Which Is An Example of A Cash Flow From An Investing Activity

ACC/291
PRINCIPLES OF ACCOUNTING II
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Practice Question 01
What type of receivable is evidenced by a formal instrument and normally requires the
payment of interest?
A trade receivable
An account receivable
A note receivable
Past-due accounts receivables
When is a receivable recorded by a service organization?
When service is provided on account
When the related expenses are incurred
When the bill is sent to the customer
When the customer pays
At what value are accounts receivable reported on the balance sheet?
Cash (net) realizable value
Present value
Maturity value
Fair market value

Short-term notes receivable are reported at their cash (net) realizable value.
True
False
Which one of these statements about promissory notes is incorrect?
The party to whom payment is to be made is called the payee.
The party making the promise to pay is called the maker.
A promissory note is not a negotiable instrument.
A promissory note is more liquid than an account receivable.
Which of the following should be classified as an other receivable?
Accounts receivable
Notes receivable
Interest receivable
Trade receivables
What type of receivables result from sales transactions?
Other receivables
Non-trade receivables
Trade receivables
Long-term receivables
Which one of the following is not a method used by companies to accelerate cash
receipts?
Offering discounts for early payment

Writing off receivables
Selling receivables to a factor
Accepting national credit cards for customer purchases
Which of the following accounts is debited when a company factors its accounts receivable?
Interest Expense
Accounts Receivable
Service Charge Expense
Loss on Sale of Accounts Receivable
Which of the following is the value at which loans and receivables should be reported under
IFRS?
Maturity value
Cash realizable value
Amortized cost
Net of bad debt expense
Land improvements are depreciable assets.
True
False
Which of the following is not a depreciable asset?
Land improvements
Equipment
Buildings
Lan
Expenditures to maintain the operating efficiency and expected productive life of the unit are expensed as
incurred.
True
False
What is depreciation?
A valuation approach
A cash accumulation approach

A cost allocation method
An adjustment to market value over time
Cuso Company purchased equipment on January 1, 2016, at a total invoice cost of $400,000. The equipment
has an estimated salvage value of $10,000 and an estimated useful life of 5 years. What is the amount of
accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?
$156,000
$78,000
$80,000
$160,000
When there is a change in estimated depreciation
current and future years depreciation should be revised.
new plant assets should be acquired to replace the old.
only future years depreciation should be revised.
previous depreciation should be corrected.

On June 1, 2017, Brislin Company sold some equipment for $22,000. The original cost was $80,000, the
estimated salvage value was $8,000, and the expected useful life was 8 years. The equipment was fully
depreciated. How much is the gain or loss on the sale?
$50,000 loss
$5,400 gain
$14,000 gain
$850 loss
Given the following account balances at year end, how much is amortization expense on Anisha Enterprises
income statement for the current year if Anisha thinks all of its intangibles should be amortized over ten
years?
Sales revenue $45,000,000
Patents 1,500,000
Accounts receivable 4,000,000
Land 15,000,000
Equipment 25,000,000
Trademarks 1,000,000
Goodwill 4,500,000
Research & development 2,000,000
$250,000
$700,000
$900,000
Some other answer
Walk Cos average total assets are $200,000, net sales total to $100,000, and net income is $40,000. How
much net income did Walk Co generate for each dollar of assets invested?
$0.50
$0.20
$5.00
$2.00
Schneider Trucking Inc. purchased a new semi-truck on January 1, 2016 for $200,000. Its useful life is
expected to be 4 years and its salvage value is estimated at $25,000. What is the depreciation for 2017
using the declining-balance method at double the straight-line rate?
$50,000
$100,000
$43,750
$87,500
The time period for classifying a liability as current is one year or the operating cycle, whichever is
probable.
longer.
shorter.
possible.
Which one of the following is not a typical current liability?
Mortgages payable
Salaries payable
Current maturities of long-term debt
Interest payable
Buttner Company borrows $88,500 on September 1, 2017, from Harrington State Bank by signing an
$88,500, 12%, one-year note. How much is accrued interest at December 31, 2017?
$10,620
$2,655
$3,540
$4,425
How is the market value of a bond issuance determined?
By adding the face value of the principal amount to the stated value of the interest payments.
By computing the present value of the principal.
By computing the present value of the interest payments.
By adding the present value of the principal amount to the present value of the interest payments.
If the contractual rate of interest is lower than the market rate of interest, bonds will sell at a premium.
True
False
What is the effect of amortizing a bond discount?
It decreases bond interest expense.
It increases the carrying value of the bonds.
It decreases the maturity value of the bonds.
There is no effect on the bond interest expense.
Cuso Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium,
what does this indicate?
The contractual interest rate exceeds the market interest rate.
The contractual interest rate and the market interest rate are the same.
The market interest rate exceeds the contractual interest rate.
No relationship exists between the market and contractual rates.
When a bond is sold at a premium, at what amount is it reported on the balance sheet?
Premium value
Market value
Interest value
Carrying value
Tanner, Inc. issued a 10%, 5-year, $100,000 bond when the market rate of interest was 12%. At what value
will the bond sell?

