ACCT207 Chapter Notes - Chapter 3: Operating Cash Flow, Income Statement, Financial Statement

26 views9 pages

limeminnow829

28 Mar 2016

School

University of Delaware

Department

Accounting

Course

ACCT207

Professor

Paretta Robert

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

The income statement has multiple subtotals, such as operating income and income before income taxes. This format is known as multiple step and is very common. Operating revenues revenues: increases in assets or settlements of liabilities from ongoing operations of the business. Operating revenues result from the sale of goods or services. When revenue is earned, assets (cash or accounts receivable) often increase. A food company that does not sell franchises, like chipotle, generate revenue from one source that is reported in the. Expenditure: any outflow of cash for any purpose, whether to buy equipment, pay off a bank loan, or pay employees their wages. Expenses: outflows or the using up of assets or increases in liabilities from ongoing operations incurred to generate revenues during the period: therefore, not all cash expenditures are expenses, but expenses are necessary to generate revenues. Expenses may be incurred before, after, or at the same time as cash is paid.

Related Questions

Question 11

The Kerchin Company purchased $60,000 worth of stock in theXeronics company in 2006. In 2012 the stock was sold for $78,000.On the statement of cash flows prepared using the indirect methodthe company will report:

	A.	a subtraction of $60,000 in the investing section.
	B.	an addition to net income of $18,000 in the operatingsection.
	C.	a subtraction from net income of $18,000 in the operatingsection.
	D.	an addition of $18,000 in the investing section.

2 points

Question 12

When preparing the operating section of a statement of cashflows using the indirect method, various adjustments are needed.Which of the following adjustments is incorrectly stated?

	A.	Add gains on sale of equipment.
	B.	Add to net income any increases in current liabilities.
	C.	Add to net income depreciation and amortization expense.
	D.	Deduct any increases in inventories from net income.

2 points

Question 13

In 2011 Armstrong Company sold for $76,000 cash, an asset whichhad an original cost of $204,000 and accumulated depreciation of$98,000. On the statement of cash flows prepared using the indirectmethod the company should report:

	A.	an addition to net income in the operating section of$30,000.
	B.	a subtraction from net income of $30,000 in the operatingsection.
	C.	a subtraction of $106,000 in the investing section.
	D.	an addition of $76,000 in the investing section.
	E.	Both A and D are correct.

2 points

Question 14

In 2011 Covington Company sold an asset which had an originalcost of $54,000 and accumulated depreciation of $28,000 for $15,000in cash. On the statement of cash flows prepared using the indirectmethod the company should report:

	A.	an addition to net income in the operating section of$11,000.
	B.	a subtraction from net income in the operating section of$11,000.
	C.	a source of cash of $15,000 in the investing section.
	D.	a use of cash in the investing section of $39,000.
	E.	Both a and c are correct.

2 points

Question 15

Henry Company's statement of cash flows indicated a $52,000decrease in cash during the year. The statement also indicated that$63,000 was provided by operating activities and $71,000 was usedby investing activities. How much are net cash used by financingactivities?

	A.	$86,000
	B.	($44,000)
	C.	$42,000
	D.	$40,000

2 points

Question 16

Which of the following would be an example of a cashequivalent?

	A.	Notes receivable.
	B.	Accounts receivable.
	C.	Money market funds.
	D.	Investment in GMC stock.

2 points

Question 17

Carte Company reported cost of goods sold for $100,000 anddepreciation expense totaling $7,000. On January 1, Carte hadinventory and accounts payable of $21,000 and $24,000,respectively. On December 31, inventory and accounts payable were$28,000 and $20,000, respectively. Net income is $60,000. Beginningaccounts receivable was $13,000 and ending was $12,000. How muchare the cash flows from operating activities using the indirectmethod?

	A.	$57,000
	B.	$50,000
	C.	$65,000
	D.	$77,000

2 points

Question 18

The statement of cash flows is typically used to determine if acompany can:

	A.	generate enough cash to pay cash dividends to stockholders.
	B.	generate enough cash to pay an increase in employees wages.
	C.	generate enough cash to acquire another company.
	D.	generate enough cash to buy equipment.

