BUSI 320 MID TERM EXAM Questions and Answers
Verified Solutions Latest Update
Question 1.
An example of a limitation of the income statement is when an increase in the value
of
an asset is not reflected in the income statement.
Correct Answer: True
Question 2.
True or false: The U.S. accounting community is moving away from
International Financial Reporting Standards (IFRS).
Correct Answer: False Reason: The U.S. accounting community is moving towards
the IFRS. A financial statement that
measures a firm's worth as of one day in time. Balance sheet Current assets
include of the following
except accounts payable The accrual method of accounting records revenues and
expenses when they
occur. Which of the following is correct for net worth? Assets minus debt and
preferred stock obligation
Which of the following sections are included in the statement of cash flows
investing activities operating
activities financing activities Which method(s) translates income from operations
from an accrual to cash
basis? Both the direct and indirect methods
Question 3.
Classifying items on the balance sheet on a historical or original cost may be
problematic
because it may not reflect the ______ value of the item.
Correct Answer: current The purchase of investments represents a ______ of funds
in determining cash flows from
investing activities. use Reason: Because the firm is tying up more of its liquid
assets to make a
longer-term investment.
Question 4.
The repurchase or retirement of the firm's securities represents a use of funds
in determining cash flows from _____ activities.
Correct Answer: financing or financial The income statement and the balance sheet
use the Blank______ method of
accounting. accrual
Question 5.
Depreciation is a non-cash expense that is deducted from revenues to arrive at net
, income;
therefore, it must be Blank______ net income to determine the actual amount of
funds on
hand.
Correct Answer: added to
Question 6.
The sum of operating, investing, and financing activities represents the net
increase or
decrease in _____ _____ for the company. (Enter one word per blank.)
cash flow ______ is calculated by subtracting capital expenditures necessary to
maintain normal
activities, as well as, dividend payments necessary to keep shareholders satisfied,
from
cash flows from operating activities.
free cash flow In order to determine cash flows from operating activities, firms may
use a _____ method
in which every item on the income statement is adjusted from accrual accounting to
cash accounting.
Correct Answer: Direct
Question 7.
Which of the following are examples of primary financial decisions that would be
likely to
be influenced by income tax considerations?
Correct Answer: Issuance of common stock verses debt decisions. Lease verses
purchase decisions. Decisions on whether
to replace assets.
Question 8.
The sale of investments represents a ______ of funds in determining cash flows
from investing activities.
source
Beginning in 2018, one of the major changes is the reduction of the corporate tax
rate
from as high as 35 percent to a flat rate of ______ percent.
Correct Answer: 21
Question 9.
The sale of the firm's securities represents a (use or source) of funds in
determining
cash flows from financing activities.
Correct Answer: source Each of the following is tax deductible to a corporation,
except: Dividends Depreciation is
considered to be a Blank______ of funds? source Reason: Depreciation is a
non-cash expenditure that is
Verified Solutions Latest Update
Question 1.
An example of a limitation of the income statement is when an increase in the value
of
an asset is not reflected in the income statement.
Correct Answer: True
Question 2.
True or false: The U.S. accounting community is moving away from
International Financial Reporting Standards (IFRS).
Correct Answer: False Reason: The U.S. accounting community is moving towards
the IFRS. A financial statement that
measures a firm's worth as of one day in time. Balance sheet Current assets
include of the following
except accounts payable The accrual method of accounting records revenues and
expenses when they
occur. Which of the following is correct for net worth? Assets minus debt and
preferred stock obligation
Which of the following sections are included in the statement of cash flows
investing activities operating
activities financing activities Which method(s) translates income from operations
from an accrual to cash
basis? Both the direct and indirect methods
Question 3.
Classifying items on the balance sheet on a historical or original cost may be
problematic
because it may not reflect the ______ value of the item.
Correct Answer: current The purchase of investments represents a ______ of funds
in determining cash flows from
investing activities. use Reason: Because the firm is tying up more of its liquid
assets to make a
longer-term investment.
Question 4.
The repurchase or retirement of the firm's securities represents a use of funds
in determining cash flows from _____ activities.
Correct Answer: financing or financial The income statement and the balance sheet
use the Blank______ method of
accounting. accrual
Question 5.
Depreciation is a non-cash expense that is deducted from revenues to arrive at net
, income;
therefore, it must be Blank______ net income to determine the actual amount of
funds on
hand.
Correct Answer: added to
Question 6.
The sum of operating, investing, and financing activities represents the net
increase or
decrease in _____ _____ for the company. (Enter one word per blank.)
cash flow ______ is calculated by subtracting capital expenditures necessary to
maintain normal
activities, as well as, dividend payments necessary to keep shareholders satisfied,
from
cash flows from operating activities.
free cash flow In order to determine cash flows from operating activities, firms may
use a _____ method
in which every item on the income statement is adjusted from accrual accounting to
cash accounting.
Correct Answer: Direct
Question 7.
Which of the following are examples of primary financial decisions that would be
likely to
be influenced by income tax considerations?
Correct Answer: Issuance of common stock verses debt decisions. Lease verses
purchase decisions. Decisions on whether
to replace assets.
Question 8.
The sale of investments represents a ______ of funds in determining cash flows
from investing activities.
source
Beginning in 2018, one of the major changes is the reduction of the corporate tax
rate
from as high as 35 percent to a flat rate of ______ percent.
Correct Answer: 21
Question 9.
The sale of the firm's securities represents a (use or source) of funds in
determining
cash flows from financing activities.
Correct Answer: source Each of the following is tax deductible to a corporation,
except: Dividends Depreciation is
considered to be a Blank______ of funds? source Reason: Depreciation is a
non-cash expenditure that is
