Question 1

The two principal sources of financing for corporations are

Accepted Answer

A)   debt and accounts payable.
B)   debt and equity.
C)   common equity and preferred equity.
D)   cash and common equity. B

Question 2

What information does a firm's statement of cash flows provide to the viewing public?

Accepted Answer

A)   a report of investments made and their cost for a specific period of time
B)   a report documenting a firm's cash inflows and cash outflows from operating, financing, and investing activities for a defined period of time
C)   a report of revenues and expenses for a defined period of time
D)   an itemization of all of a firm's assets, liabilities, and equity for a defined period of time B

Question 3

Use the following information to calculate the change in the company's cash balance for the year.

Accepted Answer

A)   $145,000
B)   $180,000
C)   $260,000
D)   $365,000 C

Question 4

Which of the following statements about Generally Accepted Accounting Principles (GAAP)is NOT true?

Accepted Answer

A)   GAAP is a set of rule-based accounting standards established by the Financial Accounting Standards Board (FAS
B)  .
B)   GAAP sets out the standards, conventions, and rules that accountants must follow when preparing audited financial statements.
C)   GAAP is complex, providing more than 150 "pronouncements" as to how to account for different types of transactions.
D)   All of the statements above are true.

Question 5

What information does a firm's income statement provide to the viewing public?

Accepted Answer

A)   an itemization of all of a firm's assets and liabilities for a defined period of time
B)   a complete listing of all of a firm's cash receipts and cash expenditures for a defined period of time
C)   a report of revenues and expenses for a defined period of time
D)   a report of investments made and their cost for a specific period of time

Question 6

Fixed assets are assets whose balances will remain the same throughout the year.

Accepted Answer

A) True 
 B)False

Question 7

How do gross profits,operating income,and net income relate to the areas of business activity reported in the income statement?

Accepted Answer

The answer of How do gross profits,operating income,and net income...

Question 8

Earnings available to common shareholders represents income that may be reinvested in the firm or distributed to its owners.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following accounts belongs in the equity section of a balance sheet?

Accepted Answer

A)   retained earnings
B)   cash
C)   long-term debt
D)   dividends

Question 10

A balance sheet is a statement of the financial position of the firm on a given date,including its asset holdings,liabilities,and equity.

Accepted Answer

A) True 
 B)False

Question 11

Siskiyou,Inc.has total current assets of $1,200,000; total current liabilities of $500,000; and long-term assets of $800,000.How much is the firm's Total Liabilities & Equity?

Accepted Answer

A)   $2,500,000
B)   $1,300,000
C)   $2,000,000
D)   $1,800,000

Question 12

Wheeler Corporation had retained earnings as of 12/31/10 of $15 million.During 2011,Wheeler's net income was $7 million.The retained earnings balance at the end of 2011 was equal to $20 million.Therefore,

Accepted Answer

A)   Wheeler paid a dividend in 2010 of $5 million.
B)   Wheeler paid a dividend in 2010 of $2 million.
C)   Wheeler sold common stock during 2010 for $5 million.
D)   Wheeler purchased treasury stock in 2010 for $2 million.

Question 13

Which of the following represents an attempt to measure the net results of the firm's operations (revenues versus expenses)over a given time period?

Accepted Answer

A)   balance sheet
B)   statement of cash flows
C)   income statement
D)   sources and uses of funds statement

Question 14

All of the following would result in an increase in stockholders equity EXCEPT

Accepted Answer

A)   the company sold common stock at par value.
B)   the company sold common stock above par value.
C)   the company purchased treasury stock.
D)   the company had positive net income greater than dividends paid.

Question 15

The December 31,2009 balance sheet shows net fixed assets of $150,000 and the December 31,2010 balance sheet shows net fixed assets of $250,000.Depreciation expense for 2009 is $25,000 and depreciation expense for 2010 is $35,000.Based on this information,the cost of fixed assets purchased during 2010 is

Accepted Answer

A)   $100,000.
B)   $110,000.
C)   $135,000.
D)   $160,000.

Question 16

A corporation has annual sales of $18 million,total assets of $4 million,a debt ratio of 40%,depreciation expense of $200,000,and a tax rate of 40%.The corporation's total stockholders' equity is equal to

Accepted Answer

A)   $5,600,000.
B)   $2,800,000.
C)   $2,400,000.
D)   $1,800,000.

Question 17

Please refer to Table 3-2 for the following questions.
Table 3-2
Enigma has the following financial information:
  
No changes were made in interest payable or taxes payable.
-Is it possible for a company that has negative net income and negative operating cash flow to end the year with an increase in cash and an increase in stock price? Explain your answer.

Accepted Answer

The answer of Please refer to Table 3-2 for the...

Question 18

Financing activities have no impact on the income statement,but rather are reflected in changes in long-term debt and short-term debt on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 19

Please refer to Table 3-2 for the following questions.
Table 3-2
Enigma has the following financial information:
  
No changes were made in interest payable or taxes payable.
-A firm paid dividends of $10,000,paid interest of $20,000,reduced debt principal outstanding (paid off debt)in the amount of $100,000,and sold new stock for $150,000.What was the firm's cash flow from financing activities?

Accepted Answer

A)   +$20,000 ($20,000 flowed into the firm) 
B)   -$20,000 ($20,000 flowed out of the firm) 
C)   +$280,000 ($280,000 flowed into the firm) 
D)   -$280,000 ($280,000 flowed out of the firm)

Question 20

The more debt a company uses to finance its assets,the lower will be its operating income due to higher interest expense.

Accepted Answer

A) True 
 B)False

Exam 3: Understanding Financial Statements and Cash Flows

The two principal sources of financing for corporations are

What information does a firm's statement of cash flows provide to the viewing public?

Use the following information to calculate the change in the company's cash balance for the year.

Which of the following statements about Generally Accepted Accounting Principles (GAAP) is NOT true?

What information does a firm's income statement provide to the viewing public?

Fixed assets are assets whose balances will remain the same throughout the year.

How do gross profits,operating income,and net income relate to the areas of business activity reported in the income statement?

Earnings available to common shareholders represents income that may be reinvested in the firm or distributed to its owners.

Which of the following accounts belongs in the equity section of a balance sheet?

A balance sheet is a statement of the financial position of the firm on a given date,including its asset holdings,liabilities,and equity.

Siskiyou,Inc.has total current assets of $1,200,000; total current liabilities of $500,000; and long-term assets of $800,000.How much is the firm's Total Liabilities & Equity?

Wheeler Corporation had retained earnings as of 12/31/10 of $15 million.During 2011,Wheeler's net income was $7 million.The retained earnings balance at the end of 2011 was equal to $20 million.Therefore,

Which of the following represents an attempt to measure the net results of the firm's operations (revenues versus expenses) over a given time period?

All of the following would result in an increase in stockholders equity EXCEPT

A corporation has annual sales of $18 million,total assets of $4 million,a debt ratio of 40%,depreciation expense of $200,000,and a tax rate of 40%.The corporation's total stockholders' equity is equal to

Financing activities have no impact on the income statement,but rather are reflected in changes in long-term debt and short-term debt on the balance sheet.

The more debt a company uses to finance its assets,the lower will be its operating income due to higher interest expense.