1 Which of the following is a limitation of the balance sheet a Many items that are of financial value are omitted b Judgments and estimates are used c Current fair value is not reported d All of these answer choices are correct 2 Balance sheet information is useful for all of the following except to a compute rates of return b analyze cash inflows and outflows for the period c evaluate capital structure d assess future cash flows 3 The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as a solvency b financial flexibility c liquidity d exchangeability 4 The basis for classifying assets as current or noncurrent is conversion to cash within a the accounting cycle or one year whichever is shorter b the operating cycle or one year whichever is longer c the accounting cycle or one year whichever is longer d the operating cycle or one year whichever is shorter 5 Which of the following is a current asset a Cash surrender value of a life insurance policy of which the company is the beneficiary b Investment in equity securities for the purpose of controlling the issuing company c Cash designated for the purchase of tangible fixed assets d Trade installment receivables normally collectible in 18 months 6 Current assets are presented in the balance sheet in a ascending order of their balances b descending order of their balances c order of their liquidity d reverse order of their liquidity 7 When a portion of inventories has been pledged as security on a loan a the value of the portion pledged should be subtracted from the debt b an equal amount of retained earnings should be appropriated c the fact should be disclosed but the amount of current assets should not be affected d the cost of the pledged inventories should be transferred from current assets to noncurrent assets 8 Which item below is not a current liability a Unearned revenue b Stock dividends distributable c The currently maturing portion of long term debt d Trade accounts payable 9 Treasury stock should be reported as a n a current asset b investment c other asset d reduction of stockholders equity 10 The financial statement which summarizes operating investing and financing activities of an entity for a period of time is the a retained earnings statement b income statement c statement of cash flows d statement of financial position 11 The statement of cash flows reports all of the following except a the net change in cash for the period b the cash effects of operations during the period c the free cash flows generated during the period d investing transactions 12 If common stock was issued to acquire an 8 000 machine how would the transaction appear on the statement of cash flows a It would depend on whether you are using the direct or the indirect method b It would be a positive 8 000 in the financing section and a negative 8 000 in the investing section c It would be a negative 8 000 in the financing section and a positive 8 000 in the investing section d It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities 13 Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows a Cash purchases of equipment b Cash purchases of bonds issued by another company c Cash received as repayment for funds loaned d Cash purchase of treasury stock 14 In preparing a statement of cash flows sale of treasury stock at an amount greater than cost would be classified as a n a operating activity b financing activity c extraordinary activity d investing activity 15 In preparing a statement of cash flows cash flows from operating activities a are always equal to accrual accounting income b are calculated as the difference between revenues and expenses c can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash d can be calculated by appropriately adding to or deducting from net income those items in the income statement that do affect cash 16 Free cash flow is calculated as net cash provided by operating activities less a capital expenditures b dividends c capital expenditures and dividends d capital expenditures and depreciation 17 Which of the following is not a required supplemental disclosure for the balance sheet a Contingencies b Financial forecasts c Accounting policies d Contractual situations 18 Which of the following best exemplifies a contingency that is reported in the notes to the financial statements a Losses from potential future lawsuits b Loss from a lawsuit settled out of court prior to the end of the fiscal year c Warranty claims on future sales d Estimated loss from an ongoing lawsuit 19 Which of the following is a contra account a Premium on bonds payable b Unearned revenue c Patents d Accumulated depreciation 20 Cash held to finance future construction of additional plants should be classified on a balance sheet as A long term investments B property plant and equipment C current assets D intangible assets 21 In a statement of cash flows interest payments to lenders and other creditors should be classified as cash outflows for A lending activities B financing activities C operating activities D borrowing activities 22 Hellespont Company uses the indirect method to prepare its statement of cash flows It should present the recognition of a loss from the impairment of goodwill as a n A Cash flow from investing activities B Cash flow from financing activities C Deduction from net income D Addition to net income 23 ABC Corporation reports Cash provided by operating activities Cash provided by investing activities Cash used in financing activities Beginning cash balance 210 000 110 000 140 000 70 000 What is Lohmeyer s ending cash balance A 250 000 B 320 000 C 470 000 D 540 000 Ending Cash 70 210 110 140 250 24 During 2012 the XYZ Company had a net income of 55 000 In addition selected accounts showed the following changes Accounts Receivable 3 000 decrease Accounts Payable 1 000 increase Building 4 000 decrease Depreciation Expense 1 500 increase Bonds Payable 8 000 increase What was the amount of cash provided by operating activities A 54 500 B 55 000 C 56 500 D 60 500 55 3 1 1 5 60 5 Building is Investment activity Bonds is financing activity 25 The net income for XYZ Co was 3 million for the year ended December 31 Year 1 Additional information is as follows