Cash provided by operating activities- 1. summarizes cash flows relating to the purchase and disposal of long

| June 11, 2016

Question
Cash provided by operating activities:

1. summarizes cash flows relating to the purchase and disposal of long-lived assets.

2. equals the change in cash for the year.

3. may be larger than net income.

4. decreases when long-term debt is repaid.

Nancy’s Cookie Shop reported equipment at $120,000 and $30,000 accumulated depreciation on its December 31, 2013, balance sheet. During 2014, the shop purchased equipment costing $30,000 and sold equipment costing $10,000 (book value $4,000) for $1,000. On December 31, 2014, net equipment was $98,000. Using the indirect method, Samantha’s would report depreciation expense on its statement of cash flows for 2014 of:

1. $14,000.

2. $30,000.

3. $18,000.

4. $22,000.

Short-term liquidity ratios include the:

1. profit margin ratio.

2. payout ratio.

3. debt to total assets ratio.

4. acid-test ratio.

Sunshine Paint reported sales of $500,000, total assets of $300,000, total owners’ equity of $160,000, current assets of $100,000, current liabilities of $40,000, and cash of $30,000. In a common-size analysis of the balance sheet, cash would be shown as:

1. 10%.

2. 30%.

3. 50%.

4. 6%.

The use of common-size analysis financial statements is an example of:

1. ratio analysis.

2. liquidity analysis.

3. vertical analysis.

4. horizontal analysis.

The purchase of an office building by issuing long-term notes payable should be reported as a:

1. cash outflow in the financing section of the statement of cash flows.

2. cash outflow in the operating section of the statement of cash flows.

3. noncash investing and financing activity.

4. cash outflow in the investing section of the statement of cash flows.

Which of the following is a solvency ratio?

1. Asset turnover ratio.

2. Acid-test ratio.

3. Debt to total assets ratio.

4. Return on assets ratio.

Wilson Company had inventory of $660,000 and $540,000 on December 31, 2013, and December 31, 2014, respectively. Cost of goods sold for 2014 was $4,200,000. Average days to sell the inventory is approximately:

1. 46.9.

2. 57.4.

3. 52.1.

4. 6.4.

Which of the following statements is true?

1. High asset turnover is a sign of efficient use of assets.

2. The price-earnings ratio is a long-term solvency ratio.

3. The current ratio measures the current profitability of the owners’ investment.

4. The acid-test ratio applies to manufacturing companies but not to service or retailing businesses.

In the statement of cash flows, the activities that affect cash flows are listed in the following order:

1. operating, investing, financing.

2. financing, operating, investing.

3. investing, financing, operating.

4. operating, financing, investing.

A transaction involving a loss on the disposal of equipment with the indirect method of presentation affects cash provided (used) by:

1. operations, financing activities, and investing activities.

2. operations and investing activities.

3. operations and financing activities.

4. financing activities and investing activities.

One major purpose of the statement of cash flows is to provide information about:

1. the firm’s resources and claims against those resources.

2. the firm’s cash receipts and payments during a period.

3. the firm’s profitability.

4. changes in retained earnings.

One cost which is part of both manufacturing overhead and total manufacturing costs is:

1. direct labor.

2. factory utilities.

3. selling and administrative costs.

4. direct materials.

Manufacturing costs are typically classified as:

1. direct materials or direct labor.

2. product costs or period costs.

3. direct materials, direct labor, or selling and administrative.

4. direct materials, direct labor, or manufacturing overhead.

A credit balance in the Manufacturing Overhead account at the end of an interim month means that:

1. cost of goods sold should be debited on the monthly income statement.

2. the balance should be reported as a prepaid expense in the monthly balance sheet.

3. corrective action by management is necessary.

4. overhead has been overapplied.

In a job order cost system, which of the following accounts is not a control account?

1. Raw Materials Inventory.

2. Finished Goods Inventory.

3. Factory Labor.

4. Manufacturing Overhead.

A job order cost system would most likely be used by a(n):

1. cement manufacturer.

