Light Internationals’ managerial accountant reported $6,500,000 for the beginning investments balance, no sales of investments, and $3,400,000 ending balance of investments during the year.
What is the amount of investments purchases during the year?
ANSWER
INCORRECT
·
$2,090,000
·
THE CORRECT ANSWER
$2,900,000
·
YOU WERE SURE AND INCORRECT
$2,099,000
·
$2,009,000
·
I DON'T KNOW YET
The company purchased $2,900,000 of investments during the year. The other answers are not correct.
Beginning balance of investments + Purchases of investments – Cost of investments sold = Ending balance of investments
$6,500,000 + ? - $0 = $9,400,000
Purchases of investments = $6,500,000 - $9,400,000 = $2,900,000
An example of a change in current assets that would be added to net income is a(an) ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
increase in interest payable
·
amortization of a bond premium
·
YOU WERE SURE AND INCORRECT
decrease in accounts payable
·
increase in accounts receivable
·
I DON'T KNOW YET
An example of a change in current assets that would be added to net income is an increase in interest payable. The other answers are not correct.
Fall Service’s accountant reported $800,000 for the beginning balance of long-term liabilities. $50,000 of new bonds were issued, and debt of $200,000 was repaid during the same period.
What is the ending balance of long-term liabilities?
ANSWER
INCORRECT
·
$700,000
·
THE CORRECT ANSWER
$650,000
·
YOU WERE SURE AND INCORRECT
$600,000
·
$750,000
·
I DON'T KNOW YET
The long-term liability ending balance is $650,000. The other answers are not correct.
Beginning long-term liabilities + Bond issuance - Repayments of debt = Ending long-term liabilities
$800,000 + $50,000 - $200,000 = $650,000
Which of the following is NOT an example of a noncash investing or financing activity?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
The collection of a long-term loan in cash
·
The issuance of a bond payable to purchase equipment
·
YOU WERE SURE AND INCORRECT
The collection of a note payable in stock
·
The issuance of stock to retire a bad debt
·
I DON'T KNOW YET
The collection of a long-term loan in cash is NOT an example of a noncash investing or financing activity. The other answers are not correct. The collection of long-term loans in cash is an example of an investing activity on the statement of cash flows. The issuance of a bond payable to purchase equipment, the collection of a note payable in stock, and the issuance of stock to retire a bad debt are examples of noncash investing or financing activities.
Which of the following is a method of presenting cash flows from operating activities that separately lists the receipt and payment of cash for specific operating activities?
ANSWER
INCORRECT
·
YOU WERE SURE AND INCORRECT
The indirect method
·
THE CORRECT ANSWER
The direct method
·
Free cash flow
·
Comparative balance sheets
·
I DON'T KNOW YET
The direct method is a method of presenting cash flows from operating activities that separately lists the receipt and payment of cash for specific operating activities. The other answers are not correct.
A comparative balance sheet is a balance sheet that presents (i.e. compares) two fiscal periods, usually highlighting the changes in each account.
The free cash flow represents the amount of excess cash a business generates after taking into consideration the capital expenditures necessary to maintain its business.
The indirect method is a method of presenting the cash flows from operating activities that begins with the company’s net income, which is prepared on an accrual basis, and then reconciles it back to the cash basis through a series of adjustments.
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