Face value
A premium
A discount
Par
Which of the following is not a commonly used method of presenting current liabilities on the balance sheet?
Listing currently maturing long-term debt first.
Listing current debt in the order of oldest first and then chronologically.
In order of magnitude or size.
In order of their maturity.

The stockholders of a corporation have unlimited
liability.
True
False
Which of the following is a disadvantage of the
corporate business form?
No income taxes
Easy acquisition of capital
Government regulation
Continuous life
If a corporation issues 1,000 shares of $3 par common stock for $7 a share, how
much is the legal capital?
$3,000
$7,000
$0
$4,000
For what reason might a company acquire treasury stock?

To increase the number of shares of stock outstanding
To reissue the shares to officers and employees under bonus and stock
compensation plans
To signal to the stock market that management believes the stock is

overpriced
To increase profit
Which one of the following is not a right of preferred stockholders?
Priority to the assets in the event of liquidation
Priority in relation to dividends
Priority voting rights
Priority to dividends and assets in liquidation.
If everything else is held constant, what will cause earnings per share to
increase?
The purchase of treasury stock
The payment of a cash dividend to preferred stockholders

The issuance of new shares common stock
The payment of a cash dividend to common stockholders
Which of the following does not increase the return on common stockholders
equity?
An increase in the return on assets ratio
An increase in the use of debt financing
An increase in the companys stock price
An increase in the companys net income
When a stock dividend is declared, which of the following accounts is debited?
Common Stock Dividends Distributable
Paid-in Capital in Excess of Par Value
Common Stock
Stock Dividends
Jaylo Inc. had net income of $500,000, net sales of $10,000,000 and paid cash
dividends of $200,000 to the common stockholders. How much is Jaylos payout
ratio?
4%
40%
20%
2%
Consider the following data for a corporation:
Net income $800,000

Preferred stock dividends $50,000
Market price per share of stock $25
Average common stockholders equity $4,000,000
Cash dividends declared on common stock $20,000
What is the return on common stockholders equity?
19.50%
20.00%
21.25%
18.75%
Which of the following is an operating activity?
Payment of a cash dividend
Sale of equipment
Payment of interest
Making a loan to another entity

Which is an example of a cash flow from an investing activity?
Payment of cash to repurchase outstanding capital stock
Receipt of cash from the sale of equipment
Payment of cash to suppliers for inventory
Receipt of cash from the issuance of bonds payable
Hanover, Inc. purchased land through the issuance of long-term bonds. How is this
reported on the statement of cash flows?
Operating activity
Significant noncash investing and financing activity that merits disclosure
Investing inflow
Financing outflow
Under the indirect method of preparing the statement of cash flows, which of the following
is added to net income in the operating activities section?
Gain on sale of equipment
Depreciation expense
Decrease in accounts payable
Increase in accounts receivable
In what section of the statement of cash flows will the issuance of bonds payable to
acquire a building be reported?
Cash flows from operating activities
Cash flows from investing activities

Cash flows from financing activities
Noncash investing and financing activities
Which of the following items is reported in the operating activities section of a statement of
cash flows prepared using the direct method?
Cash payments to suppliers
Depreciation expense
Loss on sale of building
Increase in accounts receivable
In horizontal analysis of a balance sheet, of what amount is each item expressed as a

percentage?
Current year net income amount

Base-year amount
Current year stockholders equity amount
Current year total assets amount
The following schedule is a display of what type of analysis?
Amount Percent
Current assets $200,000 25%
Property, plant, and equipment 600,000 75%
Total assets $800,000 100%
Trend analysis
Horizontal analysis
Vertical analysis
Ratio analysis
Ceradyne, Inc. presented the following data for a company:
Current liabilities $360
Long-term debt 480
Common stock 640
Retained earnings 520
Total liabilities & stockholders equity $2,000
How would common stock appear on a common size balance sheet using vertical analysis?
32.0%
Cannot be determined from the data given
75.0%
55.1%
Use the following financial statement information as of the end of each year to answer this
question.
2017 2016
Inventory $54,000 $48,000
Current assets 81,000 106,000
Total assets 392,000 336,000
Current liabilities 27,000 36,000
Total liabilities 102,000 88,000
Total stockholders equity 290,000 248,000
Preferred stock 10,000 10,000

