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

The accounting staff of Brooks and Dunn Corporation is preparing the annual report for the current fiscal year. The staff member in charge of developing the footnotes has requested assistance with classifying the following information: 1. The depreciable lives of the company's assets range from 5 to 10 years. 2. The corporation acquired Miley Cyrus Corporation by issting 100,000 shares of common stock two weeks after the end of the current fiscal year. 3. The total amount, interest rate, and maturity dates of all leases. 4. The company uses FIFO and lower of cost or market to value its inventory. 5. The allowance for uncollectible accounts is $\$ 16,000$ . 6. Structure of the company's pension plan. 7. The company uses the percentage of completion method to account for construction contracts. 8. Accrued liabilities are composed of salaries payable, taxes payable, and interest payable. Cash equivalents are defined as those financial instruments that can be converted into cash in days or less. 10. The corporation leases a building from a majority shareholder at a rate that is comparable to market rates. Required: Indicate whether the above items should be disclosed in (a) the summary of significant accounting policies note, (b) in a separate disclosure note, or (c) on the face of the balance sheet.

If there is concern that a company might not continue in existence, but the auditor has concluded that the financial statements are fairly presented, the opinion that will be issued is a(n) ________.

Cash receipts from interest and dividends are classified as operating activities on a U.S. GAAP-based statement of cash flows.

The two components of return on equity are return on assets and financial leverage.

List and describe the two balance sheet formats.

Which of the following best describes the concept of liquidity?

Valley Mills Enterprises Presented here are cash flows (in $ Millions) for Valley Mills Enterprises' most recent fiscal year. Customers \2 ,500 Interest on investments 310 Sale of old equipment 260 Sale of company's capital stock 700 Long-term debt proceeds 1,600 Interest on debt \ 600 Income tax 110 Principal payments on debt 1,000 Purchase of building 6,000 Purchase of inventory 1,600 Dividends on capital stock 400 Operating expenses 425 Net cash flows provided (used) by financing activities are ________.

The most common auditor's opinion issued on financial statements is a(n) ________.

If an auditor is not able to gather enough evidence to form an opinion on financial statements, the auditor issues a(n) ________.

Danielsen Inc. had salaries payable of $70,000 as of January 1 and $30,000 as of December 31. During the year, Danielsen showed $550,000 in salaries expense on the income statement. Cash outflows for salaries for the year were ________.

All of the following activities are classified as investing activities on a statement of cash flows except ________.

Accumulated other comprehensive income is reported on the statement of comprehensive income.

Which of the following is classified as an operating activity on a statement of cash flows?

Deluxe Hotels reported revenues of $570,000 for the year ended December 31, 2019. Accounts receivable at December 31, 2018 and 2019 were $67,000 and $47,000. If Deluxe uses the direct method of reporting operating cash flows, the company would report cash collected from customers of ________.

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

The first footnote in a set of financial statements is usually a summary of significant accounting policies.

The report format of the balance sheet lists assets on the left side and liabilities and stockholders' equity on the right side of the statement.

Disclosure of a related-party transaction must include an evaluation of the fairness of the transaction's terms.

Solvency is a measure of a firm's ability to pay its obligations as they mature.

Management is responsible for the fair presentation of a company's financial statements.