Exam 3: Operating Decisions and the Accounting System

Explain why the profit reported on the income statement is usually not equal to net cash flows from operating activities on the statement of cash flows.

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is

When a corporation pays a dividend,the

On December 31,20A,Ted Corporation paid $2,000 for next year's insurance coverage.How should this transaction be recorded by Ted Corporation?

Part A.Perform transaction analysis for Cress Company regarding the following transactions for May.Indicate an increase (+)or decrease (-)to the account in front of the amount. Part B.Determine whether the transactions (A)-(F)above affected cash flows.If so,determine the type of activity as an operating activity,an investing activity,or a financing activity.If cash is not affected use "no effect." Place a check mark under the appropriate column for each transaction

Expenses incurred but not paid decrease assets and shareholders' equity.

Revenue accounts normally have debit balances because they represent assets received while expense accounts normally have credit balances because they represent assets used.

A company reports sales revenue of $120 million this year and $110 million last year.Their total assets in the current year are $80 million and last year's total assets were $75 million.What is the current year's asset turnover ratio?

Revenue is always recognized when which of the following occurs?

Under the accrual basis of accounting

Which of the following activities does not violate the revenue recognition principle?

When a growing company finds it needs to buy more inventory before cash has been collected from customers,they often use short term credit such as trade or notes payable to finance the inventory purchases.

Accrual basis accounting recognizes revenues when cash is received from the customer.

Which of the following costs is most likely to be the largest expense item on the income statement of a merchandising chain such as Walmart?

Why is the cash basis of accounting not appropriate for use by publicly traded corporations?

During 20B,New Company earned service revenues amounting to $200,000,of which $120,000 were collected in cash; the balance will be collected in January 20C.The 20B income statement of the company should report which of the following amounts for service revenues?

Revenue recognition most commonly occurs at the point of delivery of goods or services to the customer.

Operating cash inflows and outflows are primarily connected to which of the following?

A company can experience difficulty even if it does not report a loss.

If Golden Corporation declared a dividend to its shareholders which has not been paid,this would