2 points

Question 19

Cash flows related to buying and selling long-term assets areclassified as:

	A.	financing activities.
	B.	investing activities.
	C.	non-cash activities.
	D.	operating activities.

2 points

Question 20

Given the following information, what amount of cash wascollected from customers during 2012? All sales are on account.

	2011	2012
Accounts receivable	$ 800,000	$ 580,000
Sales	3,100,000	3,250,000

	A.	$2,880,000
	B.	$3,620,000
	C.	$2,670,000
	D.	$3,470,000

2 points

crimsonshark725

Question 1

Identify the item below that is not one of the four different types of data processing activities.

		deleting
		reading
		creating
		using

Question 2

All of the following are advantages of an ERP system except

		ERPs permit manufacturing plants to receive new orders in real time.
		in an ERP, data input is captured or keyed once.
		it takes considerable experience and training to use an ERP system effectively.
		ERPs permit management to gain greater visibility into every area of the enterprise.

Question 3

Sam Jones has been the controller of Downtown Tires for 25 years. Ownership of the firm recently changed hands and the new owners are conducting an audit of the financial records. The audit has been unable to reproduce financial reports that were prepared by Sam. While there is no evidence of wrongdoing, the auditors are concerned that the discrepancies might contribute to poor decisions. Which of the following characteristics of useful information is absent in the situation described above?

		relevant
		reliable
		complete
		timely
		understandable
		verifiable
		accessible

Question 4

An ERP system might facilitate the purchase of direct materials by all of the following except

		preparing a purchase order when inventory falls to reorder point.
		routing a purchase order to a purchasing agent for approval.
		communicating a purchase order to a supplier.
		selecting the best supplier by comparing bids.

Question 5

Antia Carmie is the largest collector and retailer of Japanese fans in the St. Louis area. Antia uses computer technology to provide superior customer service. The store's database system was designed to make detailed information about each Japanese fan easily accessible to her customers. Accordingly, the fan price and condition are provided for each fan, along with many pictures of each fan. In Antia's database, the price of the Japanese fans is a(n)

		entity.
		attribute.
		field.
		record.

Question 6

Which of the following is not considered a source document?

		A copy of the company's shipping document.
		A copy of the company's ledger.
		A copy of the company's sales journal.
		A copy of the company's financial statements.

Question 7

In an ERP system, the module used to record data about transactions in the disbursement cycle is called

		financial.
		order to cash.
		customer relationship management.
		purchase to pay.

Question 8

Baggins Incorporated identifies new product development and product improvement as the top corporate goals. An employee developed an innovation that will correct a shortcoming in one of the company's products. Although Baggins current Return on Investment (ROI) is 12%, the product innovation is expected to generate ROI of only 10%. As a result, awarding bonuses to employees based on ROI resulted in

		goal conflict.
		information overload.
		decreased value of information.
		goal congruence.

Question 9

________ are examples of activities that constitute inbound logistics.

		Activities that transform inputs into final products or services
		Activities that provide post-sale support to customers
		Activities that consist of receiving, storing, and distributing the materials used as inputs by the organization to create goods and/or services it sells
		Activities that help customers to buy the organization's products or services

Question 10

In which transaction cycle would information for inventory purchases be most likely to pass between internal and external accounting information systems?

		the revenue cycle
		the expenditure cycle
		the human resources / payroll cycle
		the financing cycle

Question 11

The collection of customer payment is part of which transaction cycle?

		the human resources cycle
		the production cycle
		the revenue cycle
		the expenditure cycle

Question 12

Which of the following is an example of source data automation?

		POS (point-of-sale) scanners in retail stores
		a bill of lading
		a subsidiary ledger
		a utility bill

Question 13

All of the following are guidelines for developing a good coding system except

		be as sophisticated as possible to promote usage.
		be consistent with its intended use.
		be flexible to allow for growth.
		be consistent with the company's organization structure.

Question 14

What is a key decision that needs to be made with regards to borrowing money from lenders?

		the location
		pro forma income statement
		how much capital to acquire
		job descriptions

Question 15

Identify the false statement below.

