Question 1

When preparing a statement of changes in financial position using the cash basis for defining funds,an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

Accepted Answer

A) Funds were increased since inventory is a current asset 
B) The net increase in inventory reduced cost of goods sold but represents an assumed use of cash 
C) Inventory is an expense deducted in computing net earnings,but is not a use of funds 
D) All changes in noncash accounts must be disclosed under the all financial resources concept

Question 2

Net cash provided used)by operating activities − net cash used in acquiring property,plant is the calculation for

Accepted Answer

A) Free cash flow 
B) Cash flow from investing activities 
C) Working capital 
D) Current ratio

Question 3

What is reported on the statement of cash flows?

Accepted Answer

A) Operating,investing,and financing activities of an entity for a period of time 
B) All revenues and expense listed by operating,financing,and operating actitivity 
C) Operating,investing,and financing activities of an entity at the balance sheet date 
D) A detail of all incoming and outgoing cash flows of a business

Question 4

Which of the following should theoretically be presented in a statement of changes in financial position only because of the all-financial-resources concept?

Accepted Answer

A) Conversion of preferred stock to common stock 
B) Purchase of treasury stock 
C) Sale of common stock 
D) Declaration of cash dividend

Question 5

The financial statement which summarizes operating,investing,and financing activities of an entity for a period of time is the

Accepted Answer

A) Statement of cash flows. 
B) Retained earnings statement. 
C) Statement of financial position. 
D) Income statement.

Question 6

A transaction that would appear as an application of funds on a conventional funds statement using the all-financial-resources concept,but not on a statement using the traditional working capital concept would be the

Accepted Answer

A) Acquisition of property,plant,and equipment for cash 
B) Reacquisition of bonds issued by the reporting entity 
C) Acquisition of property,plant,and equipment with an issue of common stock 
D) Declaration and payment of dividends

Question 7

The definition of fair value in SFAS No 157FASB ASC 820)is

Accepted Answer

A) Entry price based 
B) Exit price based 
C) Replacement cost based 
D) Historical cost based

Question 8

In preparing a statement of cash flows,which of the following transactions would be considered an investing activity?

Accepted Answer

A) Sale of merchandise on credit 
B) Declaration of a cash dividend 
C) Issuance of bonds payable at a discount 
D) Sale of equipment at book value

Question 9

The firm's ability to convert an asset to cash or to pay a current liability change is the definition of

Accepted Answer

A) Liquidity 
B) Solvency 
C) Financial flexibility 
D) Working capital

Question 10

Which of the following is not a component of equity?

Accepted Answer

A) Common stock 
B) Treasury stock 
C) Retained earnings 
D) Unearned revenue

Question 11

The working capital format is one possible format for presenting a statement of changes in financial position.Which of the following formats is are)also theoretically acceptable? Cash Quick Assets

Accepted Answer

A) Acceptable Not acceptable 
B) Not acceptable Not acceptable 
C) Not acceptable Acceptable 
D) Acceptable Acceptable

Question 12

A gain on the sale of plant assets in the ordinary course of business should be presented in a statement of cash flows as a an)

Accepted Answer

A) Source and use of cash 
B) Use of cash 
C) Addition to income from continuing operations 
D) Deduction from income from continuing operations

Question 13

The calculation net income/average total assets is the formula for which of the following ratios

Accepted Answer

A) Return on assets 
B) Profit margin 
C) Asset turnover 
D) Asset usage

Question 14

The firm's ability to use its financial resources to adapt to change is the definition of

Accepted Answer

A) Liquidity 
B) Solvency 
C) Financial flexibility 
D) Working capital

Question 15

Which of the following should be presented in a statement of cash flows? Conversion of Conversion of
Long-term debt preferred stock
To common stock to common stock

Accepted Answer

A) No No 
B) No Yes 
C) Yes Yes 
D) Yes No

Question 16

The calculation net income/sales is the formula for which of the following ratios

Accepted Answer