Question 1

If an entity can borrow funds to meet an unexpected financial crisis,it exhibits high ________.

Accepted Answer

A) liquidity 
B) solvency 
C) stability 
D) financial flexibility 
A) liquidity 
B) solvency 
C) stability 
D) financial flexibility

Question 2

Which of the following is a current asset?

Accepted Answer

A) treasury bill maturing in 2 months 
B) land held for investment 
C) equipment 
D) goodwill 
A) treasury bill maturing in 2 months 
B) land held for investment 
C) equipment 
D) goodwill

Question 3

When preparing a 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

Question 4

Financial statements issued under IFRS require additional disclosures relating to executive compensation for related-party transactions.

Accepted Answer

A) True 
 B)False

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

Cash flows from investing activities are ________.

Accepted Answer

A) $(3,250) 
B) $(4,450) 
C) $(4,750) 
D) $(5,000) 
A) $(3,250) 
B) $(4,450) 
C) $(4,750) 
D) $(5,000)

Question 7

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

Accepted Answer

A) purchase of inventory 
B) sale of treasury bills with a 60-day maturity date 
C) payments from customers 
D) purchase of a Certificate of Deposit 
A) purchase of inventory 
B) sale of treasury bills with a 60-day maturity date 
C) payments from customers 
D) purchase of a Certificate of Deposit

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

When preparing the operating activities section of the statement of cash flows under the indirect method,gains on sale of equipment are subtracted from net income.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Presented below are the December 31 financial statements for Phillips Corporation (in $ Millions).
     Cash dividends of $60,750 were paid to shareholders during Year 2.
Prepare a statement of cash flows using the direct method.

Accepted Answer

The answer of Presented below are the December 31 financial...

Question 12

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 13

There is a direct relationship between a company's interest coverage ratio and degree of solvency.

Accepted Answer

A) True 
 B)False

Question 14

Define the Dupont Analysis model and explain the relationship between its components.

Accepted Answer

Dupont Analysis separates return on equi

Question 15

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 16

When preparing the operating activities section of the statement of cash flows under the indirect method,depreciation expense is subtracted from net income.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) unqualified opinion 
B) qualified opinion 
C) adverse opinion 
D) disclaimer of opinion 
A) unqualified opinion 
B) qualified opinion 
C) adverse opinion 
D) disclaimer of opinion

Question 18

Which of the following is not considered a financing activity when preparing the statement of cash flows?

Accepted Answer

A) issuance of common stock 
B) redemption of bonds payable 
C) payment of dividends 
D) payments on notes receivable 
A) issuance of common stock 
B) redemption of bonds payable 
C) payment of dividends 
D) payments on notes receivable

Question 19

The FASB prefers the indirect method of preparing the operating activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 20

The balance sheet reflects the financial position of an entity over a period of time.

Accepted Answer

A) True 
 B)False

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

If an entity can borrow funds to meet an unexpected financial crisis,it exhibits high ________.

Which of the following is a current asset?

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

Financial statements issued under IFRS require additional disclosures relating to executive compensation for related-party transactions.

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

Cash flows from investing activities are ________.

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

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

When preparing the operating activities section of the statement of cash flows under the indirect method,gains on sale of equipment are subtracted from net income.

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

Presented below are the December 31 financial statements for Phillips Corporation (in $ Millions). Cash dividends of $60,750 were paid to shareholders during Year 2. Prepare a statement of cash flows using the direct method.

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

There is a direct relationship between a company's interest coverage ratio and degree of solvency.

Define the Dupont Analysis model and explain the relationship between its components.

Degree of solvency refers to ________.

When preparing the operating activities section of the statement of cash flows under the indirect method,depreciation expense is subtracted from net income.

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

Which of the following is not considered a financing activity when preparing the statement of cash flows?

The FASB prefers the indirect method of preparing the operating activities section of the statement of cash flows.

The balance sheet reflects the financial position of an entity over a period of time.

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

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

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