BF140 Quiz 2 Review

According to the accrual accounting principle, _____ should be recognized in the period in which it is earned regardless of when cash is collected.

As accumulated depreciation does not affect the cash flow, there is no need for its _______ when a company prepares the investment activities section of the statement of cash flows. 

The ending cash balance on the statement of cash flows equals to the cash balance on the ________

______ are values that Accounts Receivable report on the balance sheet.

A _______ is a debt security that yields interest payments and can be exchanged at the option of the bondholder for common stock or some other specified ownership interest

Sunflower Co.’s income statement reported net income of $200,000 for the year. Sunflower Co. reported a decrease in prepaid insurance of $20,000 and depreciation expense of $50,000. Which of the following is the net cash flow from operating activities (if the indirect method is used)? 

• $225,000

• $100,000

• $270,000

• $50,000

Assume a company purchased an asset for $10,000 with 5-year useful life at the beginning of Year 1. Which of the following is the book value of the asset at the beginning of Year 3 if the company applies double-declining-balance method of amortization? 

• $3600

• $2800

• $8600

• $7200

Mr. Brown earns a monthly salary of $10,000. He pays 24% of federal income tax, 6% of Social Security Contributions and 1.5% of Medicare. He also authorized his employer to withhold $50 as donation to the American Heart Association. Which of the following is Mr. Brown’s net earnings? 

• $2300

• $4500

• $5600

• $6800

Using accrual accounting, revenue is recorded and reported only ________.

• when the services are rendered without regard to when cash is received

• if cash is received after the services are rendered

• when cash is received at the time services are rendered

• when cash is received without regard to when the services are rendered

An accounting report that is used to show revenue and expenses is the

• Loss and Profit Statement

• Revenue and Expenses Statement

• The Profit or Loss Statement

• The Income Statement