Chapter 12, 13, 14 Multiple Choice

Natalie Balzert
Quiz by Natalie Balzert, updated more than 1 year ago
Natalie Balzert
Created by Natalie Balzert over 6 years ago
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Quiz on Chapter 12, 13, 14 Multiple Choice, created by Natalie Balzert on 11/25/2014.

Resource summary

Question 1

Question
Corporations invest excess cash for short periods of time in each of the following except
Answer
  • Equity securities.
  • Highly liquid securities.
  • Low-Risk securities.
  • Government securities.

Question 2

Question
Corporations invest in other companies for all of the following reasons except to
Answer
  • house excess cash until needed.
  • generate earnings.
  • meet strategic goals.
  • increase trading of the other companies stock.

Question 3

Question
A typical investment to house excess cash until needed is
Answer
  • stocks of companies in a related industry.
  • debt securities.
  • low-risk, highly liquid securities.
  • stock securities.

Question 4

Question
A company may purchase a non controlling interest in another firm in related industry
Answer
  • to house excess cash until needed.
  • to generate earnings.
  • for strategic reasons.
  • for speculative reasons.

Question 5

Question
Pension funds and mutual funds regularly invest in debt and stock securities primarily to
Answer
  • generate earnings.
  • house excess cash until needed.
  • meet strategic goals.
  • control the company in which they invest.

Question 6

Question
At the time of acquisition of a debt investment,
Answer
  • no journal entry is required.
  • the cost principle applies.
  • the Stock investments account is debited when bonds are purchased.
  • the Investment account is credited for its cost plus brokerage fees.

Question 7

Question
Which of the following is not a true statement regarding short-term debt investments?
Answer
  • The securities usually pay interest.
  • Investments are frequently government or corporate bonds.
  • This type of investment must be currently traded in the securities market.
  • Debt investments are recorded at the price paid less brokerage fees.

Question 8

Question
On January 1, 2013, Danner Company purchased at face value, a $1000, 8% bond that pays interest on January 1 and July 1. Danner Company has a calendar year end. The entry for the receipt of interest on July 1, 2013 is
Answer
  • Cash..........................................40 Interest Revenue .......................40
  • Cash.........................................80 Interest Revenue..........................80
  • Interest Receivable................................40 Interest Revenue................................40
  • Interest Receivable.............................80 Interest Revenue..............................80

Question 9

Question
On January 1, 2013, Danner Company purchased at face value, a $1000, 10% bond that pays interest on January 1 and July 1. Danner Company has a calendar year end. The adjusting entry on December 31, 2013 is
Answer
  • not required
  • Cash..............50 Interest Revenue..............50
  • Interest Receivable......................50 Interest Revenue.............................50
  • Interest Receivable.....................50 Debt investments...........................50

Question 10

Question
On January 1, 2013, Milton Company purchased at face value, a $1000, 4% bond that pays interest on January 1 and July 1. Milton Company has a calendar year end. The entry for the receipt of interest on January 1, 2014 is
Answer
  • Cash..............................40 Interest Revenue................40
  • Cash............................40 Interest Receivable......................40
  • Cash....................................20 Interest Revenue...........................20
  • Cash.....................................20 Interest Receivable.........................20

Question 11

Question
The statement of cash flows should help investors and creditors assess each of the following except the
Answer
  • entity's ability to generate future income.
  • entity's ability to pay dividends.
  • reasons for the difference between net income and net cash provided by operating activities.
  • cash investing and financing transactions during the period.

Question 12

Question
The statement of cash flows
Answer
  • must be prepared on a daily basis.
  • summarizes the operating, financing,and investing activities of an entity.
  • is another name for the income statement.
  • is a special section of the income statement.

Question 13

Question
Which of the following items is not generally used in preparing a statement of cash flows?
Answer
  • Adjusted trial balance.
  • Comparative balance sheets.
  • Current income statement.
  • Additional information.

Question 14

Question
The primary purpose of the statement of cash flows is to
Answer
  • provide information about the investing and financing activities during a period.
  • prove that revenues exceed expenses if there is a net income.
  • provide information about the cash receipts and cash payments during a period.
  • facilitate banking relationships.

Question 15

Question
If a company reports a net loss, it
Answer
  • may still have a net increase in cash.
  • will not be able to pay cash dividends.
  • will not be able to get a loan.
  • will not be able to make capital expenditures.

Question 16

Question
In addition to the three basic financial statements, which of the following is also a required financial statement?
Answer
  • the "Cash Budget"
  • the Statement of Cash Flows
  • the Statement of Cash Inflows and Outflows
  • the "Cash Reconciliation"

Question 17

Question
The statement of cash flows will not report the
Answer
  • amount of checks outstanding at the end of the period.
  • sources of cash in the current period.
  • uses of cash in the current period.
  • change in the cash balance for the current period.

Question 18

Question
The statement of cash flows reports each of the following except
Answer
  • cash receipts from operating activities.
  • cash payments from investing activities.
  • the net change in cash.
  • cash sales.

Question 19

Question
Each of the following are particularly interested in the statement of cash flows except
Answer
  • creditors.
  • employees.
  • shareholders.
  • government agencies.

Question 20

Question
Lending money and collecting the loads are
Answer
  • operating activities.
  • investing activities.
  • financing activities.
  • non-cash investing and financing activities.

Question 21

Question
Which one of the following is primarily interested in the liquidity of a company?
Answer
  • Federal government.
  • Stockholders.
  • Long-term creditors.
  • Short-term creditors.

Question 22

Question
Which of of the following is not a characteristic generally evaluated in analyzing financial statements?
Answer
  • Liquidity
  • Profitability
  • Marketability
  • Solvency

Question 23

Question
In analyzing the financial statements of a company, a single item on the financial statements
Answer
  • should be reported in bold-face type.
  • is more meaningful if compared to other financial information.
  • is significant only if it is large.
  • should be accompanied by a footnote.

Question 24

Question
Short-term creditors are usually most interested in evaluating
Answer
  • solvency.
  • liquidity.
  • marketability.
  • profitability.

Question 25

Question
Long-term creditors are usually most interested in evaluating
Answer
  • liquidity and solvency.
  • solvency and marketability.
  • liquidity and profitability.
  • profitability and solvency.

Question 26

Question
Stockholders are most interested in evaluating
Answer
  • liquidity and solvency.
  • profitability and solvency.
  • liquidity and profitability.
  • marketability and solvency.

Question 27

Question
A stockholder is interested in the ability of a firm to
Answer
  • pay consistent dividends.
  • appreciate in share price.
  • survive over a long period.
  • all of these.

Question 28

Question
Comparisons of financial date made within a company are called
Answer
  • intracompany comparisons.
  • interior comparisons.
  • intercompany comparisons.
  • intramural comparisons.

Question 29

Question
A technique for evaluating financial statements that expresses the relationship among selected items of financial statement date is
Answer
  • common size analysis.
  • horizontal analysis.
  • ratio analysis.
  • vertical analysis.

Question 30

Question
Which one of the following is not a tool in financial statement analysis?
Answer
  • Horizontal analysis.
  • Circular analysis.
  • Vertical analysis.
  • Ratio analysis.
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