NEW
Font size
WorksheetsCMA-Financial Statements Types, Presentation, Limitations, Users
Total questions: 60
Worksheet time: 3600secs
Fielding Manufacturing reported net income of $296,000 including depreciation expense of $90,000. The company sold investments for $12,000 that hada cost of $36,000. Accounts receivable decreased $50,000 and accounts payable increased $46,000. What amount did Fielding report as net cash providedby operating activities?
$326,000
$266,000
$506,000
$314,000
A justification for the periodic recording of depreciation expense can be demonstrated by which of the following?
The association of efforts (expense) with accomplishments (revenue)
Systematic and rational allocation of cost over the periods benefited
Immediate recognition of an expense
Minimization of income tax liability
Holden Company purchased 150 acres of land on the outer edge of a growing city. Holden expects the value of this land to appreciate by 500% over thenext three years. How would you expect Holden to report the value of this land on their balance sheet?
At the expected future value at the time of sale
At market value
At historical cost
At a depreciated value
What is one way that cash flows from investing activities are the opposite of cash flows from financing activities?
Cash flows from investing activities frequently reflect cash flows related to cash the company has loaned to others, whereas cash flows from financing activities frequently reflect cash flows related to cash the company has borrowed from others.
Cash flows from investing activities frequently reflect cash flows related to the purchase of property, plant, and equipment, whereas cash flows from financing activities frequently reflect cash flows related to the sale of property, plant, and equipment.
Cash flows from investing activities frequently reflect cash flows related to the purchase of treasury stock, and cash flows from financing activities frequently reflect cash flows related to the sale of treasury stock.
Cash flows from investing activities frequently reflect cash flows related to the receipt of dividends and interest from purchased securities, whereas cash flows from financing activities frequently reflect cash flows related to the payment of dividends and interest to investors and creditors.
All of the following are associated with Integrated Reporting
except:
reporting standards determined by the International Integrated Reporting Council (IIRC).
forward-looking information.
the Six Capitals.
a focus on value creation.
The following information was abstracted from the accounts of the Oar Corporation at December 31, Year 2:
Total income since incorporation including Year 2 $840,000
Total cash dividends declared 260,000
Proceeds from sale of donated stock (FV on date of donation was $30,000) 90,000
Total value of stock dividends distributed 60,000
Excess of proceeds over cost of treasury stock sold 140,000
The donated stock did not allow the company to exercise significant influence over the investee. What should be the current balance of retained earnings?
$610,000
$520,000
$580,000
$670,000
Emerson Industries sold a new issue of common stock to investors. How would this be recorded differently in the statement of cash flows than if they used the stock to purchase equipment?
The sale of stock to investors should be disclosed in a separate schedule, whereas exchange of stock for equipment should be included in cash flows from investing activities.
The sale of stock to investors should be included in cash flows from financing activities, whereas exchange of stock for equipment should be disclosed in a separate schedule.
The sale of stock to investors should be included in cash flows from investing activities, whereas the exchange of stock for equipment should be included in cash flows from financing activities.
The sale of stock to investors should not be disclosed in the statement of cash flows, whereas exchange of stock for equipment should be disclosed in a separate schedule.
Paul prepares its statement of cash flows using the direct method. In which section of the statement should Paul report the dividends received from an investment?
Operating activities.
Financing activities.
Investing activities.
Supplemental disclosures.
Anders Industries currently holds two debts: an $11,000 debt due in 12 months and a $16,000 debt due in 18 months. Anders prepares a classified balance sheet using an 18-month operating cycle. How should these debts be classified?
$11,000 should be classified as a current liability, and $16,000 should be classified as a long-term liability.
$16,000 should be classified as a current liability, and $11,000 should be classified as a long-term debt.
All $27,000 in debt should be classified as current liabilities.
All $27,000 in debt should be classified as long-term liabilities.
Blue Fox Industries had the following account balances at year-end.
