Accounting 10 multiple choice and one formal question, 12-1A

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Chapter 12 Quiz 25 pts

Problem 1: 1 pt

A statement of cash flows should reconcile the differences between the beginning and ending balances of: A. Net income B. Equity C. Cash and cash equivalents D. Working capital E. Cash, cash equivalents and short-term investments

Answer:

Problem 2: 1 pt

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is: A. Operating activities B. Financing activities C. Investing activities D. Schedule of noncash investing or financing activity E. None of these as this is not reported on the statement of cash flows

Answer:

Problem 3: 1 pt

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the: A. Operating activities B. Financing activities C. Investing activities D. Schedule of noncash financing and investing activities E. None of these as this is not reported on the statement of cash flows

Answer:

Problem 4: 1 pt

Cash flows from selling trading securities are reported in the statement of cash flows as part of: A. Operating activities B. Financing activities C. Investing activities D. Noncash activities E. None of these as this is not reported in the statement of cash flows

Answer:

Problem 5: 1 pt

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from: A. Operating activities B. Investing activities C. Financing activities D. Direct activities E. Indirect activities

Answer:

Problem 6: 1 pt

The accounting principle that requires significant noncash financing and investing activities be reported on the statement of cash flows is the: A. Historical cost principle B. Materiality principle C. Full disclosure principle D. Going concern principle E. Business entity principle

Answer:

Problem 7: 1 pt

The cash flow on total assets ratio: A. Is the same as return on assets B. Is the same as profit margin C. Can be an indicator of earnings quality D. Is highly affected by accounting principles of income recognition and measurement E. Is average net assets divided by cash flows from operations

Answer:

Problem 8: 3 pts

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

Net income	$12,300
Depreciation expense	12,000
Payment on mortgage payable	15,000
Gain on sale of land	7,500
Increase in merchandise inventory	2,050
Increase in accounts payable	6,150
Proceeds from sale of land	8,000

A. $12,700 B. $13,900 C. $20,900 D. $28,400 E. $35,900

Answer:

Problem 9: 5 pts

Use the cash flow on total assets ratio to determine which of these three companies is using its assets most efficiently. 5 pts

	Company A	Company B	Company C
Cash provided by operations	$ 300,000	$ 600,000	$ 400,000
Cash provided (used) by investing activities
Purchase of operating assets	(190,000)	(380,000)	(200,000)
Cash provided (used) by financing activities
Repayment of debt	(100,000)	(210,000)	(190,000)

Net Increase in cash	$ 10,000	$ 10,000	$ 10,000
Average total assets	$ 2,500,000	$ 6,000,000	$ 5,000,000

Show your work:

A. Company A B. Company B C. Company C D. As all the companies have the same net increase in cash, they are all equally efficient in the use of their assets E. Cannot be determined from the given information

Answer:

Problem 10: 10 Pts

The following information is available for the Arthur Corporation:

Arthur Corporation Balance Sheets At December 31
	2010	2009
Assets:
Cash	$ 24,640	$ 23,040
Accounts receivable	32,180	29,400
Merchandise inventory	73,125	61,710
Long-term investments	55,900	56,400
Equipment	175,500	145,500
Accumulated depreciation	(33,550)	(31,200)
Total assets	$327,795	$284,850

Liabilities:
Accounts payable	$ 65,000	$40,380
Income taxes payable	10,725	10,200
Bonds payable	48,750	66,000
Total liabilities	$124,475	$116,580
Equity:
Common stock	117,000	96,000
Contributed capital in excess of par	13,000	9,000
Retained earnings	73,320	63,270
Total equity	$203,320	$168,270
Total liabilities and equity	$327,795	$284,850

Arthur Corporation Income Statement For Year Ended December 31, 2010
Sales		$240,000
Cost of goods sold	$80,900
Depreciation expense	29,400
Other operating expenses	48,000
Interest expense	2,000	(160,300)
Other gains (losses):
Loss on sale of equipment		(8,400)
Income before taxes		71,300
Income taxes expense		(27,650)
Net income		$ 43,650

Additional Information: (1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired. (2) Old equipment with an original cost of $37,550 was sold for $2,100 cash. (3) New equipment was purchased for $67,550 cash.

(4) Cash dividends of $33,600 were paid. (5) Additional shares of stock were issued for cash. Prepare a complete statement of cash flows for the 2009 calendar year using the direct method. Answer:

(a)

Cash receipts from customers:

(b)

Cash paid for merchandise inventory:

(c)

Payments for income taxes:

(d) Received from sales of long-term investments:

(e)

Received from stock issuance:

(f)

Paid to retire bonds:

Arthur Corp. Statement of Cash Flows (direct method) For Year Ended December 31, 2010

Cash flows from operating activities:
			(a)
			(b)
			given
			(c)
			given

Cash flows from investing activities
			(d)
			given
			given

Cash flows from financing activities:
			(e)
			(f)
			given

Net in cash
Cash balance beginning of year
Cash balance end of year