Question 1

Degree of solvency refers to ________.

Accepted Answer

A)  a company's ability to meet long-term obligations as they become due 
B)  a company's ability to refinance long-term debt as it becomes due 
C)  a company's ability to quickly convert current assets into cash 
D)  a company's ability to quickly convert long-term assets into current assets 
A)  a company's ability to meet long-term obligations as they become due 
B)  a company's ability to refinance long-term debt as it becomes due 
C)  a company's ability to quickly convert current assets into cash 
D)  a company's ability to quickly convert long-term assets into current assets

Question 2

Presented below are selected accounts for San Marcos Corporation for December 31 of the current year.   
What are current liabilities for San Marcos Corporation?

Accepted Answer

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

Question 3

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

Accepted Answer

1. The balance sheet summarizes economic

Question 4

Where does Accumulated Other Comprehensive Income appear?

Accepted Answer

A)  on the balance sheet in the shareholders' equity section 
B)  on the balance sheet in the long-term liabilities section 
C)  on the income statement after net income 
D)  on the balance sheet as a long-term asset 
A)  on the balance sheet in the shareholders' equity section 
B)  on the balance sheet in the long-term liabilities section 
C)  on the income statement after net income 
D)  on the balance sheet as a long-term asset

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Explain the importance of the summary of significant accounting policies and list five facts that are generally included in this note.

Accepted Answer

The Summary of Significant Accounting Po

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Anderson Corporation's trial balance for December 31, the end of its fiscal year, included the following accounts: $$\begin{array} { | l | r | } 
\hline \text { Accounts Payable } & \$ 47,000 \
\hline \text { Dividends Payable } & 10,000 \
\hline \text { Bond Payable, maturing in 9 years } & 54,000 \
\hline \text { Salaries Payable } & 10,000 \
\hline \text { Note Payable, due in 1 year } & 15,000 \
\hline \text { Note payable, due in 5 years } & 70,000 \
\hline
\end{array}$$
 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 ________.

Accepted Answer

A)  $86,000 
B)  $96,000 
C)  $102,000 
D)  $150,000 
A)  $86,000 
B)  $96,000 
C)  $102,000 
D)  $150,000

Question 9

San Pedro Industries
Presented below are selected accounts from the adjusted trial balance ($ Millions) for San Pedro Industries for June 30 of the current year.
  
-Prepare a classified balance sheet in IFRS-acceptable format for San Pedro Industries.

Accepted Answer

San Pedro

Question 10

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

Accepted Answer

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 collectability of existing accounts receivable 
D)  reconcile differences between net income and the associated cash receipts and payments 
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 collectability of existing accounts receivable 
D)  reconcile differences between net income and the associated cash receipts and payments

Question 11

Define the term subsequent event, explain the two types of subsequent events and provide an example of each.

Accepted Answer

A subsequent event is one that occurs in

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

San Pedro Industries
Presented below are selected accounts from the adjusted trial balance ($ Millions) for San Pedro Industries for June 30 of the current year.
  
-Prepare a classified balance sheet using the report format for San Pedro Industries.

Accepted Answer

San Pedro

Question 14

Baton Rouge Corporation Presented here are cash flows (in $ Millions) for Baton Rouge Corporation's most recent fiscal year:
$\begin{array}{lrr}
\underline{\text { Cash received from: }}\
  \text { Customers } &\$3,600\
 \text { Interest on investments } &600\
 \text { Sale of old equipment } &4,200\
 \text { Sale of company's capital stock } &410\
 \text {  Long-term debt proceeds} &2,800\
\end{array}$

$\begin{array}{lr}
\underline{\text { Cash paid for: }}\
\text { Interest on debt } & \$ 365 \
\text { Income tax } &170 \
\text { Principal payments on debt } & 1,000 \
\text { Purchase of building } &800 \
\text { Purchase of inventory } & 1,700 \
\text { Dividends on capital stock } & 300 \
\text { Operating expenses } &740
\end{array}$ 
Net cash flows provided (used) by financing activities are ________.

Accepted Answer

A)  ($890) 
B)  $1,740 
C)  $1,910 
D)  $2,510 
A)  ($890) 
B)  $1,740 
C)  $1,910 
D)  $2,510

Question 15

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

Accepted Answer

A)  An increase in accounts payable is subtracted from cost of goods sold. 
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. 
A)  An increase in accounts payable is subtracted from cost of goods sold. 
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 16

When using the indirect method of preparing the statement of cash flows, an increase in accounts payable should be treated as ________.

Accepted Answer

A)  a cash outflow 
B)  inflow and outflow of cash 
C)  an addition to net income 
D)  a deduction from net income 
A)  a cash outflow 
B)  inflow and outflow of cash 
C)  an addition to net income 
D)  a deduction from net income

Question 17

The formula for interest coverage ratio includes all of the following except ________.

Accepted Answer

A)  interest expense 
B)  income tax expense 
C)  net income 
D)  long-term liabilities 
A)  interest expense 
B)  income tax expense 
C)  net income 
D)  long-term liabilities

Question 18

Williams Corporation reported Cost of Goods Sold of $910,000 for December 31, 2019. Accounts payable on the balance sheet were $65,000 for December 31, 2018 and $54,000 for December 31, 2019. Merchandise Inventory was $81,000 for December 31, 2018 and $99,000 for December 31, 2019. Cash paid for merchandise during 2019 was ________.

Accepted Answer

A)  $921,000 
B)  $939,000 
C)  $881,000 
D)  $899,000 
A)  $921,000 
B)  $939,000 
C)  $881,000 
D)  $899,000

Question 19

The indirect method of reporting cash flows from operating activities begins with net income from the income statement.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

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

Degree of solvency refers to ________.

Presented below are selected accounts for San Marcos Corporation for December 31 of the current year. What are current liabilities for San Marcos Corporation?

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

Where does Accumulated Other Comprehensive Income appear?

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

Explain the importance of the summary of significant accounting policies and list five facts that are generally included in this note.

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

San Pedro Industries Presented below are selected accounts from the adjusted trial balance ($ Millions) for San Pedro Industries for June 30 of the current year. -Prepare a classified balance sheet in IFRS-acceptable format for San Pedro Industries.

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

Define the term subsequent event, explain the two types of subsequent events and provide an example of each.

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

San Pedro Industries Presented below are selected accounts from the adjusted trial balance ($ Millions) for San Pedro Industries for June 30 of the current year. -Prepare a classified balance sheet using the report format for San Pedro Industries.

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

When using the indirect method of preparing the statement of cash flows, an increase in accounts payable should be treated as ________.

The formula for interest coverage ratio includes all of the following except ________.

The indirect method of reporting cash flows from operating activities begins with net income from the income statement.

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

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

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