User: The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement. Answer True False 4 points Question 8 During the year, Salaries Payable decreased by $6,000. If Salary Expense amounted to $170,000 for the year, the cash paid to employees (including deductions from gross pay) is Answer A. $164,000. B. $176,000. C. $170,000. D. $182,000. 4 points Question 9 If a company has an acid-test ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio? Short-term Borrowing Collection of Receivable Answer A. Decrease Decrease B. Increase No effect C. Decrease No effect D. Increase Increase 4 points Question 10 If a company has sales of $110 in 2010 and $154 in 2011, the percentage increase in sales from 2010 to 2011 is 140%. Answer True False 4 points Question 11 Each of the following is added to net income in computing net cash provided by operating activities except Answer A. a decrease in inventory. B. amortization expense. C. an increase in accrued expenses payable. D. a gain on sale of equipment. 4 points Question 12 In the vertical analysis of the income statement, each item is generally stated as a percentage of net income. Answer True False 4 points Question 13 Gary Company reports a $15,000 increase in inventory and a $5,000 increase in accounts payable during the year. Cost of Goods Sold for the year was $160,000. The cash payments made to suppliers were Answer A. $140,000. B. $155,000. C. $170,000. D. $160,000. 4 points Question 14 Comparisons of company data with industry averages can provide some insight into the company's relative position in the industry. Answer True False 4 points Question 15 A ratio calculated in the analysis of financial statements Answer A. is meaningful only if the numerator is greater than the denominator. B. restates all items on a financial statement in terms of dollars of the same purchasing power. C. expresses a mathematical relationship between two numbers. D. shows the percentage increase from one year to another. 4 points Question 16 Ester's Bunny Barn has experienced a $60,000 loss due to tornado damage to its inventory. Tornados have never before occurred in this area. Assuming that the company's tax rate is 30%, what amount will be reported for this loss on the income statement? Answer A. $18,000 B. $42,000 C. $60,000 D. $54,000 4 points Question 17 Rasmus Company has income before taxes of $330,000 and an extraordinary loss of $100,000. If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of: Answer A. $231,000 and ($70,000) B. $231,000 and ($30,000) C. $330,000 and ($100,000) D. $99,000 and ($30,000) 4 points Question 18 Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method? Answer A. Cash receipts from customers B. Gain on sale of equipment C. Cash paid to employees D. Cash paid for income taxes 4 points Question 19 The discontinued operations section of the income statement refers to Answer A. obsolete equipment and discontinued inventory items. B. the disposal of a significant segment of a business. C. the income or loss on products that have been completed and sold. D. discontinuance of a product line. 4 points Question 20 Which of the following statements concerning the statement of cash flows is true? Answer A. The statement of cash flows is usually more accurate when using the indirect method. B. If the direct method is used, a supplementary schedule reconciling the net income to a net cash from operating activities must still be provided. C. The statement of cash flows reflects both earnings per share and cash per share. D. The statement of cash flows is an optional financial statement for external reporting purposes. 4 points Question 21 Cost of goods sold for the year amounted to $130,000, and during the year, accounts payable ______________ by $8,000 and inventory ______________ by $7,000 resulting in cash paid to suppliers of $115,000. Answer 4 points Question 22 The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments $ 45,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets $300,000 Liabilities and Stockholders' Equity Current liabilities $ 50,000 Long-term liabilities 90,000 Stockholders' equity—common 160,000 Total Liabilities and Stockholders' Equity $300,000 Income Statement Sales $ 120,000 Cost of goods sold 66,000 Gross margin 54,000 Operating expenses 30,000 Net income $ 24,000 Number of shares of common stock 6,000 Market price of common stock $20 Dividends per share .50 Reference: Ref 14-1 What is the profit margin for Soho? Answer A. 45.0% B. 17.5% C. 20.0% D. 40.0% 4 points Question 23 The order of presentation of activities on the statement of cash flows is Answer A. operating, financing, and investing. B. operating, investing, and financing. C. financing, investing, and operating. D. financing, operating, and investing. 4 points Question 24 Land acquired from the issuance of common stock is reported Answer A. in a separate schedule at the bottom of the statement. B. as an operating activity. C. as a financing activity. D. as an investing activity. 4 points Question 25 In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is Answer A. added to net income. B. not reported on a statement of cash flows. C. ignored because it does not affect cash. 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