Chapter 12, 13, 14 True / False

Question 1 of 60

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Corporations purchase investments in debt or stock securities generally for one of two reasons.

Select one of the following:

  • True
  • False

Question 2 of 60

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A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.

Select one of the following:

  • True
  • False

Question 3 of 60

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The accounting for short-term debt investments and for long-term debt investments is similar.

Select one of the following:

  • True
  • False

Question 4 of 60

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When debt investments, are sold, the gain or loss is the difference between the net proceeds from the sale and the fair value of the bonds.

Select one of the following:

  • True
  • False

Question 5 of 60

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Debt investments are investments in government and corporation bonds.

Select one of the following:

  • True
  • False

Question 6 of 60

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In accordance with the cost principle, brokerage fees should be added to the cost of an investment.

Select one of the following:

  • True
  • False

Question 7 of 60

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In accordance with the cost principle, the cost of debt investments includes brokerage fees and accrued interest.

Select one of the following:

  • True
  • False

Question 8 of 60

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In accounting for stock investments of less than 20%, the equity method is used.

Select one of the following:

  • True
  • False

Question 9 of 60

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Dividends received on stock investments of less than 20% should be credited to the Stock Investments account.

Select one of the following:

  • True
  • False

Question 10 of 60

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If an investor owns between 20% and 50% of an investors common stock, it is presumed that the investor has significant influence on the investee.

Select one of the following:

  • True
  • False

Question 11 of 60

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The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock.

Select one of the following:

  • True
  • False

Question 12 of 60

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Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted manually.

Select one of the following:

  • True
  • False

Question 13 of 60

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Under the equity method, the receipt of dividends from the investee company results in an increase in the Stock Investments account.

Select one of the following:

  • True
  • False

Question 14 of 60

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Consolidated financial statements are appropriate when an investor controls an investee by ownership of more than 50% of the investors common stock.

Select one of the following:

  • True
  • False

Question 15 of 60

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Consolidated financial statements are prepared in place of the financial statements for that parent and subsidiary companies.

Select one of the following:

  • True
  • False

Question 16 of 60

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Consolidated financial statements should be prepared only when a subsidiary company has a controlling interest in the parent company.

Select one of the following:

  • True
  • False

Question 17 of 60

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The valuation of non-trading securities is similar to the procedures followed for trading securities, except that changes in fair value are not recognized in current income.

Select one of the following:

  • True
  • False

Question 18 of 60

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An unrealized gain or loss on trading securities is reported as a separate component of stockholders' equity.

Select one of the following:

  • True
  • False

Question 19 of 60

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For non-trading securities, the unrealized gain or loss account is carried forward to future periods.

Select one of the following:

  • True
  • False

Question 20 of 60

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A decline in the fair value of a trading security is recorded by debiting an unrealized loss account and crediting the Fair Value Adjustment account.

Select one of the following:

  • True
  • False

Question 21 of 60

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The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet,and retained earnings statement.

Select one of the following:

  • True
  • False

Question 22 of 60

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For external reporting, a company must prepare either an income statement ora statement of cash flows, but not both.

Select one of the following:

  • True
  • False

Question 23 of 60

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A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions.

Select one of the following:

  • True
  • False

Question 24 of 60

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A statement of cash flows indicates the sources and uses of cash during a period.

Select one of the following:

  • True
  • False

Question 25 of 60

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A statement of cash flows should help investors and creditors assess the entity's ability to generate future income.

Select one of the following:

  • True
  • False

Question 26 of 60

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The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.

Select one of the following:

  • True
  • False

Question 27 of 60

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Financial statement readers can determine future investing and financing transactions by examining a company's statement of cash flows.

Select one of the following:

  • True
  • False

Question 28 of 60

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In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.

Select one of the following:

  • True
  • False

Question 29 of 60

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Non-cash investing and financing activities must be reported in the body of a statement of cash flows.

Select one of the following:

  • True
  • False

Question 30 of 60

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The statement of cash flows classifies cash receipts and payments as operating, non operating, financial and extraordinary activities.

