Question 1

The amortization of intangible assets applies to ________.

Accepted Answer

A)  Research and Development Costs
B)  Goodwill
C)  intangible assets with definite lives
D)  intangible assets with indefinite livesE) A) and D)
F) None of the above

Question 2

FIFO uses the ________ costs to measure the cost of goods sold.

Accepted Answer

A)  latest
B)  earliest
C)  average
D)  weighted-averageE) B) and D)
F) B) and C)

Question 3

Accounts receivable is a current asset.

Accepted Answer

A) True 
 B)False

Question 4

Why do accountants add Depreciation Expense to net income when determining net cash provided by operating activities?

Accepted Answer

A)  because depreciation expense is a source of cash
B)  because depreciation expense requires the outflow of cash
C)  because depreciation expense is an investing activity that should be reported in the investing section of the cash flow statement
D)  because it cancels the earlier deduction when calculating net incomeE) B) and C)
F) A) and D)

Question 5

The major operating activity on the statement of cash flows that increases cash is ________.

Accepted Answer

A)  sales on account
B)  proceeds from sale of common stock
C)  proceeds from issue of bonds payable
D)  collections from sales to customersE) None of the above
F) A) and B)

Question 6

A company's operating cycle can be longer than one year.

Accepted Answer

A) True 
 B)False

Question 7

An example of an investing activity on the statement of cash flows is the purchase of equipment for cash.

Accepted Answer

A) True 
 B)False

Question 8

Current liabilities are debts due within the ________ year or within the normal operating cycle if ________.

Accepted Answer

A)  past; longer than a year
B)  next; longer than a year
C)  past; shorter than a year
D)  next; shorter than a yearE) A) and C)
F) C) and D)

Question 9

The cash paid for employees' wages is included in the ________ section of the statement of cash flows.Assume the direct method is used.

Accepted Answer

A)  operating
B)  financing
C)  investing
D)  noncashE) A) and D)
F) B) and C)

Question 10

Austin Company reported cost of goods sold of $700,000,a decrease in inventory of $60,000,and an increase in accounts payable of $35,000.How much cash was paid to suppliers?

Accepted Answer

A)  $605,000
B)  $675,000
C)  $725,000
D)  $795,000E) None of the above
F) All of the above

Question 11

Peace Company's capital stock is currently trading for $22 per share.The following accounts appear on the balance sheet:  The only transaction affecting the accounts was the issue of the company's common stock.What was the original selling price of the common stock?

Accepted Answer

A)  $6.00 per share
B)  $11.00 per share
C)  $17.00 per share
D)  $22.00 per shareE) C) and D)
F) A) and D)

Question 12

An example of an operating activity on the statement of cash flows is federal taxes paid.Assume the direct method is used.

Accepted Answer

A) True 
 B)False

Question 13

The last line item on an income statement is earnings per share.

Accepted Answer

A) True 
 B)False

Question 14

When reconciling net income to net cash provided by operating activities,a(n) ________ is an addition to net income.

Accepted Answer

A)  increase in inventories
B)  increase in accounts receivable
C)  increase in wages payable
D)  decrease in taxes payableE) C) and D)
F) A) and B)

Question 15

During a period of inflation,the LIFO method reports a lower ending inventory amount than FIFO.

Accepted Answer

A) True 
 B)False

Question 16

Par value is the value that is printed on the face of the stock certificate.

Accepted Answer

A) True 
 B)False

Question 17

In a period of inflation,LIFO results in a higher net income than FIFO.

Accepted Answer

A) True 
 B)False

Question 18

An example of an operating activity on the statement of cash flows is cash dividends received on investments.Assume the direct method is used.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements about par value is FALSE?

Accepted Answer

A)  The par value per share is used to determine the dividends per share for common stock.
B)  The stated value of a stock is conceptually similar to the par value of a stock.
C)  It is generally illegal for a corporation to sell an original issue of common stock below the par value.
D)  The par value is the maximum legal liability of stockholders if the corporation cannot pay its debts.E) C) and D)
F) All of the above

Question 20

Freight and installation costs are added to the cost of equipment.

Accepted Answer

A) True 
 B)False

Exam 16: Understanding Corporate Annual Reports: Basic Financial Statements

Accounts receivable is a current asset.

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The last line item on an income statement is earnings per share.

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When reconciling net income to net cash provided by operating activities,a(n) ________ is an addition to net income.

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FIFO uses the ________ costs to measure the cost of goods sold.

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In a period of inflation,LIFO results in a higher net income than FIFO.

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Current liabilities are debts due within the ________ year or within the normal operating cycle if ________.

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Which of the following statements about par value is FALSE?

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Freight and installation costs are added to the cost of equipment.

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An example of an investing activity on the statement of cash flows is the purchase of equipment for cash.

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The amortization of intangible assets applies to ________.

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Why do accountants add Depreciation Expense to net income when determining net cash provided by operating activities?

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Peace Company's capital stock is currently trading for $22 per share.The following accounts appear on the balance sheet: The only transaction affecting the accounts was the issue of the company's common stock.What was the original selling price of the common stock?

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An example of an operating activity on the statement of cash flows is cash dividends received on investments.Assume the direct method is used.

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During a period of inflation,the LIFO method reports a lower ending inventory amount than FIFO.

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Par value is the value that is printed on the face of the stock certificate.

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The cash paid for employees' wages is included in the ________ section of the statement of cash flows.Assume the direct method is used.

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An example of an operating activity on the statement of cash flows is federal taxes paid.Assume the direct method is used.

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A company's operating cycle can be longer than one year.

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The major operating activity on the statement of cash flows that increases cash is ________.

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Austin Company reported cost of goods sold of $700,000,a decrease in inventory of $60,000,and an increase in accounts payable of $35,000.How much cash was paid to suppliers?

Correct AnswerverifiedShow Answer

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Current liabilities are debts due within the year or within the normal operating cycle if .

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