Net sales 784,000 697,000
Cost of goods sold 306,000 277,000
Net income 34,000 90,000
Tax expense 22,000 18,000
Interest expense 12,000 12,000
Dividends paid to preferred stockholders 2,000 2,000
Dividends paid to common shareholders 1,000 1,000
Compute the profit margin for 2017.
4.3%
8.9%
11.7%
8.4%
Multiple Choice Question 60
Your answer is correct.
The term "receivables" refers to
cash to be paid to debtors.
amounts due from individuals or companies.
merchandise to be collected from individuals or companies.
cash to be paid to creditors.
Three accounting issues associated with accounts receivable are
accrual, bad debts, and accelerating collections.
depreciating, valuing, and collecting.
recognizing, valuing, and accelerating collections.
depreciating, returns, and valuing.

When the allowance method is used to account for uncollectible accounts, Bad Debts
Expense is debited when
a sale is made.
an account becomes bad and is written off.
management estimates the amount of uncollectibles.
a customer's account becomes past due.
Which one of the following is not a principle of sound accounts receivable management?
Determine a payment period.
Delay cash receipts from receivables if necessary.
Determine to whom to extend credit.
Monitor collections.

The accounts receivable turnover is computed by dividing
total sales by average receivables.
total sales by ending receivables.
net credit sales by average receivables.
net credit sales by ending receivables.
The accounts receivable turnover is used to analyze
profitability.
liquidity.
risk.
long-term solvency.
The following information is provided for Sheridan Company and Concord Corporation:
(in $ millions) Sheridan Company Concord Corporation
Net income 2017 $170 $390
Net sales 2017 1625 4550
Total assets 12/31/15 1005 2280
Total assets 12/31/16 1160 3080
Total assets 12/31/17 1160 4000
What is Concord's return on assets (rounded) for 2017?
11.0%
9.8%
14.6%
12.7%
Which of the following is not properly classified as property, plant, and equipment?
Building used as a factory.
Land used in ordinary business operations.
Land improvement, such as parking lots and fences.
A truck held for resale by an automobile dealership.

A characteristic of a plant asset is that it is
held for sale in the ordinary course of the business.
not currently used in the business but held for future use.
intangible.
used in the operations of a business.
A current liability is a debt that can reasonably be expected to be paid
out of currently recognized revenues.
out of cash currently on hand.
within one year, or the operating cycle, whichever is longer.
between 6 months and 18 months.

Which of the following most likely would be classified as a current liability?
Dividends payable
Bonds payable in 5 years
Mortgage payable as a single payment in 10 years
Three-year notes payable
The 2017 financial statements of Sunland Company contain the following selected data (in
millions).
Current assets $75

Total assets 185
Current liabilities 39
Total liabilities 64
Cash 9
Interest expense 4
Income taxes 11
Net income 13
The debt to assets ratio (rounded) is
52.0%.
2.89%.
34.6%.
7.7 times.
In a recent year Monty Corp. had net income of $152000, interest expense of $28700, and
income tax expense of $41500. What was Monty Corp.s times interest earned (rounded)
for the year?
6.30
5.30
7.74
6.74
If bonds are issued at a discount, it means that the
bondholder will receive effectively less interest than the contractual rate of interest.
market interest rate is lower than the contractual interest rate.

market interest rate is higher than the contractual interest rate.
financial strength of the issuer is suspect.
If bonds are issued at a premium, the stated interest rate is
adjusted to a higher rate of interest.
higher than the market rate of interest.
lower than the market rate of interest.
too low to attract investors.
The chief accounting officer in a company is known as the
vice-president.
treasurer.
controller.
president.
Which one of the following would not be considered an advantage of the corporate form of
organization?
Limited liability of stockholders.
Separate legal existence.
Continuous life.
Government regulation.
Which of the following would not be true of a privately held corporation?
Its shares are regularly traded on the New York Stock Exchange.
It does not offer its shares for sale to the general public.
It is sometimes called a closely held corporation.

