Question 1

Cash receipts of interest income are reported in the ________ section of the statement of cash flows.The direct method is used.

Accepted Answer

A)  operating activities 
B)  investing activities 
C)  financing activities 
D)  noncash investing and financing activities

Question 2

The net amount a company expects to collects on Accounts Receivable is equal to ________.

Accepted Answer

A)  gross Accounts Receivable 
B)  Allowance for Doubtful Accounts 
C)  gross Accounts Receivable minus Allowance for Doubtful Accounts 
D)  gross Accounts Receivable plus Allowance for Doubtful Accounts

Question 3

Nonoperating items on a multiple-step income statement do NOT include ________.

Accepted Answer

A)  interest income 
B)  interest expense 
C)  gain from disposal of a fixed asset 
D)  selling expenses

Question 4

The wages expense of Florida Corporation was $45,000 as per its income statement.Beginning wages payable was $6,000.Ending wages payable was $3,000.The cash paid to employees was ________.

Accepted Answer

A)  $42,000 
B)  $45,000 
C)  $48,000 
D)  $50,000

Question 5

How should Unearned Rent Revenue be classified on a balance sheet at December 31,2013? The rental contract covers the period,January 1,2013 through December 31,2015.

Accepted Answer

A)  current liability only 
B)  long-term liability only 
C)  current and long-term liability 
D)  current asset only

Question 6

Under the direct method of preparing the statement of cash flows,the cash collected from customers is determined for the operating activities section.

Accepted Answer

A) True 
 B)False

Question 7

Accounts payable,wages payable and income taxes payable are all considered to be current liabilities.

Accepted Answer

A) True 
 B)False

Question 8

Mary Company had the following data available:
$\begin{array} { l  }
 \text {Paid-in capital, December 31, 2014 }&\$43,000 \
 \text { Retained earnings, December 31,2014}&\$27,000 \
 \text { Net income for the year ended December 31,2015 }&\$ 35,400\
 \text { Dividends declared in 2015}&\$ 20,000\
\end{array}$

What is the balance in Retained Earnings on December 31,2015?

Accepted Answer

A)  $23,400 
B)  $42,400 
C)  $52,400 
D)  $66,400

Question 9

Michigan Company has the following data available:
$\begin{array}{lll}&\text { December } & \text { December } \
&31,2011 & 31,2012\
\text { Fixed Assets } & \$ 125 & \$ 125 \
\text { Accumulated Depreciation } & \$ 110 & \$ 117 \
\text { Long-term debt } & \$ 125 & \$ 5 \
\text { Commonstock } & \$ 300 & \$ 400 \
\text { Retained earnings } & \$ 100 & \$ 120
\end{array}$
Dividends of $20 were declared on December 1,2012.What is the net income for the year ended December 31,2012?

Accepted Answer

A)  $10 
B)  $20 
C)  $30 
D)  $40

Question 10

The purpose of depreciation is to ________.

Accepted Answer

A)  establish the current replacement cost of a fixed asset 
B)  accumulate funds to replace a fixed asset 
C)  set aside cash to replace a fixed asset 
D)  allocate the original cost of a fixed asset to the periods that benefit from the use of the fixed asset

Question 11

The account Unearned Revenue is a revenue account.

Accepted Answer

A) True 
 B)False

Question 12

Nebraska Company gave a long-term note payable in the amount of $285,000 to acquire a new piece of land.This transaction will be reported on the statement of cash flows as a ________.

Accepted Answer

A)  investing activity 
B)  financing activity 
C)  investing and financing activity 
D)  noncash investing and financing transaction

Question 13

A multiple step income statement has several measures of profit that do NOT include ________.

Accepted Answer

A)  operating income 
B)  gross margin 
C)  income before taxes 
D)  cost of sales

Question 14

The cash received from the sale of bonds payable is included in the ________ section of the statement of cash flows.

Accepted Answer

A)  operating 
B)  investing 
C)  financing 
D)  noncash

Question 15

The limited liability of stockholders in a corporation means that ________.

Accepted Answer

A)  the company's creditors cannot seek payment from the stockholders as individuals if the corporation cannot pay its debt 
B)  the company's creditors cannot receive more than the face value of their debt 
C)  the short-term creditors have to be paid before the long-term creditors 
D)  the long-term creditors have to be paid before the short-term creditors

Question 16

Intangible assets are ________.

Accepted Answer

A)  assets with a physical presence 
B)  assets that can be seen and touched 
C)  rights to expected future benefits 
D)  assets with definite lives only

Question 17

Accrued interest payable is a long-term liability because it relates to a long-term bond payable.

Accepted Answer

A) True 
 B)False

Question 18

________ summarizes the results of the basic operating activities of a company.

Accepted Answer

A)  Gross margin 
B)  Gross profit 
C)  Net profit 
D)  Operating income

Question 19

The cash received from the sale of land is included in the ________ section of the statement of cash flows.

Accepted Answer

A)  operating 
B)  investing 
C)  financing 
D)  noncash

Question 20

An example of a noncash transaction on the statement of cash flows is the purchase of equipment with a long-term note payable.

Accepted Answer

A) True 
 B)False

Exam 16: Understanding Corporate Annual Reports: Basic Financial Statements

Cash receipts of interest income are reported in the ________ section of the statement of cash flows.The direct method is used.

The net amount a company expects to collects on Accounts Receivable is equal to ________.

Nonoperating items on a multiple-step income statement do NOT include ________.

The wages expense of Florida Corporation was $45,000 as per its income statement.Beginning wages payable was $6,000.Ending wages payable was $3,000.The cash paid to employees was ________.

How should Unearned Rent Revenue be classified on a balance sheet at December 31,2013? The rental contract covers the period,January 1,2013 through December 31,2015.

Under the direct method of preparing the statement of cash flows,the cash collected from customers is determined for the operating activities section.

Accounts payable,wages payable and income taxes payable are all considered to be current liabilities.

The purpose of depreciation is to ________.

The account Unearned Revenue is a revenue account.

Nebraska Company gave a long-term note payable in the amount of $285,000 to acquire a new piece of land.This transaction will be reported on the statement of cash flows as a ________.

A multiple step income statement has several measures of profit that do NOT include ________.

The cash received from the sale of bonds payable is included in the ________ section of the statement of cash flows.

The limited liability of stockholders in a corporation means that ________.

Intangible assets are ________.

Accrued interest payable is a long-term liability because it relates to a long-term bond payable.

________ summarizes the results of the basic operating activities of a company.

The cash received from the sale of land is included in the ________ section of the statement of cash flows.

An example of a noncash transaction on the statement of cash flows is the purchase of equipment with a long-term note payable.