ADM 1340 Chapter Notes - Chapter 13: Share Capital, Comprehensive Income, Accrual

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15 Feb 2015

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ADM 1340 Full Course Notes

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Ows also enhances the comparability of di erent companies it eliminates the accrual based e ects of using di erent accounting treatments for similar transactions statement of cash ows is a required statement for publicly traded and private corporations. De nition of cash cash and cash equivalents cash equivalents are short term, highly liquid investments are readily convertible to cash within a short period of time debt investments due within three months. Classi cation of cash flows statement classi es cash receipts and cash payments into three types of activities operating activities. Nancing activities includes obtaining cash from issuing debt and repaying amounts borrowed includes obtaining cash from shareholders and paying them dividends generally a ects non current liabilities and shareholders" equity accounts. Rst two adjustments non-cash expenses and revenues losses and gains last adjustment increase or decrease in current assets and liabilities.

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Choose the correction answer

15. The statement of cash flowsprovides information to help investors and creditors assess thecash and noncash investing and financing transactions during theperiod.

T F

16. The net increase(decrease) in cash reported on the statement of cash flows shouldreconcile the beginning and ending cash balances reported in thecomparative balance sheets.

T F

17. Anobjective of the statement of cash flows is to

a. disclose changes during the period in all assetand all equity accounts.

b. disclose the change in working capital during theperiod.

c. provide information about the operating,investing, and financing activities of an entity during aperiod.

d. None of these answers are correct.

18. Theprimary purpose of the statement of cash flows is to provideinformation

a. about the operating, investing, and financingactivities of an entity during a period.

b. that is useful in assessing future cash flowprospects.

c. about the cash receipts and cash payments of anentity during a period.

d. about the entity's ability to meet itsobligations and to pay dividends.

19. Cash equivalents are

a. treasury bills, commercial paper, and moneymarket funds purchased with excess cash.

b. investments with original maturities of threemonths or less.

c. readily convertible into known amounts ofcash.

d. All of these answers are correct.

20. Xanthe Corporation had the following transactions occur in thecurrent year:

1. Cash sale of merchandise inventory.

2. Sale of delivery truck at book value.

3. Sale of Xanthe common stock for cash.

4. Issuance of a note payable to a bank forcash.

5. Sale of a security held as anavailable-for-sale investment.

6. Collection of loan receivable.

How many of the above items willappear as a cash inflow from investing activities on a statement ofcash flows for the current year?

a. Five items

b. Four items

c. Three items

d. Two items

erinchimpanzee626

36. The best measure of a company's ability to generate sufficientcash to continue as a going concern is net cash provided by
A) financing activities.
B) investing activities.
C) operating activities.
D) processing activities.

37. Using the indirect method, if equipment is sold at a gain,the
A) sale proceeds received are deducted in the operating activitiessection.
B) sale proceeds received are added in the operating activitiessection.
C) amount of the gain is added in the operating activitiessection.
D) amount of the gain is deducted in the operating activitiessection.

38. The statement of cash flows
A) is prepared instead of an income statement under generallyaccepted accounting principles.
B) is used to assess an entity's ability to pay dividends and meetobligations.
C) is prepared from comparative income statements.
D) reflects earnings per share figures on a cash basis and on anaccrual basis in the body of the statement.

39. In the bottom portion of the statement of cash flowsworksheet,
A) inflows of cash are debits in the reconciling columns.
B) outflows of cash are debits in the reconciling columns.
C) information pertaining to investing and financing activitiesonly is entered.
D) only significant noncash transactions are entered.

40. Which of the following characteristics does not apply to cashequivalents?
A) Short-term
B) Highly-liquid
C) Readily convertible into cash
D) Sensitive to interest rate changes

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ADM 1340 Chapter Notes - Chapter 13: Share Capital, Comprehensive Income, Accrual

ADM 1340 Full Course Notes

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