Select one of the following:

  • True
  • False

Question 31 of 60

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The sale of land for cash would be classified as a cash inflow from an investing activity.

Select one of the following:

  • True
  • False

Question 32 of 60

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Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income.

Select one of the following:

  • True
  • False

Question 33 of 60

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The receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities.

Select one of the following:

  • True
  • False

Question 34 of 60

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The payment of interest on bonds payable is classified as a cash outflow from operating activities.

Select one of the following:

  • True
  • False

Question 35 of 60

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Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

Select one of the following:

  • True
  • False

Question 36 of 60

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The acquisition of a building by issuing bonds would deb considered an investing and financing activity that did not affect cash.

Select one of the following:

  • True
  • False

Question 37 of 60

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All major financing and investing activities affect cash.

Select one of the following:

  • True
  • False

Question 38 of 60

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Cash provided by operations is generally equal to operating income.

Select one of the following:

  • True
  • False

Question 39 of 60

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Using the indirect method, an increase in accounts receivable during a period is deducted from net income in calculating cash provided by operations.

Select one of the following:

  • True
  • False

Question 40 of 60

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Using the indirect method, an increase in accounts payable during a period is deducted from net income in calculating cash provided by operations.

Select one of the following:

  • True
  • False

Question 41 of 60

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Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.

Select one of the following:

  • True
  • False

Question 42 of 60

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Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles.

Select one of the following:

  • True
  • False

Question 43 of 60

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Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments.

Select one of the following:

  • True
  • False

Question 44 of 60

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Analysis of financial statements is enhanced with the use of comparative data.

Select one of the following:

  • True
  • False

Question 45 of 60

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Comparisons of company data with industry averages can provide some insight into the company's relative position in the industry.

Select one of the following:

  • True
  • False

Question 46 of 60

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Vertical and horizontal analyses are concerned with the format used to prepare financial statements.

Select one of the following:

  • True
  • False

Question 47 of 60

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Horizontal, vertical and circular analyses are the most common tools of financial statement analysis.

Select one of the following:

  • True
  • False

Question 48 of 60

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Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

Select one of the following:

  • True
  • False

Question 49 of 60

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Another name for trend analysis is horizontal analysis.

Select one of the following:

  • True
  • False

Question 50 of 60

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If a company has sales of $110 in 2012 and $154 in 2013, the percentage increase in sales from 2012 to 2013 is 140%.

Select one of the following:

  • True
  • False

Question 51 of 60

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In horizontal analysis, if an item has a negative amount in the base year,and a positive amount in the following year, no percentage change for that item can be computed.

Select one of the following:

  • True
  • False

Question 52 of 60

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Common size analysis expresses each item within a financial statement in terms of a percent of a base amount.

Select one of the following:

  • True
  • False

Question 53 of 60

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Vertical analysis is a more sophisticated analytical tool than horizontal analysis.

Select one of the following:

  • True
  • False

Question 54 of 60

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Vertical analysis is useful in making comparisons of companies of different sizes.

Select one of the following:

  • True
  • False

Question 55 of 60

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Meaningful analysis of financial statements will include either horizontal or vertical analysis, but not both.

Select one of the following:

  • True
  • False

Question 56 of 60

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Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%.

Select one of the following:

  • True
  • False

Question 57 of 60

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In the vertical analysis of the income statement, each item is generally stated as a percentage of net income.

Select one of the following:

  • True
  • False

Question 58 of 60

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A ratio can be expressed as a percentage, a rate, or a proportion.

Select one of the following:

  • True
  • False

Question 59 of 60

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A solvency ratio measures the income or operating success of an enterprise for a given period of time.

Select one of the following:

  • True
  • False

Question 60 of 60

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The current ratio is a measure of all the ratios calculated for the current year.

Select one of the following:

  • True
  • False
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Chapter 12, 13, 14 True / False

Natalie Balzert
Quiz by , created about 2 years ago

Quiz on Chapter 12, 13, 14 True / False, created by Natalie Balzert on 25/11/2014.

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Natalie Balzert
Created by Natalie Balzert about 2 years ago
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