Chapter 15

Question 1

3 Types of External Reports?

Answer 1

income statement, statement of cash flow, balance sheet

Question 2

Fundamental Principle

Answer 2

Change in Cash Balance= Change in Noncash balance sheets

Question 3

Basic Equation for Asset Accounts

Answer 3

Beginning Balance + Debits - credit = Ending Balance

Question 4

Cash in Cash Flows refers to:

Answer 4

Currency and Bank Accounts, treasury bills, commercial paper, and money market funds

Question 5

Operating Activities

Answer 5

Revenue and expense transactions that affect net income

Question 6

Investing Activities

Answer 6

Acquiring or disposing of noncurrent/long-term assets

Question 7

Financing Activities

Answer 7

Borrowing from and repaying principal to creditors and transactions with stockholders

Question 8

Operating Cash Inflows

Answer 8

Collecting cash from customers

Question 9

Operating Cash Outflows

Answer 9

Paying suppliers for inventory purchases, paying bills to insurers, utility providers, paying wages and salaries to employees, paying taxes to government bodies, paying interest to lenders

Question 10

Investing Cash Inflows

Answer 10

Selling stocks and bonds held foras a long-term investment, selling property plan and equipment, collecting the principal on a loan to another entity

Question 11

Investing Cash Outflows

Answer 11

Buying property pland and equipment, buying stocks and bonds as a long-term investment, lending money to another entity

Question 12

Financing Cash Inflows

Answer 12

Borrowing money from creditor, collecting cash from sale of common stock

Question 13

Financing Cash Outflows

Answer 13

Repaying the principal amount of a debt, paying cash to repurchase your own common stock, paying a dividend to stockholders.

Question 14

Direct Method

Answer 14

Reconstructs the income statement on a cash basis from top to bottom

Question 15

Indirect Method

Answer 15

Accrual net income is adjusted to a cash basis, used by 99% of companies. Both have the same amount of cash provided

Question 16

Indirect Method Steps

Answer 16

1. Add depreciation charges to net income
2. Analyze net changes
3. Noncash balance sheet accounts adjust for gains and losses

Question 17

Basic equation for contra asset, liability, and stockholders equity accounts

Answer 17

Beg Balance- Debits+Credits= Ending Balance

Question 18

Under GAAP gains and losses must be included in ____ and removed from net income in _____

Answer 18

Investing & Operating activities

Question 19

Free Cash Flow

Answer 19

Measures a company’s ability to fund its capital expenditures and dividends from its net cash provided