Classify the following accounts as assets (A),liabilities (L),or shareholders' equity (SE)and whether they are current (C),non-current (NC),or not applicable (N/A).

Question 26

A company reporting under IFRS may list its assets in either increasing or decreasing order of liquidity.

Question 27

Anderson Corporation's trial balance for December 31,the end of its fiscal year,included the following accounts: The bond payable is a serial bond with equal amounts of principal maturing each year.The note payable due in 5 years has equal principal payments due each year.
The amount that should be classified as current liabilities on Anderson's December 31 balance sheet is ________.

A)$92,000
B)$111,000
C)$117,000
D)$162,000

Question 28

Which of the following statements regarding balance sheet presentation is true?

A)IFRS does not prescribe the ordering of liabilities within current and noncurrent groups.
B)The account format lists liabilities and shareholders' equity directly below the assets.
C)The report format lists liabilities and shareholders' equity on the right side of the statement.
D)GAAP allows assets to be listed in either increasing or decreasing order of liquidity.

Question 29

What is working capital for San Marcos Corporation?

A)$85
B)$123
C)$238
D)$548

Question 30

What are long-term assets for San Marcos Corporation?

A)$1,155
B)$1,620
C)$1,680
D)$1,905

Question 31

What are current liabilities for San Marcos Corporation?

A)$710
B)$770
C)$795
D)$855

Question 32

What are current assets for San Marcos Corporation?

A)$893
B)$948
C)$940
D)$1,343

Question 33

Glover Corporation's trial balance for December 31,the end of its fiscal year,included the following accounts: The amount that should be classified as current liabilities on Glover's December 31 balance sheet is ________.

A)$63,000
B)$73,000
C)$93,000
D)$153,000

Question 34

Hendrickson Corporation's trial balance for July 31,the end of its fiscal year,included the following accounts: Investments are treasury bills that were purchased in May and mature on August 15.Prepaid insurance is a three year policy that was purchased on July 31.
The amount that should be classified as current assets in the July 31 balance sheet is ________.

A)$144,500
B)$138,500
C)$93,500
D)$213,500

Question 35

Which of the following is a component of shareholders' equity?

A)Dividends Payable
B)Investment in Common Stock
C)Minority Interest
D)Other Comprehensive Income

Question 36

The report format of the balance sheet lists assets on the left side and liabilities and stockholders' equity on the right side of the statement.

Question 37

What are total liabilities for San Marcos Corporation?

A)$1,715
B)$1,755
C)$1,770
D)$1,810

Question 38

Webb Corporation's trial balance for July 31,the end of its fiscal year,included the following accounts: The investment account consists of marketable securities of which management plans to sell half of by December 31.Prepaid insurance is a two year policy that was purchased on July 31.The note receivable is an installment note that will be paid in three equal installments on December 31 of each year.
The amount that should be classified as current assets in the July 31 balance sheet is ________.

A)$150,500
B)$153,000
C)$175,500
D)$210,500

Question 39

What are long-term liabilities for San Marcos Corporation?

A)$900
B)$960
C)$985
D)$1,070

Question 40

Which of the following is a not a component of shareholders' equity?

A)Common Stock
B)Other Comprehensive Income
C)Additional Paid in Capital
D)Treasury Stock

Question 41

The statement of cash flows summarizes a firm's cash flows and outflows over a period of time.

Question 42

The statement of cash flows summarizes a firm's cash inflows and outflows at a specific point in time.

Question 43

Presented below are activities from Prosser Industries,Inc.
Required: Please indicate whether each of these activities is classified as an (O)perating,(I)nvesting,or (F)inancing Activity on the statement of cash flows.

Question 44

Which of the following is classified as a financing activity on a statement of cash flows?

A)purchase of a vendor's common stock.
B)sale of equipment at a gain.
C)payment of dividends to shareholders.
D)redemption of a sinking fund.

Question 45

Dividend payments to shareholders are classified as operating activities on the statement of cash flows.

Question 46

The statement of cash flows enables financial statement users to do all of the following except ________.

A)assess an entity's ability to pay liabilities and dividends
B)determine the extent to which an entity will require external financing
C)assess the collectibility of existing accounts receivable
D)reconcile differences between net income and the associated cash receipts and payments

Question 47

All of the following activities are classified as investing activities on a statement of cash flows except ________.

A)purchase of land
B)sale of long-term investments
C)purchase of copyright
D)gain on sale of securities

Question 48

All of the following activities are classified as financing activities on a statement of cash flows except ________.

A)distribution of dividends in the form of stock
B)issuance of serial bonds
C)payment of mortgage
D)sale of treasury stock

Question 49

In order to sustain operations a firm must have positive cash flows from operating activities over the long run.

Question 50

What is ending retained earnings for San Marcos Corporation?

A)$108
B)$173
C)$353
D)$413

Question 51

Cash receipts from interest and dividends are classified as operating activities on a GAAP-based statement of cash flows.

Question 52

Which of the following is classified as an operating activity on a statement of cash flows?

A)payment of dividends
B)sale of equipment
C)issuance of common stock
D)purchase of inventory

Question 53

Which of the following is classified as an investing activity on a statement of cash flows?

