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Chapter 12, 13, 14 True / False

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Quiz on Chapter 12, 13, 14 True / False, created by Natalie Balzert on 25/11/2014.
Natalie Balzert
Quiz by Natalie Balzert, updated more than 1 year ago
Natalie Balzert
Created by Natalie Balzert about 10 years ago
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Resource summary

Question 1

Question
Corporations purchase investments in debt or stock securities generally for one of two reasons.
Answer
  • True
  • False

Question 2

Question
A reason some companies purchase investments is because they generate a significant portion of their earnings from investment income.
Answer
  • True
  • False

Question 3

Question
The accounting for short-term debt investments and for long-term debt investments is similar.
Answer
  • True
  • False

Question 4

Question
When debt investments, are sold, the gain or loss is the difference between the net proceeds from the sale and the fair value of the bonds.
Answer
  • True
  • False

Question 5

Question
Debt investments are investments in government and corporation bonds.
Answer
  • True
  • False

Question 6

Question
In accordance with the cost principle, brokerage fees should be added to the cost of an investment.
Answer
  • True
  • False

Question 7

Question
In accordance with the cost principle, the cost of debt investments includes brokerage fees and accrued interest.
Answer
  • True
  • False

Question 8

Question
In accounting for stock investments of less than 20%, the equity method is used.
Answer
  • True
  • False

Question 9

Question
Dividends received on stock investments of less than 20% should be credited to the Stock Investments account.
Answer
  • True
  • False

Question 10

Question
If an investor owns between 20% and 50% of an investors common stock, it is presumed that the investor has significant influence on the investee.
Answer
  • True
  • False

Question 11

Question
The Stock Investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock.
Answer
  • True
  • False

Question 12

Question
Under the equity method, the investment in common stock is initially recorded at cost, and the Stock Investments account is adjusted manually.
Answer
  • True
  • False

Question 13

Question
Under the equity method, the receipt of dividends from the investee company results in an increase in the Stock Investments account.
Answer
  • True
  • False

Question 14

Question
Consolidated financial statements are appropriate when an investor controls an investee by ownership of more than 50% of the investors common stock.
Answer
  • True
  • False

Question 15

Question
Consolidated financial statements are prepared in place of the financial statements for that parent and subsidiary companies.
Answer
  • True
  • False

Question 16

Question
Consolidated financial statements should be prepared only when a subsidiary company has a controlling interest in the parent company.
Answer
  • True
  • False

Question 17

Question
The valuation of non-trading securities is similar to the procedures followed for trading securities, except that changes in fair value are not recognized in current income.
Answer
  • True
  • False

Question 18

Question
An unrealized gain or loss on trading securities is reported as a separate component of stockholders' equity.
Answer
  • True
  • False

Question 19

Question
For non-trading securities, the unrealized gain or loss account is carried forward to future periods.
Answer
  • True
  • False

Question 20

Question
A decline in the fair value of a trading security is recorded by debiting an unrealized loss account and crediting the Fair Value Adjustment account.
Answer
  • True
  • False

Question 21

Question
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

Question 22

Question
For external reporting, a company must prepare either an income statement ora statement of cash flows, but not both.
Answer
  • True
  • False

Question 23

Question
A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions.
Answer
  • True
  • False

Question 24

Question
A statement of cash flows indicates the sources and uses of cash during a period.
Answer
  • True
  • False

Question 25

Question
A statement of cash flows should help investors and creditors assess the entity's ability to generate future income.
Answer
  • True
  • False

Question 26

Question
The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.
Answer
  • True
  • False

Question 27

Question
Financial statement readers can determine future investing and financing transactions by examining a company's statement of cash flows.
Answer
  • True
  • False

Question 28

Question
In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.
Answer
  • True
  • False

Question 29

Question
Non-cash investing and financing activities must be reported in the body of a statement of cash flows.
Answer
  • True
  • False

Question 30

Question
The statement of cash flows classifies cash receipts and payments as operating, non operating, financial and extraordinary activities.
Answer
  • True
  • False

Question 31

Question
The sale of land for cash would be classified as a cash inflow from an investing activity.
Answer
  • True
  • False

Question 32

Question
Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income.
Answer
  • True
  • False

Question 33

Question
The receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities.
Answer
  • True
  • False

Question 34

Question
The payment of interest on bonds payable is classified as a cash outflow from operating activities.
Answer
  • True
  • False

Question 35

Question
Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.
Answer
  • True
  • False

Question 36

Question
The acquisition of a building by issuing bonds would deb considered an investing and financing activity that did not affect cash.
Answer
  • True
  • False

Question 37

Question
All major financing and investing activities affect cash.
Answer
  • True
  • False

Question 38

Question
Cash provided by operations is generally equal to operating income.
Answer
  • True
  • False

Question 39

Question
Using the indirect method, an increase in accounts receivable during a period is deducted from net income in calculating cash provided by operations.
Answer
  • True
  • False

Question 40

Question
Using the indirect method, an increase in accounts payable during a period is deducted from net income in calculating cash provided by operations.
Answer
  • True
  • False

Question 41

Question
Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.
Answer
  • True
  • False

Question 42

Question
Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles.
Answer
  • True
  • False

Question 43

Question
Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments.
Answer
  • True
  • False

Question 44

Question
Analysis of financial statements is enhanced with the use of comparative data.
Answer
  • True
  • False

Question 45

Question
Comparisons of company data with industry averages can provide some insight into the company's relative position in the industry.
Answer
  • True
  • False

Question 46

Question
Vertical and horizontal analyses are concerned with the format used to prepare financial statements.
Answer
  • True
  • False

Question 47

Question
Horizontal, vertical and circular analyses are the most common tools of financial statement analysis.
Answer
  • True
  • False

Question 48

Question
Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.
Answer
  • True
  • False

Question 49

Question
Another name for trend analysis is horizontal analysis.
Answer
  • True
  • False

Question 50

Question
If a company has sales of $110 in 2012 and $154 in 2013, the percentage increase in sales from 2012 to 2013 is 140%.
Answer
  • True
  • False

Question 51

Question
In horizontal analysis, if an item has a negative amount in the base year,and a positive amount in the following year, no percentage change for that item can be computed.
Answer
  • True
  • False

Question 52

Question
Common size analysis expresses each item within a financial statement in terms of a percent of a base amount.
Answer
  • True
  • False

Question 53

Question
Vertical analysis is a more sophisticated analytical tool than horizontal analysis.
Answer
  • True
  • False

Question 54

Question
Vertical analysis is useful in making comparisons of companies of different sizes.
Answer
  • True
  • False

Question 55

Question
Meaningful analysis of financial statements will include either horizontal or vertical analysis, but not both.
Answer
  • True
  • False

Question 56

Question
Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%.
Answer
  • True
  • False

Question 57

Question
In the vertical analysis of the income statement, each item is generally stated as a percentage of net income.
Answer
  • True
  • False

Question 58

Question
A ratio can be expressed as a percentage, a rate, or a proportion.
Answer
  • True
  • False

Question 59

Question
A solvency ratio measures the income or operating success of an enterprise for a given period of time.
Answer
  • True
  • False

Question 60

Question
The current ratio is a measure of all the ratios calculated for the current year.
Answer
  • True
  • False
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