Sales $452,000
Cash 23,400
Accounts payable 14,300
Rent expense 3,700
Accounts receivable 9,400
Cost of goods sold 214,000
Land 104,000
Unearned revenue 6,800
Gain on sale 17,500
Equipment 28,800
Inventories 2,200
Notes payable 67,000
What is the amount of total current assets reported on the balance sheet?
$39,900
$35,000
$32,800
$63,800
Your boss at Trinitron Inc. wants to discuss the origin of the company's cash in the last year and how it was used. What documents should you bring to the meeting?
The comparative balance sheet and the retained earnings statement
The income statements from last year and the year before
The balance sheet and the income statement
The statement of cash flows and supplementary schedules
In which section of the statement of cash flows would depreciation expense be found?
Operating
Investing
Financing
Noncash activities
All of the following are classifications on the Statement of Cash Flows except:
*Source: Retired ICMA CMA Exam Questions.
investing activities.
operating activities.
investing activities.
financing activities.
The following information is available for Mercer Industries.
What is Mercer's net cash provided by operating activities?
$258,000
$384,000
$366,000
$150,000
Disposal of which of the following would qualify as a disposal of a component?
A transportation company sells its bus operations but not its airline operations.
An auto parts manufacturer sells one of its five parts-manufacturing subsidiaries.
A toy company phases out one product line.
A technology company upgrades its software.
In good years, Dailey Industries often loans cash to other companies, but in difficult years, they have to borrow cash from other entities. How would they record these differently on the statement of cash flows?
Loaning money would be classified as an investing activity, whereas borrowing money would be classified as a financing activity.
Loaning money would be classified as a financing activity, whereas borrowing money would be classified as an investing activity.
Loaning money would be classified as a financing activity, whereas borrowing money would be classified as an operating activity.
Loaning money would be classified as an operating activity, whereas borrowing money would be classified as a financing activity.
The calculation of comprehensive income includes which of the following?
Operating income
Neither operating income nor distribution to owners
Operating income and distribution to owners
Distribution to owners
The financial accountant of Eva Wolfe Corp. has ascertained the cash flows from operations as follows.
The management accountant of the company argues that the cash flow from operations is incorrect as calculated. Which of the following statements correctly identifies the error in the above calculation?
Dividend income and interest income are already included in net income and do not require adjustment to find cash flow from operating activities.
The increase in current liabilities should be deducted from net income.
Depreciation on equipment should not be added back to net income for calculating cash flow from operations.
Cash flow from operations should be found using the direct method.
Last quarter Hyperion Enterprises sold new stock and paid dividends. How do these activities compare?
Both would be reported as a financing activity of the statement of cash flows.
Both would be reported as an operating activity on the statement of cash flows.
Both would be reported as an investing activity on the statement of cash flows.
Both would be reported on a separate schedule attached to the statement of cash flows.
As of December 31, 20x8, a firm's net income was $92,000 and its net cash flow from operating activities was $101,600. Over the course of 20x8, the firm's accounts receivable balance increased by several thousand dollars. Given this information and assuming that the firm uses the indirect method and the only other asset and liability is accounts payable, which of the following statements must be true?
The firm must have seen a significant drop in its accounts payable balance over the course of 20x8.
The firm must have seen a significant increase in its accounts payable balance over the course of 20x8.
The firm's accounts payable balance likely held steady over the course of 20x8.
Based on these figures, we cannot make any conclusions about how the firm's accounts payable balance must have changed during 20x8.
Manufactured capital, as defined under Integrated Reporting, includes all of the following items except:
Work-in-process inventory
Roads and bridges
Custom-made tools and patterns used in the manufacturing process
Patents and trademarks
When an organization begins to design and implement integrated reporting, the organization would likely perform all of the following except:
Attend workshops which discuss integrated reporting.
Meet with other organizations which have implemented integrated reporting.
Review the Integrated Reporting Framework published by the International Integrated Reporting Council.
Mandate the specific KPIs within all segments of the organization that will be included in the integrated report.
