1-Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $140,000 was sold for a $5,000 gain in Year 2. The following selected information is available for Sebring Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.
- at dec31 year2 year1
- equipment 610,000 750,000
- accumulated depreciation- equipment 428,000 500,000
a. $23,000.
b. $33,000.
c. $28,000.
d. $40,000.
e. $68,000.
2-When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from investing activities generally affect:
a. Net income, current assets, and current liabilities.
b. Noncurrent assets.
c. Noncurrent liability and the equity accounts.
d. Both noncurrent assets and noncurrent liabilities.
e. Equity accounts only.
3-The direct method of reporting operating cash flows:
a. Is recommended but not required by the FASB.
b. Must be used by all companies.
c. Is used by most companies.
d. Is considered supplementary disclosure.
e. Is not recommended by the FASB, but is commonly used.
4-Investing activities include the:
a. Purchase of plant assets.
b. Lending and collecting on notes receivable.
c. Sale of short-term investments other than cash equivalents.
d. Sale of plant assets.
e. All of these.
5-When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from operating activities generally affect:
a. Net income, current assets, and current liabilities.
b. Noncurrent assets.
c. Noncurrent liability and the equity accounts.
d. Both noncurrent assets and noncurrent liabilities.
e. Equity accounts only.
6-A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:
a. $(3,000).
b. $(60,000).
c. $(57,000).
d. Zero. This is an operating activity.
e. Zero. This is an investing activity.
7-Beewell's net income for the year ended December 31, Year 2 was $185,000. Information from Beewell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2.
DEC 31 year 2 year1
Common stock $5 par value 500000 450000
Paid-in capital in excess of par 948000 853000
retain earning 688000 582000
a. $79,000.
b. $106,000.
c. $95,000.
d. $50,000.
e. $145,000.
8-the cash flow on total assets ratio is calculated by:
a. Dividing cash flows from operations by average total assets.
b. Dividing total cash flows by average total assets.
c. Dividing average total assets by cash flows from investing activities.
d. Dividing average total assets by total cash flows.
e. Total cash flows divided by average total assets times 365.
9-A high level of expected risk suggests a low price-earnings ratio.
a. TRUE
b. FALSE
10-Financial statement analysis lessens the need for expert judgment.
a. TRUE
b. FALSE
11- Trend analysis of financial statement items can include comparisons of relations between items on different financial statements.
a. TRUE
b. FALSE
12-Analysis of a single financial number is often of limited value.
a. TRUE
b. FALSe
13-Vertical analysis is used to reveal patterns in data covering successive periods.
a. TRUE
b. FALSE
14-The current ratio is calculated as current liabilities divided by current assets.
a. TRUE
b. FALSE
15- One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.
a. TRUE
b. FALSE