Question 1

Accumulated other comprehensive income appears on an entity's income statement.

Accepted Answer

A) True 
 B)False  False

Question 2

IFRS specifies that biological assets should be reported on the balance sheet.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is a current asset?

Accepted Answer

A)   treasury bill acquired with 2 months to maturity
B)   land held for investment
C)   equipment
D)   goodwill A

Question 4

Which of the following is considered an investing activity when preparing the statement of cash flows?

Accepted Answer

A)   a purchase of equipment
B)   a payment on an equipment note
C)   sale of common stock
D)   payment of interest on a bond issue

Question 5

Which of the following is a not a component of shareholders' equity?

Accepted Answer

A)   Common Stock
B)   Dividends Payable
C)   Additional Paid-in Capital
D)   Treasury Stock

Question 6

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

Accepted Answer

A)   depreciation expense
B)   gain on sale of long-term assets
C)   decrease in prepaid expenses
D)   increase in income taxes payable

Question 7

Which of the following is not a limitation of the balance sheet?

Accepted Answer

A)   Many balance sheet accounts are reported at historical cost instead of market values or liquidation values.
B)   A number of assets and liabilities, such as human capital and reputation, are not reported on the balance sheet.
C)   Many balance sheet accounts are based upon estimates as opposed to determinable amounts.
D)   Many of the balances are reported at their liquidation values.

Question 8

Presented below are selected accounts for San Marcos Corporation for December 31 of the current year. 
 What is ending retained earnings for San Marcos Corporation?

Accepted Answer

A)   $308
B)   $173
C)   $305
D)   $613

Question 9

Teague Industries Presented below is selected financial data for Teague Industries for the current year:
\(\begin{array}{|c|c|c|c|}
\hline \text { Current assets: } & & \text { Current liabilities } & \
\hline \text { Cash and cash equivalents } & \$ 3,513 & \text { Accounts payable } & \$ 5,365 \
\hline \text { Short-term investments } & 1,565 & \text { Other current liabilities } & 2,882 \
\hline \text { Receivables, net } & 1,861 & \text { Total current liabilities } & 8,247 \
\hline \text { Merchandise inventories } & 6,185 & \text { Noncurrent liabilities } & 5,156 \
\hline \text { Other current assets } & 1,925 & \text { Shareholders' Equity } & 6,230 \
\hline \text { Total current assets } & 15,049 & \begin{array}{l}
\text { Total liabilities and shareholders' } \
\text { equity }
\end{array} & \$ 19,633 \
\hline \text { Noncurrent assets } & 4,584 & & \
\hline \text { Total assets } & \$ 19,633 & & \
\hline \text { Revenues } & \$ 50,826 & & \
\hline \text { Costs and Expenses } & 45,963 & & \
\hline \text { Operating Income } & 4,863 & & \
\hline \begin{array}{l}
\text { Other income/expense (including } \
\text { interest expense of } \$ 50 \text { ) }
\end{array} & (26) & & \
\hline \text { Income before income tax } & 4,837 & & \
\hline \text { Income tax expense } & (1,439) & & \
\hline \text { Net income } & \$ 3,398 & & \
\hline
\end{array}\)
 
Previous Years' Financial Data
$$\begin{array} { | l | r | } 
\hline \text { Total Assets } & \$ 17,120 \
\hline \text { Shareholders' Equity } & 3,990 \
\hline
\end{array}$$
 Working capital for Teague Industries is ________.

Accepted Answer

A)   $6,230
B)   $6,802
C)   $1,852
D)   $11,386

Question 10

There is an inverse relationship between a company's solvency level and risk of default.