2. paint manufacturer.

3. automobile manufacturer.

4. specialty printing company.

The formula for computing a predetermined overhead rate is:

1. estimated annual overhead costs ÷ actual annual operating activity.

2. actual annual overhead costs ÷ estimated annual operating activity.

3. actual annual overhead costs ÷ actual annual operating activity.

4. estimated annual overhead costs ÷ estimated annual operating activity.

An example of a period cost, as opposed to a product cost, is:

1. depreciation on the factory building.

2. wages of factory workers.

3. salesperson’s commissions.

4. factory utilities.

When there is beginning work in process, units transferred out are computed by subtracting:

1. beginning work in process units from the units started into production.

2. ending work in process units from the units started into production.

3. ending work in process units from the units accounted for.

4. beginning work in process units from the units to be accounted for.

A production cost report contains sections for:

1. units to be accounted for.

2. costs accounted for.

3. All three of the other choices are correct.

4. unit costs.

Which of the following does not describe a characteristic of process costing?

1. All units of production receive precisely the same amount of material, labor, and overhead.

2. Job cost sheets must pass from one production department to the next on a daily basis.

3. Once production begins, it continues until the finished product emerges.

4. Work in process accounts are maintained for each production department.

Given the following data, compute equivalent units of production for conversion costs:

Beginning Work in Process—4,000 units, 40% complete

Units Started into Production—40,000 units

Ending Work in Process—3,000 units, 20% complete.

1. 42,200.

2. 43,000.

3. 39,000.

4. 41,600.

Raw materials inventory, January 1 $20,000

Raw materials inventory, December 31 10,000

Work in process inventory, January 1 6,000

Work in process inventory, December 31 9,000

Finished goods inventory, January 1 16,000

Finished goods inventory, December 31 20,000

Raw materials purchases 400,000

Direct labor 200,000

Factory utilities 75,000

Indirect labor 45,000

Factory depreciation 180,000

Selling & administrative expenses 210,000

Direct materials used is:

1. $400,000.

2. $430,000.

3. $390,000.

4. $410,000.

Raw materials inventory, January 1 $20,000

Raw materials inventory, December 31 10,000

Work in process inventory, January 1 6,000

Work in process inventory, December 31 9,000

Finished goods inventory, January 1 16,000

Finished goods inventory, December 31 20,000

Raw materials purchases 400,000

Direct labor 200,000

Factory utilities 75,000

Indirect labor 45,000

Factory depreciation 180,000

Selling & administrative expenses 210,000

Assume direct materials is $400,000. Total manufacturing costs equal:

1. $700,000.

2. $600,000.

3. $900,000.

4. $780,000.

Raw materials inventory, January 1 $20,000

Raw materials inventory, December 31 10,000

Work in process inventory, January 1 6,000

Work in process inventory, December 31 9,000

Finished goods inventory, January 1 16,000

Finished goods inventory, December 31 20,000

Raw materials purchases 400,000

Direct labor 200,000

Factory utilities 75,000

Indirect labor 45,000

Factory depreciation 180,000

Selling & administrative expenses 210,000

Assume manufacturing costs is $850,000. Cost of goods manufactured equals:

1. $847,000.

2. $854,000.

3. $850,000.

4. $853,000.

Raw materials inventory, January 1 $20,000

Raw materials inventory, December 31 10,000

Work in process inventory, January 1 6,000

Work in process inventory, December 31 9,000

Finished goods inventory, January 1 16,000

Finished goods inventory, December 31 20,000

Raw materials purchases 400,000

Direct labor 200,000

Factory utilities 75,000

Indirect labor 45,000

Factory depreciation 180,000

Selling & administrative expenses 210,000

Assume goods manufactured is $870,000. The cost of goods sold is:

1. $870,000.

2. $866,000.

3. $867,000.

4. $874,000.

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