Question 1

On a balance sheet, what is the preferable presentation of notes or accounts receivable from officers, employees, or affiliated companies?

Accepted Answer

It is preferable to present notes or accounts receivable from officers, employees, or affiliated companies as assets but separately from other receivables on the balance sheet to provide transparency and avoid confusion with other receivables.

Question 2

A measure of a company's financial flexibility is

Accepted Answer

Free cash flow measures how much cash a company generates after accounting for capital expenditures. It is a good measure of a company's financial flexibility as it indicates how much cash the company has available to reinvest in the business, pay off debt, or distribute to shareholders. The other ratios listed are useful for evaluating a company's overall financial performance but do not specifically measure its financial flexibility.

Question 3

The balance sheet can be used to analyze all of the following except

Accepted Answer

The balance sheet provides information about a company's assets, liabilities, and equity at a specific point in time. While it can be used to analyze financial flexibility, solvency, and liquidity, it does not directly provide information about profitability. Instead, profitability is typically analyzed using the income statement.

Question 4

A gain on the sale of plant assets in the ordinary course of business should be presented in a statement of cash flows as a (an)

Accepted Answer

A gain on the sale of plant assets is deducted from income from continuing operations in the operating activities section of the statement of cash flows because it is a non-cash item that was included in net income.

Question 5

Which of the following should theoretically be presented in a statement of changes in financial position only because of the all-financial-resources concept?

Accepted Answer

The conversion of preferred stock to common stock is a non-cash transaction that affects the financial position but not the cash flow, fitting the all-financial-resources concept.

Question 6

The balance sheet discloses

Accepted Answer

The balance sheet discloses stocks, which are snapshots of what a company owns and owes at a specific point in time.

Question 7

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

Accepted Answer

The statement of cash flows provides information about the sources and uses of cash during a period of time and summarizes the entity's operating, investing, and financing activities. The retained earnings statement shows changes in the amount of retained earnings over a period of time, the statement of financial position (also known as the balance sheet) presents the financial position of an entity at a specific point in time, and the income statement summarizes revenues and expenses for a period of time.

Question 8

When preparing a funds statement using the all financial resources concept, the retirement of long-term debt by the issuance of common stock should be presented in a statement of changes in financial position as a Source of Funds$\quad$ Use of Funds

Accepted Answer

The answer of When preparing a funds statement using the...

Question 9

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

Accepted Answer

Sale of equipment at book value is an investing activity as it involves the sale of a long-term asset. Option A is a sale of merchandise, which is a normal course of business and is classified as an operating activity. Option B is a financing activity as dividends are paid to shareholders. Option C is a financing activity as bonds payable are a source of long-term financing for the company.

Question 10

A statement of cash flows should be issued by a profit-oriented business

Accepted Answer

A statement of cash flows is a required financial statement that should be issued by a profit-oriented business whenever a balance sheet and a statement of income and retained earnings are issued. It presents cash inflows and outflows from operating, investing, and financing activities, providing valuable information about a company's liquidity and its ability to generate cash.

Question 11

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

Accepted Answer

Making and collecting loans and disposing of property, plant, and equipment are examples of investing activities as they involve the acquisition and disposal of long-term assets for the purpose of generating revenue or reducing expenses in the future. Financing activities involve obtaining and repaying funds from creditors or investors, while operating activities involve the day-to-day business activities of the company. Liquidity activities involve managing short-term assets and liabilities to ensure the company has enough cash on hand to meet its obligations.

Question 12

The working capital format is one possible format for presenting a statement of changes in financial position. Which of the following formats is (are) also theoretically acceptable? Cash$\quad$Quick Assets

Accepted Answer

The working capital format is not the only acceptable format for presenting a statement of changes in financial position. The cash and quick assets format, where the changes in cash and quick assets are highlighted, is also theoretically acceptable. Therefore, both the working capital and cash/quick assets formats are acceptable options.

Question 13

A transaction that would appear as an application of funds on a conventional funds statement using the all-financial-resources concept, but not on a statement using the traditional working capital concept would be the

Accepted Answer

Under the traditional working capital concept, only current assets and current liabilities are considered in the funds statement. Therefore, the acquisition of property, plant, and equipment through the issue of common stock would not be reflected as an application of funds in the statement. However, under the all-financial-resources concept, all assets and liabilities, both current and non-current, are considered in the funds statement, and the acquisition of property, plant, and equipment with the issue of common stock would be reflected as an application of funds.

Question 14

Which of the following should be presented in a statement of cash flows supplemental schedule?

Conversion of Long-term debt to common stock

Conversion of preferred stock to common stock

Accepted Answer

Conversions of long-term debt to common stock and conversions of preferred stock to common stock are non-cash transactions. These should be disclosed in a supplemental schedule to the statement of cash flows, as they are important financing and investing activities that do not involve cash flows but significantly affect the financial position of the company.

Question 15

A basic objective of the statement of cash flows is to

Accepted Answer

The basic objective of the statement of cash flows is to provide essential information for financial statements users in making economic decisions. It shows the inflows and outflows of cash during the period, allowing users to analyze the liquidity and cash flow position of the company. While it does disclose changes in certain asset and liability accounts, its primary purpose is not to supplant the income statement and balance sheet. It also does not solely focus on changes in working capital.

