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Exam 2: Financial Statements and the Annual Report

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Question 71

Multiple Choice

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Which one of the following is an investing activity of a business?

A) Paying for purchases of inventory
B) Issuing stock for cash
C) Borrowing money from a bank.
D) Purchasing a manufacturing plant for cash

E) None of the above
F) All of the above

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Question 72

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Match the following characteristics with the statements about each qualitative characteristic's importance. -This quality refers to an amount large enough to affect a decision.

A) Consistency
B) Materiality
C) Conservatism
D) Comparability
E) Reliability
F) Relevance
G) Understandability

H) A) and E)
I) C) and F)

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Question 73

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A question asked by stockholders is, "How much profit did the company make?" What should the stockholder examine to get the most information that will help evaluate the answer to this question?

The operating cycle for all businesses is one year.

The following list contains several items that appear on an income statement. Select the choice that lists the items in the order they would appear on a multi-step income statement

What is the purpose of a statement of cash flows? Give an example of one of each of the three activities.

Read the information about Cargo Corporation. Required: Prepare the long-term asset section of Cargo Corp.'s balance sheet at December 31, 2015. You may omit the heading. Why are these amounts classified as "long-term"?

Bartlett Industries Bartlett Industries began operations on January 2, 2015, with an investment of $50,000 by each of its two stockholders. Net income for its first year of business was $240,000. Bartlett Industries paid a total of $100,000 in dividends to its stockholders during the year. -Read the information about Bartlett Industries. The company's dividends for the year:

For each item listed, select the section of the balance sheet in which the item would be reported. -Capital stock

A balance sheet shows cash, $75,000; marketable securities, $115,000; accounts receivable, $150,000 and $222,500 of inventories. Current liabilities are $225,000. The current ratio is 2.5 to 1.

Guinther & Sons, Inc. Guinther & Sons, Inc. a retailer of men's clothing earned a net profit of $77,000 for 2014. The balance sheet for Guinther & Sons includes the following items: -Read the information for Guinther & Sons. Calculate the total amount of current assets for Guinther & Sons.

Relevant information can be quantitative or qualitative. In deciding whether to go to college part-time or full-time, which of the following is a qualitative factor for a student?

Harrison Company calculated the following amounts concerning its financial information for the years ending December 31, 2015 and 2014: REQUIRED: Suppose Harrison Company had a decrease in its cash account from 2014 to 2015. Would the other current asset amounts have increased or decreased? Explain.

The purchase of inventory for cash will cause the current ratio to decrease.

You are comparing three companies that use different depreciation methods. Which of the following would help you the most in making a comparison of the companies?

Which of the following statements is true concerning intangible assets?

Cook, Inc., a manufacturer of tires, has given you its most recent annual report in an effort to obtain a sizable loan. The company is very profitable and appears to have a sound financial position. Based on a report presented on prime-time television last night, you are aware that Cook is a defendant in several lawsuits related to its defective tires that cause vehicles to overturn. The information presented on television is an example of financial information that is:

What is the primary objective of financial reporting?

are cash and other assets that are reasonably expected to be realized in cash during the normal operating cycle of the business.

Which of the following best describes a company's operating activities?