Deck 6: Reporting and Analyzing Inventory

Question 1

Which of the following income statement figures would probably be the best indicator of a company's future performance?

A) Total revenues.
B) Income from operation.
C) Net income.
D) Comprehensive income.

Answer 1

B

Question 2

A disadvantage of the corporate form of business is:

A) its status as a separate legal entity.
B) continuous existence.
C) government regulation.
D) ease of transfer of ownership.

Answer 2

C

Question 3

The purchase of treasury stock:

A) increases total assets and decreases total stockholders' equity.
B) decreases total assets and increases total stockholders' equity.
C) increases total assets and increases total stockholders' equity.
D) decreases total assets and decreases total stockholders' equity.

Answer 3

D

Question 4

Common size analysis is one technique of:

A) ratio analysis.
B) horizontal analysis.
C) liquidity analysis.
D) vertical analysis.

Question 5

___ 4. Deeper Company paid $42,000 to buy 4,000 shares of its $6 par value common stock for the treasury. The stock was originally issued for $50,000. The entry to record the purchase includes a:

A) debit to Treasury Stock for $42,000.
B) credit to Treasury Stock for $50,000.
C) debit to Treasury Stock for $50,000.
D) credit to Common Stock for $42,000.

Question 6

If a loss of $12,000 is incurred in selling (for cash) equipment having a book value of $60,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is:

A) $12,000.
B) $60,000.
C) $48,000.
D) $78,000.

Question 7

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is:

A) cash flows from operating activities.
B) cash flows from investing activities.
C) cash flows from financing activities.
D) usually different from year to year.

Question 8

One major purpose of the statement of cash flows is to provide information about:

A) the firm's profitability.
B) the firm's cash receipts and payments during a period.
C) the firm's resources and claims against those resources.
D) changes in retained earnings.

Question 9

Investing activities include:

A) collecting cash on loans made.
B) obtaining cash from creditors.
C) obtaining capital from owners.
D) repaying money previously borrowed.

Question 10

The best way to study the relationship of the components within a financial statement is to prepare:

A) common size statements.
B) a trend analysis.
C) profitability analysis.
D) ratio analysis.

Question 11

Which of the following would be considered an "Other Comprehensive Income" item?

A) Net income.
B) Gain on disposal of discontinued operations.
C) Extraordinary loss related to flood.
D) Unrealized loss on available-for-sale securities.

Question 12

Tildon Company reported net income of $35,000 for the year. During the year, accounts receivable increased by $7,000, accounts payable increased by $3,000 and depreciation expense of $5,000 was recorded. Net cash provided by operating activities for the year is:

A) $50,000.
B) $34,000.
C) $36,000.
D) $35,000.

Question 13

The purchase of an office building by issuing long-term notes payable should be reported as a:

A) cash outflow in the financing section of the statement of cash flows.
B) cash outflow in the investing section of the statement of cash flows.
C) cash outflow in the operating section of the statement of cash flows.
D) noncash investing and financing activity.

Question 14

Lorens Manufacturing declared a 10% stock dividend when it had 200,000 shares of $5 par value common stock outstanding. The market price per common share was $12 per share when the dividend was declared. The entry to record this dividend declaration includes a credit to:

A) Stock Dividends of $240,000.
B) Paid-in Capital in Excess of Par for $140,000.
C) Common Stock for $240,000.
D) Stock Dividends for $100,000.

Question 15

Swanson Company had inventory of $220,000 and $180,000 on December 31, 2012, and December 31, 2011, respectively. Cost of goods sold for 2012 was $1,800,000. Average days in inventory is approximately:

A) 36.5.
B) 9.
C) 40.6.
D) 10.

Question 16

Thomas Corporation issued 3,000 shares of $5 par value common stock for $20 per share. The entry to record this transaction includes a credit to Paid-in Capital in Excess of Par for:

A) $60,000.
B) $45,000.
C) $15,000.
D) $30,000.

Question 17

In the statement of cash flows, the activities that affect cash flows are listed in the following order:

A) investing, financing, then operating.
B) operating, financing, then investing.
C) financing, operating, then investing.
D) operating, investing, then financing.

Question 18

Ross Paints reported sales of $350,000, total assets of $150,000, total stockholders' equity of $60,000, current assets of $50,000, current liabilities of $30,000, and cash of $15,000. In a vertical analysis of the balance sheet, cash would be shown as:

A) 25%.
B) 10%.
C) 30%.
D) 20%.