Below is the balance sheet and a partial income statement for Wonderful Water Bottles, a water bottle manufacturer and distributor:
This year Wonderful Water Bottles declared and paid dividends of $500,000. Based on the information provided, what was Wonderful Water Bottles’ sales revenue for the year?
$15,000,000
$15,500,000
$16,000,000
Not enough information provided.
Which aspect of a firm's statement of cash flows most interests potential stockholders?
Changes in the firm's inventory balance
The firm's ability to pay dividends
The firm's gains and losses from selling plant assets
The firm's investments in new plant assets
An extract of the footnotes of Chavez Inc., with 13 subsidiaries across 4 countries, reads as follows:
"The company uses the current rate method for translation of subsidiary accounts. Paid-in capital accounts have been translated using the historic rate. All assets and liabilities have been translated using the current exchange rate on the balance sheet date, whereas income statement accounts have been translated using the end-of-year rate."
The CEO of the company did not approve the financial statements, stating that the accounting policies followed are not in line with U.S. GAAP. Which of the following statements support the CEO's decision?
Income statement accounts should be translated based on the average rate for the current year.
Income statement accounts should be translated based on the current exchange rate on the balance sheet date.
Paid-in capital accounts should be translated using the end-of-year rate.
All assets and liabilities should be translated using the average rate for the current year.
How is the retained earnings statement related to the statement of cash flows when accounting for dividends?
The retained earnings statement shows dividends declared, and the statement of cash flows shows dividends paid.
The retained earnings statement shows dividends paid, and the statement of cash flows shows dividends received.
The retained earnings statement shows dividends received, and the statement of cash flows shows dividends declared.
The retained earnings statement shows dividends paid, and the statement of cash flows shows dividends declared.
A statement of cash flows prepared using the indirect method would have cash activities listed in which one of the following orders?
*Source: Retired ICMA CMA Exam Questions.
Investing, financing, operating.
Financing, investing, operating.
Operating, investing, financing.
Operating, financing, investing.
In terms of integrated reporting, an organization's system of transforming inputs through its business activities into outputs and outcomes that aim to fulfil the organization's strategic purposes and create value over the short, medium, and long term is known as its:
Strategic plan.
Business model.
Guiding principles.
Organizational overview.
Last year, XYZ Inc. sold one of its warehouse facilities for $1.5 million. It also earned $25,000 in interest on a loan that it made to another company. How should these transactions be reflected on XYZ's annual statement of cash flows, and why?
The two transactions should be reported in separate sections of the statement because one involves income while the other involves financing activities. Specifically, XYZ should record a $1.5 million cash inflow in the operating activities section and a $25,000 cash inflow in the financingactivities section.
Both transactions should be reported in the operating activities section of the statement because both involve income statement items. Because thetwo transactions are unrelated, they should be recorded separately—as a $1.5 cash inflow from the facility sale and a $25,000 cash inflow from interest income.
The two transactions should be reported in separate sections of the statement because one involves long-term assets while the other involves income. Specifically, XYZ should record a $1.5 million cash inflow in the investing activities section and a $25,000 cash inflow in the operating activities section.
Both transactions should be reported in the investing activities section of the statement because both involve asset items. Because the two transactions are unrelated, they should be recorded separately—as a $1.5 cash inflow from the facility sale and a $25,000 cash inflow from interest income.
What is the difference in accounting between a research cost and a development cost?
Research costs are capitalized and amortized until the product goes to market, whereas development costs are capitalized and amortized from thetime the product hits the market until the product is withdrawn from the market.
Research costs are expensed as incurred, whereas development costs are capitalized and amortized over the life of the new product.
Research costs are capitalized and amortized over the life of the project, whereas development costs are expensed as incurred.
There are no differences in accounting between research costs and development costs.
Which of the following must be done in order to determine net cash provided by operating activities?
Convert accrual based net income to a cash basis.
Subtract noncash expenses from net income.
Include the issuance of the company's bonds for cash.
Add noncash revenues to net income.
AWS Inc. is engaged in the construction of rail tracks. The CEO suggests allocating all of the insurance, property taxes, and supervisory factory labor to construction, but the management accountant disagrees. The management accountant will argue that the indirect costs should be allocated in what way?
The indirect costs should not be capitalized to the rail tracks.
The indirect costs should be allocated to the extent of proportionate completion.
The indirect costs should be allocated proportionally based on the value of the asset.
The indirect costs should be allocated to the extent of the difference between net realizable value and carrying value.
Which of the following is true of an income statement presented as per U.S. GAAP?
It reconciles beginning and ending balances of stockholders' equity.
When a company sells a component of its business, the income or loss associated with the component should be reported net of tax separately from income from continuing operations.
Bank overdrafts are always included as a component of operating activities on the cash flow statement.
Financial measures of contractual agreements such as pension obligations, lease contracts, and stock option plans are required to be disclosed on the income statement as a separate line item.
Which of the following statements regarding natural capital, as defined within Integrated Reporting, is true?
Natural capital includes funds received from the sale of goods which contain over 50% organic components.
Natural capital includes only renewable environmental resources and processes.
The Hoover Dam, the Tennessee Valley Authority, and Lake Michigan Locks are considered natural resources because they help manage the flow of water.
Natural capital includes biodiversity and eco-system health.
Which of the following is the best comparison of net income and net cash flow from operations?
Net income is different from net cash flow from operations because noncash flow items such as depreciation and amortization are part of income.
Net cash flow from operations includes net income along with net cash flow from investment and financing activities.
Net income consists of net cash flow from operations after interest paid and received has been subtracted.
Net income and net cash flow from operations are determined by different methods but are the same amount.
Ashe Corp. was organized on January 1, Year 1, with authorized capital of 100,000 shares of $20 par value common stock. During Year 1 Ashe had the following transactions affecting stockholders’ equity:
What amount should Ashe report for additional paid-in capital at December 31, Year 1?
$84,000
$80,000
$54,000
$50,000
The contents of the section of the annual report entitled “Management’s Discussion and Analysis” (MD&A) are:
not reviewed by independent auditors.
mandated by pronouncements of the Financial Accounting Standards Board.
mandated by regulations of the Securities and Exchange Commission (SEC).
not mandated.
Which of the following statements is true regarding the time frame dimension of an integrated report?
The length of the short-term perspective must be one fiscal year.
The length of each time frame for short, medium, and long term is decided by the organization. There is no set answer for establishing the length foreach term.
A long-term perspective is required for all organizations which have been in existence for ten years or more.
The short term must be one or two years, the medium term may be two to five years, and the long term may be five or more years.
Brendan Bishop Scientific is considering acquiring a new plant and paying for it with common stock at par value. However, the CFO is not in favor of the acquisition. Which of the following is the most likely reason for the CFO's disagreement?
The company has fewer amounts of long-term assets.
The company's stock is most likely overpriced.
It is difficult to estimate the net realizable value of the asset and, hence, difficult to estimate the annual depreciation expenses.
The true cost of the asset cannot be determined as the stock's trading activity should also be considered.
According to U.S. GAAP, where on the income statement should a multinational company report the loss from the disposal sale of a major operating unit?
*Source: Retired ICMA CMA Exam Questions.
Report the loss, pretax, in a separate section between income from continuing operations and net income.
Report the loss, net of tax, in a separate section between income from continuing operations and net income.
Report the loss, pretax, in a separate section between income from operations and income before income tax.
Report the loss, net of tax, in a separate section between income before tax and net income.
Which of the following would be in the investing section of the statement of cash flows?
Depreciation expense
Issuing shares of common stock
Proceeds from selling equipment
Conversion of bonds into common stock
In the Lucas Company, there was an increase in the land account during the year of $24,000. Analysis reveals that the change resulted from a cash sale ofland at cost $55,000, and a cash purchase of land for $79,000. In the statement of cash flows, how should the change in the land account be reported in the investment section?
As a purchase of land $79,000 and a sale of land $55,000
Only as a sale of land $55,000
Only as a purchase of land $79,000
As a net purchase of land, $24,000
What is value creation?
A taxation method in which a business calculates the value of all taxable sales and then subtracts the sum of all taxable purchases; a tax rate (VAT) isapplied to the difference.
The process that results in increases, decreases, or transformations of the capitals caused by the organization's business activities and outputs.
An investment tactic where stocks are selected which appear to trade for less than their intrinsic, or book, values.
The amount by which the value of an article is increased at each stage of its production, exclusive of initial costs.
“Employing different accounting methods will yield different net incomes.” How is this factor a limitation of financial statements?
Difference in results due to variations in accounting methods makes it difficult for users to compare the performance of separate entities.
The flexibility of employing different methods for presentation of financial statements can lead to inaccurate disclosure of information.
Change in net income due to change in accounting methods affects the determination of future performance of a company.
Choice between cash-based accounting and accrual accounting for financial reporting allows companies to smooth earnings for a longer period.
All of the following are elements of an income statement except:
*Source: Retired ICMA CMA Exam Questions.
gains and losses.
shareholders’ equity.
expenses.
revenue.
Pierre Company had the following transactions during the fiscal year ending December 31, year 3:
Which of the answers below describes the correct entry for Pierre Company's statement of cash flows on December 31, year 3 using the indirect method?
The decrease of $10,000 in accounts receivable is reported as a $10,000 decrease in the operating section of the statement of cash flows.
The $1,000 gain from the sale of the delivery van is included in operating activities as a deduction.
Financing activities include the $1,000 gain from the sale of the delivery van.
The $104,000 dividend payout is represented as an outflow of funds in the financing section.
Which accounts are affected by a small stock dividend?
Common stock, paid-in capital in excess of par—common stock, retained earnings, and cash
Common stock, retained earnings, and cash
Retained earnings and cash
Common stock, paid-in capital in excess of par—common stock, and retained earnings
The symbol <IR> refers to:
Integrated Reporting.
Investment Reporting.
Interest Revenue.
International Reporting.
What is one major difference between a stock split and a stock dividend?
The total par value of the stock increases with a stock split but has no change with a stock dividend.
The total retained earnings has no change with a stock split but increases with a stock dividend.
The total paid-in capital increases with a stock split but has no change with a stock dividend.
The par value per share decreases with a stock split but has no change with a stock dividend.
All of the following statements are an example of human capital as it pertains to Integrated Reporting except:
Systems, procedures, and protocols
Sponsorship of an internal Leadership Institute which assists employees in their ability to manage change
Employees passing the Certified Management Accountant exam
A formal job rotation program designed to improve interdepartmental understanding
The management of Arthur Energy recognized a contingent liability of $50,000 in the current year. However, before the annual report was issued, the company resolved the issue, making a lump-sum payment of $42,000. The board of directors has decided to incorporate the transaction in the subsequent year's financial statements. Which of the following provisions of U.S. GAAP, if applicable, is likely to prove the management decision wrong?
Loss contingencies must be recognized when it is probable that a loss has been incurred and the amount of the loss is reasonably estimable.
Whenever GAAP or industry-specific regulations allow a choice between two or more accounting methods, the method selected should be disclosed.
If an event alters the estimates used in preparing the financial statements, then the financial statements should be adjusted.
If an event provides additional evidence about conditions that existed as of the balance sheet date and alters the estimates used, then the financial statements should be adjusted.
Gilliam Industries records revenue of $6.4 million for an accounting period. In that same accounting period, they have a beginning balance of $392,000 and an ending balance of $439,000 in the Accounts Receivable account. How should the cash flows from operating activities be adjusted to account for these items? Why? Assume Gilliam uses the indirect method.
Using the indirect method, Gilliam will only have to adjust for the change in Accounts Receivable, resulting in a $47,000 increase in cash flows from operating activities.
Using the indirect method, Gilliam will only have to adjust for the change in Accounts Receivable, resulting in a $47,000 decrease in cash flows from operating activities.
Using the indirect method, Gilliam will have to adjust for both the revenue and the change in Accounts Receivable, resulting in a $6,447,000 increase in cash flows from operating activities.
Using the indirect method, Gilliam will have to adjust for both the revenue and the change in Accounts Receivable, resulting in a $6,353,000 increase in cash flows from operating activities.
Suzanne Rogers, a financial analyst, is analyzing Capital One's stock. She is more interested in estimating the cash flows Capital One can generate. From the financial analyst's perspective, which of the following balance sheet reporting is best suited to avoid adjustments?
Inventory reported at current market value; fixed assets reported at historical cost.
Inventory reported at replacement cost; fixed assets reported at market value.
Inventory reported at historical cost; fixed assets reported at historical cost.
Inventory reported at historical cost; fixed assets reported at fair value.
When preparing a statement of cash flows, a company must make an adjustment to net income for sales that have been made but for which cash collections have not yet been received. Which of the following describes this circumstance?
An increase in accounts receivable account during the year
A decrease in accounts payable account during the year
A decrease in accounts receivable account during the year
An increase in accounts payable account during the year
Use the partial comparative balance sheets for Hyperion Enterprises to determine the net cash inflow from operating activities. Hyperion Enterprises hada net income of $120,000, which includes depreciation of $20,000. Equipment with a book value of $14,000 was sold for $10,000, and new equipment was purchased for $60,000.
$46,000
$44,000
$94,000
$86,000
A company uses the calendar year as its financial results reporting time period. On May 31 of the prior year, the company committed to a plan to sell aline of business. As a result, the operation of this line of business and cash flows will be eliminated from the company's operations, and the company will have no significant continuing involvement with the line of business subsequent to the disposal. For the period January 1 through May 31of the prior year, the line of business had revenues of $1,000,000 and expenses of $1,600,000. The assets of the line of business were sold on November 30 at a loss for which no tax benefit is available. In its income statement for the year ended December 31of prior year, how should the company report the line of business operations from January 1 through May 31?
*Source: Retired ICMA CMA Exam Questions.
$1,000,000 and $1,600,000 should be included with revenues and expenses, respectively, as part of continuing operations.
$600,000 should be reported as part of the loss on disposal of a component.
$600,000 should be reported as an extraordinary loss.
$600,000 should be included in the determination of income or loss from operations of a discontinued component.
Expanding Company (EC) is a rapidly growing startup company. EC's operating cycle is 150 days. To fund their growth, EC has taken out several different issuances of debt financing and has several other liabilities:
What is the total amount of EC's current and non-current liabilities?
$1,200,000 current liabilities, $24,400,000 non-current liabilities
$1,500,000 current liabilities, $24,100,000 non-current liabilities
$2,000,000 current liabilities, $23,600,000 non-current liabilities
$2,800,000 current liabilities, $22,800,000 non-current liabilities
The cash flow from operations for Charlene Energy Inc. is $25,000 for the current year. If the amortization expense increases by $5,000 and other factors remain same, under which of the following assumptions will the cash flow from operations remain unaffected?
Cash paid for intangibles also increased by $5,000 during the year.
The company is operating in a tax-free environment.
The company can change the amortization method during a financial year.
The company has an infinite life.
In the Bein Company, net income is $65,000. If accounts receivable increased $35,000 and accounts payable decreased $10,000, what is the net cash provided by operating activities using the indirect method?
$20,000
$40,000
$90,000
$110,000
Challenges which might deter organizations from implementing Integrated Reporting include:
Complexity, cost, and litigation risk.
Complexity and the cost to register with the International Integrated Reporting Council.
Conflicts between the specific requirements of Integrated Reporting, Sustainability Reporting, and Triple-Bottom-Line Reporting.
The requirement that Integrated Reporting must include revenue profit guidance for the next two, five, and ten years.
