Question 1

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

Accepted Answer

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

Question 2

Which of the following should be reported for capital stock?

Accepted Answer

A)  The shares authorized
B)  The shares issued
C)  The shares outstanding
D)  All of these

Question 3

The account form and the report form of the balance sheet are both acceptable under GAAP.

Accepted Answer

A) True 
 B)False

Question 4

Garret Company owns the following investments:   Trading securities (fair value)  $60,000 Available-for-sale securities (fair value)  35,000 Held-to-maturity securities (amortized cost)  47,000\begin{array} { l r } 	ext { Trading securities (fair value)  } & \$ 60,000 \	ext { Available-for-sale securities (fair value)  } & 35,000 \	ext { Held-to-maturity securities (amortized cost)  } & 47,000\end{array} Trading securities (fair value)   Available-for-sale securities (fair value)   Held-to-maturity securities (amortized cost)  ​$60,00035,00047,000​  Garret will report investments in its current assets section of

Accepted Answer

A)  $0.
B)  exactly $60,000.
C)  $60,000 or an amount greater than $60,000, depending on the circumstances.
D)  exactly $95,000.

Question 5

The balance sheet contributes to financial reporting by providing a basis for all of the following except

Accepted Answer

A)  computing rates of return.
B)  evaluating the capital structure of the enterprise.
C)  determining the increase in cash due to operations.
D)  assessing the liquidity and financial flexibility of the enterprise.

Question 6

The cash debt coverage ratio is computed by dividing net cash provided by operating activities by

Accepted Answer

A)  average long-term liabilities.
B)  average total liabilities.
C)  ending long-term liabilities.
D)  ending total liabilities.

Question 7

Which item below is not a current liability?

Accepted Answer

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

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

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

Question 10

Horton Company owns the following investments:   Trading securities (fair value)  $60,000 Available-for-sale securities (fair value)  35,000 Held-to-maturity securities (amortized cost)  47,000\begin{array} { l r } 	ext { Trading securities (fair value)  } & \$ 60,000 \	ext { Available-for-sale securities (fair value)  } & 35,000 \	ext { Held-to-maturity securities (amortized cost)  } & 47,000\end{array} Trading securities (fair value)   Available-for-sale securities (fair value)   Held-to-maturity securities (amortized cost)  ​$60,00035,00047,000​  Horton will report securities in its long-term investments section of

Accepted Answer

A)  exactly $95,000.
B)  exactly $107,000.
C)  exactly $142,000.
D)  $82,000 or an amount less than $82,000, depending on the circumstances.

Question 11

Which of the following would be classified in a different major section of a balance sheet from the others?

Accepted Answer

A)  Capital stock
B)  Common stock subscribed
C)  Stock dividend distributable
D)  Stock investment in affiliate

Question 12

When a portion of inventories has been pledged as security on a loan,

Accepted Answer

A)  the value of the portion pledged should be subtracted from the debt.
B)  an equal amount of retained earnings should be appropriated.
C)  the fact should be disclosed but the amount of current assets should not be affected.
D)  the cost of the pledged inventories should be transferred from current assets to noncurrent assets.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Long-term liabilities include

Accepted Answer

A)  obligations not expected to be liquidated within the operating cycle.
B)  obligations payable at some date beyond the operating cycle.
C)  deferred income taxes and most lease obligations.
D)  all of these.

Question 15

Reese Corp.'s trial balance reflected the following account balances at December 31, 2007:   Accounts receivable (net)  $24,000 Trading securities 6,000 Accumulated depreciation on equipment and furniture 15,000 Cash 11,000 Inventory 30,000 Equipment 25,000 Patent 4,000 Prepaid expenses 2,000 Land held for future business site 18,000\begin{array} { l r } 	ext { Accounts receivable (net)  } & \$ 24,000 \	ext { Trading securities } & 6,000 \	ext { Accumulated depreciation on equipment and furniture } & 15,000 \	ext { Cash } & 11,000 \	ext { Inventory } & 30,000 \	ext { Equipment } & 25,000 \	ext { Patent } & 4,000 \	ext { Prepaid expenses } & 2,000 \	ext { Land held for future business site } & 18,000\end{array} Accounts receivable (net)   Trading securities  Accumulated depreciation on equipment and furniture  Cash  Inventory  Equipment  Patent  Prepaid expenses  Land held for future business site ​$24,0006,00015,00011,00030,00025,0004,0002,00018,000​  In Reese's December 31, 2007 balance sheet, the current assets total is

Accepted Answer

A)  $90,000.
B)  $82,000.
C)  $77,000.
D)  $73,000.

Question 16

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

Accepted Answer

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

Question 17

One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is

Accepted Answer

A)  failure to reflect current value information.
B)  the extensive use of separate classifications.
C)  an extensive use of estimates.
D)  failure to include items of financial value that cannot be recorded objectively.

Question 18

Treasury stock should be reported as a(n)

Accepted Answer

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

Question 19

The stockholders' equity section is usually divided into what three parts?

Accepted Answer

A)  Preferred stock, common stock, treasury stock
B)  Preferred stock, common stock, retained earnings
C)  Capital stock, additional paid-in capital, retained earnings
D)  Capital stock, appropriated retained earnings, unappropriated retained earnings

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 5: Balance Sheet and Statement of Cash Flows

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

Correct Answer
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Correct Answer
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Financial statement readers often assess liquidity by using the current cash debt coverage ratio.

Correct Answer
verified

One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is

Correct Answer
verified

The balance sheet contributes to financial reporting by providing a basis for all of the following except

Correct Answer
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The stockholders' equity section is usually divided into what three parts?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Treasury stock should be reported as a(n)

Correct Answer
verified

The account form and the report form of the balance sheet are both acceptable under GAAP.

Correct Answer
verified

Which of the following should be reported for capital stock?

Correct Answer
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Correct Answer
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Which item below is not a current liability?

Correct Answer
verified

The cash debt coverage ratio is computed by dividing net cash provided by operating activities by

Correct Answer
verified

Which of the following would be classified in a different major section of a balance sheet from the others?

Correct Answer
verified

When a portion of inventories has been pledged as security on a loan,

Correct Answer
verified

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

Correct Answer
verified

Long-term liabilities include

Correct Answer
verified

Correct Answer
verified

Exam 5: Balance Sheet and Statement of Cash Flows

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is

Correct AnswerverifiedShow Answer

The balance sheet contributes to financial reporting by providing a basis for all of the following except

Correct AnswerverifiedShow Answer

The stockholders' equity section is usually divided into what three parts?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Treasury stock should be reported as a(n)

Correct AnswerverifiedShow Answer

The account form and the report form of the balance sheet are both acceptable under GAAP.

Correct AnswerverifiedShow Answer

Which of the following should be reported for capital stock?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which item below is not a current liability?

Correct AnswerverifiedShow Answer

The cash debt coverage ratio is computed by dividing net cash provided by operating activities by

Correct AnswerverifiedShow Answer

Which of the following would be classified in a different major section of a balance sheet from the others?

Correct AnswerverifiedShow Answer

When a portion of inventories has been pledged as security on a loan,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Long-term liabilities include

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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