Accounting Exam 2 Flashcards
Which of the following is a limitation of the balance sheet?
a. Many items that are of financial value are omitted.
b. Judgments and estimates are used.
c. Current fair value is not reported.
d. All of these
All of these
The balance sheet is useful for analyzing all of the following except
a. liquidity.
b. solvency.
c. profitability.
d. financial flexibility.
Profitability
Balance sheet information is useful for all of the following except to
a. compute rates of return
b. analyze cash inflows and outflows for the period
c. evaluate capital structure
d. assess future cash flows
Analyze cash inflows and outflows for the period
Balance sheet information is useful for all of the following except
a. assessing a company’s risk
b. evaluating a company’s liquidity
c. evaluating a company’s financial flexibility
d. determining free cash flows.
Determining free cash flows
A limitation of the balance sheet that is not also a limitation of the income statement is
Valuation of items at historical cost
The balance sheet contributes to financial reporting by providing a basis for all of the following except
a. computing rates of return.
b. evaluating the capital structure of the enterprise.
c. determining the increase in cash due to operations.
d. assessing the liquidity and financial flexibility of the enterprise.
Determining the increase in cash due to operations
One criticism not normally aimed at a balance sheet prepared using current accounting and reporting standards is
The extensive use of separate classifications
The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as
Liquidity
The net assets of a business are equal to
a. current assets minus current liabilities.
b. total assets plus total liabilities.
c. total assets minus total stockholders’ equity.
d. none of these.
None of these
The correct order to present current assets is
cash, accounts receivable, inventories, prepaid items
The basis for classifying assets as current or noncurrent is conversion to cash within
The operating cycle or one year, whichever is longer
The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in
inventory back into cash, or 12 months, whichever is longer
During 2012 the DLD Company had a net income of $55,000. In addition, selected accounts showed the following changes:
Accounts Receivable $3,000 increase
Accounts Payable 1,000 increase
Building 4,000 decrease
Depreciation Expense 1,500 increase
Bonds Payable 8,000 increase
What was the amount of cash provided by operating activities?
$54,500
Harding Corporation reports the following information:
Net income $450,000
Depreciation expense 140,000
Increase in accounts receivable 60,000
Harding should report cash provided by operating activities of
$530,000
Sauder Corporation reports the following information:
Net income $300,000
Depreciation expense 70,000
Increase in accounts receivable 30,000
Sauder should report cash provided by operating activities of
$340,000
Packard Corporation reports the following information: Net cash provided by operating activities $235,000 Average current liabilities 150,000 Average long-term liabilities 100,000 Dividends declared 60,000 Capital expenditures 110,000 Payments of debt 35,000 Packard’s cash debt coverage ratio is
0.94
Packard Corporation reports the following information: Net cash provided by operating activities $235,000 Average current liabilities 150,000 Average long-term liabilities 100,000 Dividends paid 60,000 Capital expenditures 110,000 Payments of debt 35,000 Packard’s free cash flow is
$65,000
Pedigo Corporation reports the following information: Net cash provided by operating activities $275,000 Average current liabilities 150,000 Average long-term liabilities 100,000 Dividends paid 60,000 Capital expenditures 110,000 Payments of debt 35,000 Pedigo’s cash debt coverage ratio is
1.10
Pedigo Corporation reports the following information: Net cash provided by operating activities $275,000 Average current liabilities 150,000 Average long-term liabilities 100,000 Dividends paid 60,000 Capital expenditures 110,000 Payments of debt 35,000 Pedigo free cash flow is
$105,000
An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the table value is found at
2% for 32 periods
If the number of periods is known, the interest rate is determined by
dividing the future value by the present value and looking for the quotient in the future value of 1 table.
Present value is
a. the value now of a future amount.
b. the amount that must be invested now to produce a known future value.
c. always smaller than the future value.
d. all of these.
All of these
Which of the following statements is true?
a. The higher the discount rate, the higher the present value.
b. The process of accumulating interest on interest is referred to as discounting.
c. If money is worth 10% compounded annually, $1,100 due one year from today is equivalent to $1,000 today.
d. If a single sum is due on December 31, 2012, the present value of that sum decreases as the date draws closer to December 31, 2012.
c. If money is worth 10% compounded annually, $1,100 due one year from today is equivalent to $1,000 today.
What is the primary difference between an ordinary annuity and an annuity due?
The timing of the periodic payment.