It is usually smaller than a publicly held company.
The following information pertains to Blue Company. Assume that all balance sheet
amounts represent average balance figures.
Total assets $400000

Stockholders' equity-common 280000
Total stockholders' equity 282000
Sales revenue 108000
Net income 22000
Number of shares of common stock 6000
Common dividends 6100
Preferred dividends 6600
What is Blue's payout ratio?
27.73%.
21%.
13%.
41%.

Concord Corporation had net income of $67245 and paid dividends of $38000 to common
stockholders and $16500 to preferred stockholders in 2017. Concord Corporation common
stockholders equity at the beginning and end of 2017s was $450000 and $545000,
respectively. Concord Corporation return on common stockholders equity is
10%.
5%.
14%.
9%.
The primary purpose of the statement of cash flows is to
provide information about the cash receipts and cash payments during a period.
provide information about the investing and financing activities during a period.
prove that revenues exceed expenses if there is a net income.
facilitate banking relationships.

Which one of the following items is not generally used in preparing a statement of cash
flows?
Additional information.
Adjusted trial balance.
Current income statement.
Comparative balance sheets.
The category that is generally considered to be the best measure of a company's ability to
continue as a going concern is
usually different from year to year.
cash flows from operating activities.
cash flows from investing activities.
cash flows from financing activities.

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows.
Indicate where, if at all, a stock dividend declared and issued would be classified on the
statement of cash flows.
Financing activities section.
Does not represent a cash flow.
Investing activities section.
Operating activities section.
Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows.
Indicate where, if at all, an inventory increase with cash would be classified on the
statement of cash flows.
Investing activities section.
Financing activities section.
Operating activities section.
Does not represent a cash flow.
.
Free cash flow provides an indication of a companys ability to
generate net income.
generate cash to invest in capital expenditures.
generate cash to pay dividends.
generate cash to invest in capital expenditures and to pay dividends.
When using the indirect method to compute cash provided by operating activities
decreases in inventory are subtracted from net income.
income taxes paid may be ignored.
amortization expense is added to net income.
increases in accounts receivable are added to net income.

To determine the net cash provided (used) by operating activities, it is necessary to
analyze
the current year's income statement.
a comparative balance sheet.
additional information.
all of these answer choices are correct.
Which of these is not a liquidity ratio?
Inventory turnover
Accounts receivable turnover
Current ratio
Asset turnover
The current ratio would be of most interest to

short-term creditors.
long-term creditors.
customers.
stockholders.

Which Is An Example of A Cash Flow From An Investing Activity

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ACC/291

The Latest Version A+ Study Guide

ACC 291 Entire Course Link

When is a receivable recorded by a service organization?

When service is provided on account

When the related expenses are incurred

When the bill is sent to the customer

When the customer pays

At what value are accounts receivable reported on the balance sheet?

Cash (net) realizable value

Fair market value

Which one of these statements about promissory notes is incorrect?

The party to whom payment is to be made is called the payee.

The party making the promise to pay is called the maker.

A promissory note is not a negotiable instrument.

A promissory note is more liquid than an account receivable.

Which of the following should be classified as an other receivable?

What type of receivables result from sales transactions?

Offering discounts for early payment

Selling receivables to a factor

Accepting national credit cards for customer purchases

Service Charge Expense

Loss on Sale of Accounts Receivable

Cash realizable value

Net of bad debt expense

Land improvements are depreciable assets.

A cash accumulation approach

An adjustment to market value over time

When there is a change in estimated depreciation

current and future years depreciation should be revised.

new plant assets should be acquired to replace the old.

only future years depreciation should be revised.

previous depreciation should be corrected.

depreciated. How much is the gain or loss on the sale?

Sales revenue $45,000,000

Accounts receivable 4,000,000

Research & development 2,000,000

Some other answer

using the declining-balance method at double the straight-line rate?

Current maturities of long-term debt

How is the market value of a bond issuance determined?

By computing the present value of the interest payments.

What is the effect of amortizing a bond discount?

It decreases bond interest expense.

It increases the carrying value of the bonds.

It decreases the maturity value of the bonds.

There is no effect on the bond interest expense.

what does this indicate?

The contractual interest rate exceeds the market interest rate.

The market interest rate exceeds the contractual interest rate.

No relationship exists between the market and contractual rates.

will the bond sell?

Listing currently maturing long-term debt first.

In order of magnitude or size.

In order of their maturity.

The stockholders of a corporation have unlimited

Which of the following is a disadvantage of the

corporate business form?

For what reason might a company acquire treasury stock?

To signal to the stock market that management believes the stock is

Which one of the following is not a right of preferred stockholders?

Priority to the assets in the event of liquidation

Priority in relation to dividends