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1.The income statement is linked to the balance sheetthrough:

A.The cash account

B.The stock account

C.The costs of goods sold

D.The retained earnings account

2.The sale of a birdbath on credit would affect all of thefollowing accounts except:

A.Cash

B.Accounts receivable

C.Costs of goods sold

D.Inventory

3.The purchase of a copy machine with a useful life of 5 yearswould affect which of the following?

A.Fixed Assets ( PPE)

B.Investments

C.Inventory

D.Retained earnings

4.Receiving cash from customer who owed a balance from a salemade in the previous accounting period would:

A.Increase gross margin on the income statement

B.Increase total assets on the balance sheet

C.Increase retained earnings on the balance sheet

D.None of the above

5.The interest paid on a note payable would be classified asa(n):

A.Financing activity on a statement of cash flows

B.Operating activity on a statement of cash flows

C.Repayment activity on a statement of cash flows

D.Investing activity on a statement of cash flows

6.The sale of long term bonds payable would be classified asa(n):

A.Financing activity on a statement of cash flows

B.Operating activity on a statement of cash flows

C.Repayment activity on a statement of cash flows

D.Investing activity on a statement of cash flows

7.The proceeds from the sale of land that had been held forinvestment purposes would be classified as a(n):

A.Financing activity on a statement of cash flows

B. Operating activity on a statement of cash flows

C. Repayment activity on a statement of cash flows

D.Investing activity on a statement of cash flows

8. Under the accrual basis of accounting, the difference betweenthe ending cash balance and the cash balance at the beginning ofthe period will be the same as net income for the period.

A.True B. False

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18 Aug 2018

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1. A creditor is reviewing Hoffman Electronics’ statements ofretained earnings for the last 3 years. The creditor is trying todetermine whether a substantial loan should be given to HoffmanElectronics. Which question will most likely be answered byreviewing the statement of retained earnings?

a. Does Hoffman Electronics make risky investments that impedethe cash flow of the firm?

b. What was the ending permanent account balance for HoffmanElectronics last quarter?

c. What assets owned by Hoffman Electronics are valuable enoughto cover debt repayment?

d. Does Hoffman Electronics have enough earnings to pay bothdividends and debts?

2. True or false. By reviewing a company’s statement of retainedearnings over multiple reporting periods, an investor can evaluatethe company’s future growth potential based on net incomechanges.

3. A creditor would most likely be interested in reviewing afirm’s statement of retained earnings to determine if the firm

a. exhibits liquidity.

b.can repay its debt obligations.

c.makes risky investments.

d.has sufficient receivables.

4. On statement of cash flow, the repayment of loans iscategorized as a cash flow from ____activities.

a. operating

b. financing

5."Fill in the blank" question: select the correct answer.

In a statement of cash flows, cash inflows that result fromproviding goods to customers are included in the section called“cash flows from_______ activities.

a. investing

b. operating

c. sales

d. investing

6. Creditors want to know whether Photon, Inc. uses itsavailable cash to purchase new equipment. Which section of thestatement of cash flows would provide this information?

a.Cash flows from operating activities

b.Cash flows from sales activities

c.Cash flows from financing activities

d.Cash flows from investing activities

7. Creditors are examining the statement of cash flows forPhoton, Inc. Which of the following questions can be answered byreviewing the statement of cash flows?

a. What is the average net income of Photon?

b.What type of assets does Photon possess?

c.Does Photon reset its temporary accounts?

d.Does Photon pay its bills when they are due?

Powell Co. borrowed $20,000 from the local bank on April 1,2014, when the company was started. The note had an 8 percentannual interest rate and a one-year term to maturity. Powell Co.recognized $54,000 of revenue on account in 2014 and $65,000 ofrevenue on account in 2015. Cash collections from accountsreceivable were $46,000 in 2014 and $63,000 in 2015. Powell Co.paid $27,000 of salaries expense in 2014 and $36,000 of salariesexpense in 2015. Powell Co. paid the loan and interest at thematurity date. Required a. Organize the information in accountsunder an accounting equation. (Enter any decreases to accountbalances with a minus sign. Select "NA" if there is no effect onthe "Accounts Titles for Retained Earnings".) b. What amount of netcash flow from operating activities would be reported on the 2014cash flow statement? (Enter cash outflows as negative amounts.) c.What amount of interest expense would be reported on the 2014income statement? d. What amount of total liabilities would bereported on the December 31, 2014, balance sheet? e. What amount ofretained earnings would be reported on the December 31, 2014,balance sheet? f. What amount of cash flow from financingactivities would be reported on the 2014 statement of cash flows?(Enter cash outflows as negative amounts.) g. What amount ofinterest expense would be reported on the 2015 income statement? h.What amount of cash flows from operating activities would bereported on the 2015 cash flow statement? (Enter cash outflows asnegative amounts.) i. What amount of assets would be reported onthe December 31, 2015, balance sheet? ReferencesWorksheetDifficulty: 3 HardLearning Objective: 07-01 Show how notespayable and related interest expense affect financial statements.Check my work ©2016 McGraw-Hill Education. All rights reserved.Requires a modern browser - e.g. Safari 1, Netscape 6 or IE 5

ch of the following would NOT be considered an inventoriable productcost in an automated manufacturing environment?

rent paid on the production facilities

wages paid to the factory machine operators

depreciation on the equipment in the factory

delivery charges paid for finished goods shipped to customers

2)An inflow of cash from an investing activity would be ________.

assuming a long term debt
selling a piece of equipment
issuing common stock

receiving cash for sales to customers on account

3)Which of the following statements does NOT accurately describe the information provided by the statement of cash flows?

provide managers with a tool to assess if cash flows are sufficient to meet operational demands
provide information relevant to the decision to make cash distributions to owners of the company
provide a format for calculating net income on the accrual basis of accounting

4)What is the current ratio for Company A calculated using the following Balance Sheet?

Company A

Balance Sheet

December 31, 2010

Assets

Cash

$29,000

Accounts receivable (net)

114,000

Inventory

113,000

Prepaid expenses

6,000

Long-term investments

18,000

Net property, plant, and equipment

507,000

Total assets

$787,000

Liabilities and equity

Accounts payable

$73,000

Note payable

358,000

Common stock

186,000

Retained earnings

170,000

Total liabilities and equity $787,000

3.59
1.96
1.42
1.83

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