		A service company does not have an inventory system.
		Retail stores do not have a production cycle.
		Financial institutions have installment-loan cycles.
		Every organization should implement every transaction cycle module.

Question 16

The chart of accounts of a fast-food restaurant would probably include

		a list of customers.
		a list of financial statement accounts.
		a list of vendors.
		a list of employees.

Question 17

Which statement below regarding the AIS is false?

		Traditionally, most AIS have been designed so that both financial and operational data are stored in a manner that facilitates their integration in reports.
		The AIS must be able to provide managers with detailed and operational information about the organization's performance.
		Both traditional financial measures and operational data are required for proper and complete evaluation of performance.
		The AIS was often just one of the information systems used by an organization to collect and process financial and nonfinancial data.

Question 18

In Petaluma, California, electric power is provided to consumers by Pacific Power. Each month Pacific Power mails bills to 186,000 households and then processes payments as they are received. What is the best way for this business to ensure that payment data entry is efficient and accurate?

		well-designed paper forms
		turnaround documents
		source data automation
		sequentially numbered bills

Question 19

Data must be converted into information to be considered useful and meaningful for decision making. There are seven characteristics that make information both useful and meaningful. If the same information can be reproduced by two independent and knowledgeable people, it is representative of the characteristic of

		verifiability.
		truthful.
		relevance.
		reliability.

Question 20

		entity.
		attribute.
		field.
		record.

lilaccod491

Multiple Choice:

21. All the following are true regarding Quotesexcept:

a. Quotes post entries to general ledger accounts

b. Quotes can be transferred to create an invoice

c. Quotes can be linked to customer jobs

d. Quotes can be linked to items

22. If a customer was overcharged for theservices, the customer's invoice can be reduced by posting a:

a. Sales invoice

b. Customer receipt

c. Debit memo

d. Credit memo

23. On the statement of cash flows, the cashflows from operating activities section would include:

a. Receipts from the issuance of capital stock

b. Receipts from the sale of investments

c. Payments for the acquisition of investments

d. Net income

24.The Income Statement will include thefollowing accounts:

a. Revenues less Expenses (ordered largest to smallest amount)with Other Expenses listed last
b. Revenues less Expenses (ordered smallest to largest amounts.With Miscellaneous Expenses listed last

c. Revenues less Expenses (ordered in alphabetical order) withOther Expenses listed last

d. Revenues less Expenses (order is not important)

25. The Statement of Cash Flows answers all ofthe following except:

a. Where the receipts come from

b. Where the cash payments were used for

c. What the overall change in cash was

d. If there will be enough cash to pay the currentliabilities

26. On the Navigation Bar, make the followingselections to enter a sales invoice:

a. Customers & Sales Navigation Center, click on theCustomers icon and select View and Edit Customers

b. Customers & Sales Navigation Center, click on the SalesInvoices icon and select Set up Invoice Defaults

c. Tasks; Purchases/Receive Inventory

d. Customers & Sales Navigation Center, click on the SalesInvoices icon and select New Sales Invoice

27. The following would be included in theheading of an income statement:

a. Title of the statement

b. Name of the business

c. Period of time covered by the statement

d. All of the above

. 28. A departmentalized accounting systemprovides information that can be used to:

a. Custom design departmental statements

b. Evaluate profitability and cost effectiveness

c. Evaluate current assets

d. Modify PCA's standard forms

29. In Peachtree, information about a sale isrecorded in the:

a. Purchase window

b. Inventory window

c. Purchases/Receive Inventory window

d. Sales/Invoicing window

30. The sample company, Bellwether GardenSupply, uses which method of posting?

a. Batch posting

b. Real-time posting

c. Cash basis posting

d. Accrual basis posting

jadekoala82

ACCT207 Chapter Notes - Chapter 3: Operating Cash Flow, Income Statement, Financial Statement

Document Summary

Get access

Related Documents

ACCT207 Chapter Notes - Chapter 2: Accounts Payable, Quick Ratio, Current Liability

ACCT207 Chapter Notes - Chapter 2: International Accounting Standards Board, Accrual, Preferred Stock

ACCT207 Lecture Notes - Lecture 2: Perpetual Inventory, Gross Profit, Cash Register

Related Questions