ACC 556 CHAPTER 12 QUIZ

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Question 1 

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?

 

$<105,000>.

 

$395,000.

 

$<605,000>.

 

$115,000.

Question 2 

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

True

False

Question 3 

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
Cash Flow Coverage Coverage 

 

Increase                                   Increase                                    Increase

 

Decrease                                 Decrease                                   Decrease

 

No Effect                                  No Effect                                   No Effect

 

Increase                                   No Effect                                   No Effect

Question 4 

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.

True

False

Question 5 

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.

Question 6 

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.

Question 7 

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.

Question 8 

Generally, the most important category on the statement of cash flows is cash flows from

 

operating activities.

 

investing activities.

 

financing activities.

 

significant noncash activities.

Question 9 

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.

Question 10 

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.

Question 11 

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.

 

A.

Cash     outflow—financing activity

 

B.

Cash inflow—investing     activity

 

C.

Deducted from net     income

 

D.

Added to net     income

 

E.

Cash     inflow—financing activity

 

F.

Cash     outflow—investing activity

 

G.

Significant     noncash investing and financing activity

Question 12 

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

 

$275,000.

 

$245,000.

 

$227,000.

 

$260,000.

Question 13 

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.

Question 14 

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.

Question 15 

The cash debt coverage ratio indicates a company’s ability to repay its liabilities from cash generated from operations.

True

False

Question 16 

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?

 

1.333 times.

 

.600 times .

 

.833 times .

 

.369 times.

Question 17 

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?

 

$496,000.

 

$568,000.

 

$536,000.

 

$436,000.

Question 18 

The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement.

True

False