Question 16

The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts

Accepted Answer

The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts inventory back to cash or 12 months, whichever is longer. This means that if it takes more than 12 months for the inventory to be converted back to cash, it will be classified as noncurrent asset. Choice D is the only option that reflects this principle.

Question 17

There would probably be a major difference between a statement of source and application of working capital and a cash flow statement in the treatment of

Accepted Answer

The major difference between a statement of source and application of working capital and a cash flow statement in the treatment mentioned would be in "A change during the period in the accounts payable balance." This is because the statement of source and application of working capital focuses on changes in working capital, where accounts payable is a component, while a cash flow statement categorizes changes in cash flows from operating, investing, and financing activities without directly focusing on working capital changes.

Question 18

Current assets are presented on the balance sheet in

Accepted Answer

Current assets are presented on the balance sheet in order of their liquidity, meaning the most liquid assets (those that can be easily converted to cash) are listed first and the least liquid assets are listed last. This allows investors to quickly understand how easily a company can meet its short-term obligations.

Question 19

When preparing a statement of changes in financial position using the cash basis for defining funds, an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

Accepted Answer

An increase in ending inventory over beginning inventory decreases the cost of goods sold, increasing the reported net earnings. However, under the cash basis for defining funds, an increase in inventory is not considered a use of cash. Therefore, an adjustment must be made to reflect the assumed use of cash associated with the increase in inventory. This adjustment is made by subtracting the increase in inventory from the reported net earnings.

Question 20

The valuation basis used in conventional financial statements is

Accepted Answer

The answer of The valuation basis used in conventional financial...

Quiz 7: Financial Statements Ii: the Balance Sheet and the Statement of Cash Flows

On a balance sheet, what is the preferable presentation of notes or accounts receivable from officers, employees, or affiliated companies?

A measure of a company's financial flexibility is

The balance sheet can be used to analyze all of the following except

A gain on the sale of plant assets in the ordinary course of business should be presented in a statement of cash flows as a (an)

Which of the following should theoretically be presented in a statement of changes in financial position only because of the all-financial-resources concept?

The balance sheet discloses

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

When preparing a funds statement using the all financial resources concept, the retirement of long-term debt by the issuance of common stock should be presented in a statement of changes in financial position as a Source of Funds $\quad$ Use of Funds

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

A statement of cash flows should be issued by a profit-oriented business

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

The working capital format is one possible format for presenting a statement of changes in financial position. Which of the following formats is (are) also theoretically acceptable? Cash $\quad$ Quick Assets

A transaction that would appear as an application of funds on a conventional funds statement using the all-financial-resources concept, but not on a statement using the traditional working capital concept would be the

Which of the following should be presented in a statement of cash flows supplemental schedule?

Conversion of Long-term debt to common stock Conversion of preferred stock to common stock

A basic objective of the statement of cash flows is to

The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts

There would probably be a major difference between a statement of source and application of working capital and a cash flow statement in the treatment of

Current assets are presented on the balance sheet in

When preparing a statement of changes in financial position using the cash basis for defining funds, an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

The valuation basis used in conventional financial statements is

Quiz 7: Financial Statements Ii: the Balance Sheet and the Statement of Cash Flows

On a balance sheet, what is the preferable presentation of notes or accounts receivable from officers, employees, or affiliated companies?

A measure of a company's financial flexibility is

The balance sheet can be used to analyze all of the following except

A gain on the sale of plant assets in the ordinary course of business should be presented in a statement of cash flows as a (an)

Which of the following should theoretically be presented in a statement of changes in financial position only because of the all-financial-resources concept?

The balance sheet discloses

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

When preparing a funds statement using the all financial resources concept, the retirement of long-term debt by the issuance of common stock should be presented in a statement of changes in financial position as a Source of Funds \quad Use of Funds

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

A statement of cash flows should be issued by a profit-oriented business

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

The working capital format is one possible format for presenting a statement of changes in financial position. Which of the following formats is (are) also theoretically acceptable? Cash \quad Quick Assets

A transaction that would appear as an application of funds on a conventional funds statement using the all-financial-resources concept, but not on a statement using the traditional working capital concept would be the

Which of the following should be presented in a statement of cash flows supplemental schedule? Conversion of Long-term debt to common stock Conversion of preferred stock to common stock

A basic objective of the statement of cash flows is to

The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts

There would probably be a major difference between a statement of source and application of working capital and a cash flow statement in the treatment of

Current assets are presented on the balance sheet in

When preparing a statement of changes in financial position using the cash basis for defining funds, an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

The valuation basis used in conventional financial statements is

When preparing a funds statement using the all financial resources concept, the retirement of long-term debt by the issuance of common stock should be presented in a statement of changes in financial position as a Source of Funds $\quad$ Use of Funds

The working capital format is one possible format for presenting a statement of changes in financial position. Which of the following formats is (are) also theoretically acceptable? Cash $\quad$ Quick Assets

Which of the following should be presented in a statement of cash flows supplemental schedule?

Conversion of Long-term debt to common stock Conversion of preferred stock to common stock