ACC 556 CHAPTER 12 QUIZ
ACC 556 CHAPTER 12 QUIZ
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Zoum Corporation had the following transactions during 2014:
1 – Issued $125,000 of par value common stock for cash.
2 – Recorded and paid wages expense of $60,000.
3 – Acquired land by issuing common stock of par value $50,000.
4 – Declared and paid a cash dividend of $10,000.
5 – Sold a long-term investment (cost $3,000) for cash of $3,000.
6 – Recorded cash sales of $400,000.
7 – Bought inventory for cash of $160,000.
8 – Acquired an investment in Zynga stock for cash of $21,000.
9 – Converted bonds payable to common stock in the amount of $500,000.
10 – Repaid a 6 year note payable in the amount of $220,000.
What is the net cash provided by financing activities?
The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.
Authentic Exposure Company had the following transactions that took place during the year:
I. Paid amount owing to suppliers $2,750.
II. Purchased new equipment for $5,000 by signing a long-term note payable.
III. Purchased a patent and paid $15,000 cash for the asset.
How what is the total effect of these transactions on Free Cash Flow, Current Cash Debt Coverage, and Cash Debt Coverage respectively?
Free Current Cash Debt Cash Debt
Increase Increase Increase
Decrease Decrease Decrease
No Effect No Effect No Effect
Increase No Effect No Effect
The current cash debt coverage ratio is considered a better representative of liquidity than the current ratio because it involves the entire year rather than a balance at one point in time.
Which of the following transactions does not affect cash during a period?
Write-off of an uncollectible account.
Collection of an accounts receivable.
Sale of treasury stock.
Redeeming bonds before maturity.
The information to prepare the statement of cash flows comes from all of the following sources except
comparative balance sheets.
additional transaction data about cash provided or used during the period.
adjusted trial balance.
current income statement.
In order to determine net cash provided by operating activities, a company must convert net income from an accrual basis to a cash basis under
the direct method only.
the indirect method only.
both the direct method and the indirect method.
neither the direct nor the indirect method.
Generally, the most important category on the statement of cash flows is cash flows from
significant noncash activities.
The statement of cash flows will not provide insight into
why dividends were not increased.
whether cash flow is greater than net income.
the exact proceeds of a future bond issue.
how the retirement of debt was accomplished.
All of the following statements are true regarding cash flow presentations except
the balance sheet provides only limited information about a company’s cash flows.
the balance sheet provides information about how property, plant, and equipment were financed.
the income statement does not show how much cash was generated by operating activities.
if cash from operations is compared to net income, information about the quality of reported net income is revealed.
For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
Decrease in accounts payable during a period
Declaration and payment of a cash dividend.
Loss on disposal of land.
Decrease in accounts receivable during a period.
Redemption of bonds for cash.
Proceeds from sale of equipment at book value.
Issuance of common stock for cash.
Purchase of a building for cash.
Acquisition of land in exchange for common stock.
Increase in inventory during a period.
Cash outflow—financing activity
Cash inflow—investing activity
Deducted from net income
Added to net income
Cash inflow—financing activity
Cash outflow—investing activity
Significant noncash investing and financing activity
Peninsula Company reported net income of $260,000 for the year. During the year, accounts receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expense of $45,000 was recorded. Net cash provided by operating activities for the year is
The statement of cash flows
must be prepared on a daily basis.
summarizes the operating, financing, and investing activities of an entity.
is another name for the income statement.
is a special section of the income statement.
In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)
subtraction from net income.
addition to net income.
addition to cash flow from investing activities.
subtraction from cash flow from investing activities.
The cash debt coverage ratio indicates a company’s ability to repay its liabilities from cash generated from operations.
Laser Performance Inc. has the following information available (amount in thousands).
Net Income $30,000
Average Total Liabilities 80,000
Average Current Liabilities 36,000
Cash Provided by Operations 48,000
Cash Sales 130,000
Capital Expenditures 22,000
Dividends Paid 6,000
What is the current cash debt coverage?
.600 times .
.833 times .
The net income reported on the income statement for the current year was $440,000. Depreciation was $62,000. Accounts receivable and inventories decreased by $20,000 and $32,000, respectively. Prepaid expenses and accounts payable increased, respectively, by $2,000 and $16,000. How much cash was provided by operating activities?
The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement.