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WorksheetsTestbank ch. 5
Total questions: 75
Worksheet time: 38mins
Which of the following is a limitation of the statement of financial position?
Many items that are of financial value are omitted.
Judgments and estimates are used.
Current fair value may not be reported.
All of these choices are correct.
The statement of financial position is useful for analyzing all of the following except
liquidity.
solvency.
profitability.
financial flexibility.
Statement of financial position information is useful for all of the following except to
compute rates of return
analyze cash inflows and outflows for the period
evaluate capital structure
assess future cash flows
Statement of financial position information is useful for all of the following except
assessing a company's risk
evaluating a company's liquidity
evaluating a company's financial flexibility
determining free cash flows.
A limitation of the statement of financial position that is not also a limitation of the income statement is
the use of judgments and estimates
omitted items
the numbers are affected by the accounting methods employed
valuation of items at historical cost
The statement of financial position contributes to financial reporting by providing a basis for all of the following except
computing rates of return.
evaluating the capital structure of the enterprise.
determining the increase in cash due to operations.
assessing the liquidity and financial flexibility of the enterprise.
One criticism not normally aimed at a statement of financial position prepared using current accounting and reporting standards is
failure to reflect current value information.
the extensive use of separate classifications.
an extensive use of estimates.
failure to include items of financial value that cannot be recorded objectively.
The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as
solvency.
financial flexibility.
liquidity.
exchangeability.
The statement of financial position
Omits many items that are of financial value.
Makes very limited use of judgments and estimates.
Uses fair value for most assets and liabilities.
All of the choices are correct regarding the statement of financial position.
__________ describes the amount of time that is expected to lapse until an asset is realized or otherwise converted into cash or until a liability has to be paid.
Solvency.
Liquidity.
Profitability.
Financial flexibility.
The net assets of a business are equal to
current assets minus current liabilities.
total assets plus total liabilities.
total assets minus total shareholders' equity.
total assets minus total liabilities.
The correct order to present current assets is
cash, accounts receivable, prepaid items, inventories.
inventories, receivables, prepaid items, cash.
cash, inventories, accounts receivable, prepaid items.
inventories, prepaid items, accounts receivable, cash.
The basis for classifying assets as current or noncurrent is conversion to cash within
the accounting cycle or one year, whichever is shorter.
the operating cycle or one year, whichever is longer.
the accounting cycle or one year, whichever is longer.
the operating cycle or one year, whichever is shorter.
The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in
inventory back into cash, or 12 months, whichever is shorter.
receivables back into cash, or 12 months, whichever is longer.
tangible fixed assets back into cash, or 12 months, whichever is longer.
inventory back into cash, or 12 months, whichever is longer.
The current assets section of the statement of financial position should include
machinery.
patents.
goodwill.
inventory.
Which of the following is a current asset?
Customer lists.
Tools.
Land held for speculation.
Prepaid expenses.
Equity or debt securities held to finance future construction of additional plants should be classified on a balance sheet as
current assets.
property, plant, and equipment.
intangible assets.
long-term investments.
Each of the following is an intangible asset except
copyrights.
goodwill.
plant expansion fund.
trademarks.
Which of the following is not a long-term investment?
Investments in ordinary shares
Franchise
Land held for speculation
A sinking fund
A generally accepted method of valuation is
prepaid expenses at fair value.
accounts receivable at net realizable value.
inventories at lower-of-cost-or-net realizable value.
Which item below is not a current liability?
Unearned revenue
Treasury shares
The currently maturing portion of long-term debt
Trade accounts payable
Working capital is
capital which has been reinvested in the business.
unappropriated retained earnings.
cash and receivables less current liabilities.
current assets less current liabilities.
An example of an item which is not an element of working capital is
accrued interest on notes receivable.
goodwill.
current maturities of long-term debt.
short-term investments.
Non-current liabilities include
obligations not expected to be liquidated within the next year or operating cycle.
obligations payable at some date beyond the next year or operating cycle.
deferred income taxes and most lease obligations.
All of these choices are correct.
Which of the following is included in long-term liabilities?
Lease obligations
Most pension obligations
Non-current liabilities that mature within the operating cycle and will be paid from a sinking fund
All of these choices are correct.
Treasury shares should be reported as a(n)
current asset.
investment.
other asset.
reduction of equity.
Which of the following should be reported for share capital?
The shares authorized
The shares issued
The shares outstanding
All of these choices are correct.
The shareholders' equity section is usually divided into how many parts?
6
5
4
3
Which of the following is not an acceptable major asset classification?
Current assets
Investments
Property, plant, and equipment
Reserves
The following information is taken from Fulton Company's trial balance: Land held for speculation €70,000; Research and development costs 35,000; Plant expansion fund 47,000. Fulton will report long-term investments of
€82,000.
€70,000.
€117,000.
€105,000.
For Grimmett Company, the following information is available: Capitalized leases ¥200,000; Trademarks 55,000; Long-term receivables 75,000. In Grimmett's statement of financial position, intangible assets should be reported at
¥ 55,000.
¥ 75,000.
¥255,000.
¥275,000.
Houghton Company has the following items: share capital-ordinary, €820,000; treasury shares, €85,000; deferred taxes, €100,000 and retained earnings, €313,000. What amount should Houghton Company report as total equity?
€948,000.
€1,048,000.
€1,148,000.
€1,218,000.
The following information is taken from Kohler Company's trial balance: Receivables due from employees (due in 4 years) £ 60,000; Prepaid advertising 45,000; Trading securities (fair value) 57,000. Kohler will report current assets of
£105,000.
£117,000.
£162,000.
£102,000.
For Randolph Company, the following information is available: Capitalized leases R280,000; Trademarks 110,000; Long-term receivables 105,000. In Randolph's statement of financial position, intangible assets should be reported at
R110,000.
R105,000.
R390,000.
R385,000.
Olmsted Company has the following items: share capital-ordinary, €920,000; treasury shares, €85,000; deferred taxes, €100,000 and retained earnings, €363,000. What amount should Olmsted Company report as total equity?
€1,098,000.
€1,198,000.
€1,298,000.
€1,398,000.
Under what circumstances would cash be excluded from current assets?
The cash includes short-term, highly liquid investments that will mature in 3 months or less.
The cash is restricted for a purpose other than for paying current obligations.
The cash includes currency and demand deposits.
Cash is always reported as a current asset.
Within the statement of financial position where should the account non-controlling interest (minority interest) be reported?
Non-current assets.
Non-current liabilities.
Equity.
Current liabilities.
On the statement of financial position all of the following are reported as investments except
Bonds, ordinary shares, and long-term notes.
Non-controlling interest.
Pension funds.
Non-consolidated subsidiaries.
In compiling a complete set of financial statements under IFRS, in what order should the following items be reported in the equity section on the statement of financial position at December 31, 2022? If an item is not reported in the equity section, omit it from your answer. I. Share premium II. Retained earnings III. Investments IV. Non-controlling interest V. Accumulated comprehensive income VI. Share capital
I, VI, IV, II, V, III
VI, I, II, V, IV
VI, I, IV, II, V
III, VI, I, II, IV, V
Using IFRS, which of the following items is matched correctly with its basis of valuation for purposes of reporting on the statement of financial position?
I. Inventory A. Cost
II. Prepaid expenses B. Estimated amount collectible
III. Receivables C. Lower-of-cost-or net realizable value
On Rosalie Corporation's statement of financial position at December 31, 2022, what amount should be reported as intangible assets?
£1,113,000
£1,149,000
£1,050,000
£660,000
The statement of cash flows provides answers to all of the following questions except
where did the cash come from during the period?
what was the cash used for during the period?
what is the impact of inflation on the cash balance at the end of the year?
what was the change in the cash balance during the period?
Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?
Cash purchases of equipment.
Cash purchases of bonds issued by another company.
Cash received as repayment for funds loaned.
Cash purchase of treasury stock.
In preparing a statement of cash flows, which of the following transactions would be considered an investing activity?
Sale of equipment at book value
Sale of merchandise on credit
Declaration of a cash dividend
Issuance of bonds payable at a discount
In a statement of cash flows, receipts from sales of property, plant, and equipment and other productive assets should generally be classified as cash inflows from
operating activities.
financing activities.
investing activities.
selling activities.
In a statement of cash flows, depreciation expense is
added back to net income to compute net cash provided by operating activities.
added to other cash flow activities to compute net cash provided or used by investing activities.
subtracted from other cash flow activities to compute net cash provided or used by investing activities.
subtracted from net income to compute net cash provided by operating activities.
Which of the following statements is incorrect?
A high amount of net cash provided by operating activities indicates that a company is able to generate sufficient cash from operations to pay its bills without further borrowings.
Companies that have strong financial flexibility can take advantage of profitable investments even in tough times.
The higher the current cash debt coverage, the less likely a company will have liquidity problems.
Substantial decreases in receivables or inventory can explain the difference between positive net income and negative cash provided by operating activities.
If ordinary shares were issued to acquire an CHF8,000 machine, how would the transaction appear on the statement of cash flows?
It would be a positive CHF8,000 in the investing section and a negative CHF8,000 in the operating section.
It would be a positive CHF8,000 in the financing section and a negative CHF8,000 in the investing section.
It would be a negative CHF8,000 in the financing section and a positive CHF8,000 in the investing section.
It would not appear on the statement of cash flows but rather in a cash flow note.
Lohmeyer Corporation reports: Cash provided by operating activities €250,000; Cash used by investing activities 110,000; Cash provided by financing activities 140,000; Beginning cash balance 120,000. What is Lohmeyer's ending cash balance?
€330,000.
€400,000.
€550,000.
€620,000.
Keisler Corporation reports: Cash provided by operating activities TL200,000; Cash used by investing activities 110,000; Cash provided by financing activities 140,000; Beginning cash balance 90,000. What is Keisler's ending cash balance?
TL250,000.
TL320,000.
TL470,000.
TL540,000.
During 2022 the DLD Company had a net income of W200,000. In addition, selected accounts showed the following changes: Accounts Receivable W12,000 increase; Accounts Payable 4,000 increase; Buildings 16,000 decrease; Depreciation Expense 6,000 increase; Bonds Payable 32,000 increase. What was the amount of cash provided by operating activities?
W198,000
W200,000
W206,000
W238,000
Harding Corporation reports the following information: Net income R 1,000,000; Depreciation expense 280,000; Increase in accounts receivable 120,000. Harding should report cash provided by operating activities of
R600,000.
R840,000.
R1,160,000.
R$1,400,000.
Sauder Corporation reports the following information: Net income HK$750,000; Depreciation expense 210,000; Increase in accounts receivable 90,000. Sauder should report cash provided by operating activities of
HK450,000.
HK630,000.
HK870,000.
HK1,050,000.
Caroline, Inc. exchanged a tract of land it held in Mississippi for a tract of land owned by Rosalie Corporation located in Illinois. How is this transaction reported on Caroline, Inc.'s statement of cash flows?
As a cash inflow from investing activities and a cash outflow from financing activities.
As a cash inflow and a cash outflow from investing activities.
As a cash inflow and a cash outflow from financing activities.
This transaction is not reported in the body of the statement of cash flows.
Caroline, Inc. had the following transactions during 2022: Exchanged land for a building €764,000; Purchased treasury shares 160,000; Paid cash dividend 380,000; Purchased equipment 212,000; Issued ordinary shares 588,000. What is Caroline, Inc.'s net cash provided (used) by investing activities?
€212,000 used by investing activities.
€552,000 provided by investing activities.
€372,000 used by investing activities.
€392,000 provided by investing activities.
Caroline, Inc. had the following transactions during 2022: Exchanged land for a building £764,000; Purchased treasury shares 160,000; Paid cash dividend 380,000; Purchased equipment 212,000; Issued ordinary shares 588,000. What is Caroline, Inc.'s net cash provided (used) by financing activities?
£600,000 provided by financing activities.
£48,000 provided by financing activities.
£48,000 used by financing activities.
£428,000 used by financing activities.
Cash debt coverage is computed by dividing net cash provided by operating activities by
average non-current liabilities.
average total liabilities.
ending non-current liabilities.
ending total liabilities.
Current cash debt coverage is often used to assess
financial flexibility.
liquidity.
profitability.
solvency.
A measure of a company's financial flexibility is
cash debt coverage.
current cash debt coverage.
free cash flow.
cash debt coverage and free cash flow.
Free cash flow is calculated as net cash provided by operating activities less
capital expenditures.
dividends.
capital expenditures and dividends.
capital expenditures and depreciation.
One of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility. Which of the following explanations is a description of financial flexibility?
The nearness to cash of assets and liabilities.
The firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities.
The firm's ability to pay its debts as they mature.
The firm's ability to invest in a number of projects with different objectives and costs.
Net cash provided by operating activities divided by average total liabilities equals
current cash debt coverage.
cash debt coverage.
free cash flow.
the current ratio.
Packard Corporation reports the following information: Net cash provided by operating activities €275,000; Average current liabilities 150,000; Average non-current liabilities 100,000; Dividends declared 60,000; Capital expenditures 110,000; Payments of debt 35,000. Packard's cash debt coverage is
1.10.
1.83.
2.75.
6.11.
Packard Corporation reports the following information: Net cash provided by operating activities €275,000; Average current liabilities 150,000; Average non-current liabilities 100,000; Dividends paid 60,000; Capital expenditures 110,000; Payments of debt 35,000. Packard's free cash flow is
€70,000.
€105,000.
€165,000.
€215,000.
Pedigo Corporation reports the following information: Net cash provided by operating activities £225,000; Average current liabilities 150,000; Average non-current liabilities 100,000; Dividends paid 60,000; Capital expenditures 110,000; Payments of debt 35,000. Pedigo's cash debt coverage is
0.90.
1.50.
2.25.
4.09.
In a statement of cash flows, payments to acquire debt securities of other entities (other than cash equivalents) should be classified as cash outflows for
operating activities.
investing activities.
financing activities.
lending activities.
Which of the following statement of financial position classifications would normally require the greatest amount of supplementary disclosure?
Current assets
Current liabilities
Plant assets
Long-term liabilities
The presentation of non-current liabilities in the statement of financial position should disclose
maturity dates.
interest rates.
nature of the obligation.
All of these choices are correct.
A complete set of financial statements includes each of the following except
a statement of comprehensive income.
a statement of changes in equity.
notes.
All of these answers are included.
Accounting policies include each of the following except
principles.
conventions.
rules.
All of these answers are included.
Caroline, Inc. hired a new controller in late 2022... In compiling a complete set of financial statements under IFRS, which of the following components must be included?
A statement of financial position at the end of the period.
Notes, including a summary of significant accounting policies.
A statement of comprehensive income for the period.
All of these choices are correct.
Which of the following statements is incorrect regarding notes to the financial statements?
IFRS requires specific note disclosures including disaggregation of inventories into classifications such as merchandise, production supplies, work in process, and finished goods.
IFRS requires a maturity analysis for receivables.
IFRS requires that all notes be clear, simple to understand, and non-technical in nature.
All of the choices are correct regarding notes to the financial statements.
Which of the following is a contra account?
Premium on bonds payable
Unearned service revenue
Patents
Accumulated depreciation
Which of the following is not a method of disclosing pertinent information?
Supporting schedules
Parenthetical explanations
Cross reference and contra items
All of these are methods of disclosing pertinent information.
Which of the following is a limitation of the statement of financial position?
Many items that are of financial value are omitted.
Judgments and estimates are used.
Current fair value may not be reported.
All of these choices are correct.
