Exam 16: Basic Accounting Concepts, Techniques, and Conventions

An example of a financing activity on the statement of cash flows is the conversion of debt to common stock.

The sum of all depreciation taken to date on a fixed asset

Given below is a list of events: 1. payment of employee wages 2) cash collections from customers 3) sale of capital stock 4) sale of land, at cost 5) payment of a cash dividend 6) borrow cash from creditors 7) purchase of equipment 8) cash sale of inventory 9) purchase inventory on account Which of the above events are inflows in the operating section of the statement of cash flows?

An example of a financing activity on the statement of cash flows is payment of cash dividends.

Captain Nemo Company has the following balances as of December 31, 20X5: Beginning retained earnings \ 20,000 Cost of goods sold 46,000 Depreciation expens e 1,450 Dividends 4,000 Income tax expense 5,000 Interest expense 1,050 Rent expense 1,700 Sales 68,000 Wage expense 6,800 Prepare a combined statement of income and retained earnings using the multiple- step method.

If a company's sales were all for cash and it paid all expenses in cash as incurred, then the cash flows from operating activities would be identical to net income.

Retained earnings are sometimes called retained income.

Assets such as notes receivable and short- term investments that are not cash equivalents

A creditor claim that is junior to the other creditors in exercising claims against assets

Operating income is equal to the cash flow from operations on a cash flow statement.

Stock that has no predetermined rate of dividends and is the last to obtain a share in the assets when the corporation is dissolved

Preferred stockholders' potential participation in earnings is unlimited.

An example of an investing activity on the statement of cash flows is purchasing fixed assets by issuing debt.

Current assets less current liabilities

The possibility that long- term debt holders can transfer their debt back to the company in exchange for the company's stock

Crosby Company reported sales on account of $250,000, an increase in inventory of $70,000, and a decrease in accounts receivable of $20,000. _ was received from Crosby Company's customers.

is not considered in the determination of the operating cycle.

The liabilities of Pocahontas Company are listed below: Accounts payable \ 20,000 First Mortgage bonds payable \ 100,000 Debentures payable \ \ 0,000 Pocahontas Company liquidated its assets, receiving $150,000 cash. The debenture holders will receive if the debentures are subordinated.

Which one of the following statements is false?

Formal certificates of indebtedness that are accompanied by a promise to pay interest at a specified annual rate