A)purchase of land
B)issuance of serial bonds
C)purchase of insurance policy
D)purchase of treasury stock

Question 54

All of the following activities are classified as operating activities on a statement of cash flows except ________.

A)purchase of inventory
B)sale of treasury bills with a 60-day maturity date
C)payments from customers
D)purchase of a Certificate of Deposit

Question 55

Purchases of fixed assets are classified as investing activities on the statement of cash flows.

Question 56

What is total stockholders' equity for San Marcos Corporation?

A)$710
B)$818
C)$993
D)$1,058

Question 57

Prepare a classified balance sheet using the report format for San Pedro Industries.

Question 58

Prepare a classified balance sheet using the account format for San Pedro Industries.

Question 59

Prepare a classified balance sheet in IFRS-acceptable format for San Pedro Industries.

Question 60

Redemption of bonds payable is classified as a financing activity on the statement of cash flows.

Question 61

Which of the following is not considered a financing activity when preparing the statement of cash flows?

A)issuance of common stock
B)redemption of bonds payable
C)payment of dividends
D)payments on notes receivable

Question 62

When preparing the operating activities section of the statement of cash flows under the indirect method,losses on sales of equipment are omitted.

Question 63

When preparing the operating activities section of the statement of cash flows under the direct method,an increase in accounts receivable is subtracted from sales.

Question 64

Hitchcock Enterprises sold a vacant plot of land for $20,000.The company had paid $5,000 for the land ten years ago.On the statement of cash flows,this transaction would be reported as a ________.

A)operating cash inflow of $15,000
B)investing cash inflow of $15,000
C)investing cash flow of $20,000
D)financing cash inflow of $20,000

Question 65

Which of the following is considered an financing activity when preparing the statement of cash flows?

A)a purchase of equipment
B)a payment on an equipment note
C)sale of common stock
D)payment of interest on a bond issue

Question 66

Which of the following is not considered an investing activity when preparing the statement of cash flows?

A)a purchase of equipment
B)a sale of investments
C)payment of dividends
D)payments on notes receivable

Question 67

Moore Corporation reported net income of $210,000 for the current year ended June 30.Accounts receivable had a beginning balance of $35,000 and an ending balance of $39,000.Accounts payable had a beginning balance of $29,000 and an ending balance of $32,000.Assuming that this is all of the relevant information,Moore's cash flows from operating activities are ________.

A)$203,000
B)$209,000
C)$211,000
D)$217,000

Question 68

The only difference between the statement of cash flows under the indirect method and the direct method is in the reporting of cash flows from operating activities.

Question 69

When preparing a the operating section of the statement of cash flows using the indirect method,which of the following items are subtracted from net income?

A)depreciation expense
B)gain on sale of long-term assets
C)decrease in prepaid expenses
D)increase in income taxes payable

Question 70

When preparing the operating section of the statement of cash flows using the direct method,which of the following statements is true?

A)An increase in accounts payable is added to expenses.
B)An increase in accounts receivable is added to sales.
C)Depreciation expense is added to cash flows.
D)Gains on sales of long term assets are subtracted from cash flows.

Question 71

Bookworm Booksellers reported sales revenue of $350,000 for the fiscal year ended July 31.The accounts receivable balance at the beginning of the year was $26,000 and $35,000 at the end of the year.On the statement of cash flows,what amount of cash would be shown as collected from customers?

A)$324,000
B)$341,000
C)$350,000
D)$359,000

Question 72

Presented below are activities from Ford Enterprises,Inc.
Required: Please indicate whether each of these activities is classified as an (O)perating,(I)nvesting,or (F)inancing Activity on the statement of cash flows.

Question 73

When preparing a the operating section of the statement of cash flows using the indirect method,which of the following items are added to net income?

A)decrease in accounts payable
B)unrealized gains on trading securities
C)loss on sale of equipment
D)increase in merchandise inventory

Question 74

Which of the following is considered an investing activity when preparing the statement of cash flows?

A)a purchase of equipment
B)a payment on an equipment note
C)sale of common stock
D)payment of interest on a bond issue

Question 75

When preparing the operating activities section of the statement of cash flows under the indirect method,gains on sale of equipment are subtracted from net income.

Question 76

When preparing the the operating section using the direct method,which of the following statements is true?

A)A decrease in accounts payable is added to expenses.
B)A decrease in accounts receivable is added to sales.
C)Depreciation expense is deducted from cash flows.
D)Gains on sales of long-term assets are omitted from cash flows.

Question 77

When preparing the operating activities section of the statement of cash flows under the indirect method,depreciation expense is subtracted from net income.

Question 78

The FASB prefers the indirect method of preparing the operating activities section of the statement of cash flows.

Question 79

When preparing a the operating section of the statement of cash flows using the indirect method,which of the following items are added to net income?

A)decrease in accrued expenses
B)gain on sale of long-term assets
C)bad debt expense
D)increase in accounts receivable

Question 80

Danielsen,Inc had salaries payable of $50,000 as of January 1 and $30,000 as of December 31.During the year,Danielsen showed $750,000 in salaries expense on the income statement.Cash outflows for salaries for the year were ________.

A)$730,000
B)$750,000
C)$770,000
D)$800,000