Accepted Answer

A) True 
 B)False

Question 11

Glover Corporation's trial balance for December 31, the end of its fiscal year, included the following accounts: $$\begin{array} { | l | r | } 
\hline \text { Accounts Payable } & \$ 40,000 \
\hline \text { Dividends Payable } & 22,000 \
\hline \text { Bond Payable, maturing in 9 years } & 36,000 \
\hline \text { Salaries Payable } & 9,000 \
\hline \text { Note Payable, due in 1 year } & 30,000 \
\hline \text { Note payable, due in 5 years } & 60,000 \
\hline
\end{array}$$
 The amount that should be classified as current liabilities on Glover's December 31 balance sheet is ________.

Accepted Answer

A)   $71,000
B)   $79,000
C)   $101,000
D)   $161,000

Question 12

Prepaid expenses are normally reported as current assets.

Accepted Answer

A) True 
 B)False

Question 13

Baton Rouge Corporation Presented here are cash flows (in $ Millions) for Baton Rouge Corporation's most recent fiscal year:
$\begin{array}{lrr}
\underline{\text { Cash received from: }}\
  \text { Customers } &\$3,600\
 \text { Interest on investments } &700\
 \text { Sale of old equipment } &4,100\
 \text { Sale of company's capital stock } &490\
 \text {  Long-term debt proceeds} &2,200\
\end{array}$

$\begin{array}{lr}
\underline{\text { Cash paid for: }}\
\text { Interest on debt } & \$ 395 \
\text { Income tax } &210 \
\text { Principal payments on debt } & 1,400 \
\text { Purchase of building } &1,100 \
\text { Purchase of inventory } & 1,400 \
\text { Dividends on capital stock } & 350 \
\text { Operating expenses } &770
\end{array}$ 
Net cash flows from operating activities (direct method) are ________.

Accepted Answer

A)   $825
B)   $1,525
C)   $1,735
D)   $1,920

Question 14

When using the direct method, losses on the sale of long-term assets are added to net income in the operating activities section.

Accepted Answer

A) True 
 B)False

Question 15

Complete the U.S. GAAP and IFRS columns in the table below by identifying the cash flow activity on the statement of cash flows: Operating, Investing, or Financing. If a standard allows for more than one activity classification be sure to note both. For example, if an activity can be classified as "Operating or Financing," please note both classifications.
 $$\begin{array} { |l ll| } 
\hline\text { Activities } & \text { U.S. GAAP }&\text{IFRS} \
\hline \text { Cash receipts from interest } & \
\hline \text { Cash payments for interest } & \
\hline \text { Cash receipts from dividends } & \
\hline \text { Cash payments for dividends to } \
\text { owners }\
\hline 
\end{array}$$

Accepted Answer

The answer of Complete the U.S. GAAP and IFRS columns...

Question 16

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

Accepted Answer

A)   purchase of a vendor's common stock
B)   sale of equipment at a gain
C)   payment of dividends to shareholders
D)   redemption of a sinking fund

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

When using the indirect method to report cash flows from operating activities, depreciation expense is subtracted from net income to arrive at net cash provided by operating activities.

Accepted Answer

A) True 
 B)False

Question 19

A body that oversees the activities of the company is known as ________.

Accepted Answer

A)   auditors
B)   the audit committee
C)   the board of directors
D)   management

Question 20

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

Accepted Answer

A)   $920
B)   $1,000
C)   $1,025
D)   $1,130

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

Accumulated other comprehensive income appears on an entity's income statement.

IFRS specifies that biological assets should be reported on the balance sheet.

Which of the following is a current asset?

Which of the following is considered an investing activity when preparing the statement of cash flows?

Which of the following is a not a component of shareholders' equity?

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

Which of the following is not a limitation of the balance sheet?

Presented below are selected accounts for San Marcos Corporation for December 31 of the current year. What is ending retained earnings for San Marcos Corporation?

There is an inverse relationship between a company's solvency level and risk of default.

Prepaid expenses are normally reported as current assets.

When using the direct method, losses on the sale of long-term assets are added to net income in the operating activities section.

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

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

When using the indirect method to report cash flows from operating activities, depreciation expense is subtracted from net income to arrive at net cash provided by operating activities.

A body that oversees the activities of the company is known as ________.

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