Q&A Hero

Q: on the statement of cash flows using the indirect method, patent amortization expense will a.be added to net income in the operating section b.be deducted from net income in the operating section c.appear as an inflow of cash in the investing section d.appear as an outflow of cash in the investing section

Q: The book value of a fixed asset reported on the balance sheet represents its market value on that date. a. True b. False

Q: using the indirect method, if equipment is sold at a gain, the a.sale proceeds received are deducted in the operating activities section b.sale proceeds received are added in the operating activities section c.amount of the gain is added in the operating activities section d.amount of the gain is deducted in the operating activities section

Q: An exchange of similar assets is said to have commercial substance if future cash flows change as a result of the exchange. a. True b. False

Q: which of the following adjustments to convert net income to net cash provided by operating activities is not added to net income? a.gain on sale of equipment b.depreciation expense c.patent amortization expense d.depletion expense

Q: When depreciation estimates are revised, all years of the asset’s life are affected. a. True b. False

Q: using the indirect method, which of the following adjustments to convert net income to net cash provided by operating activities is incorrect?

Q: Regardless of the depreciation method, the amount that will be depreciated during the life of the asset will be the same. a. True b. False

Q: using the indirect method, which of the following adjustments to convert net income to net cash provided by operating activities is correct?

Q: Residual value is not incorporated in the initial computations for double-declining-balance depreciation. a. True b. False

Q: in calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n) a.subtraction from net income b.addition to net income c.addition to cash flow from investing activities d.subtraction from cash flow from investing activities

Q: Land acquired as a speculation is reported under Investments on the balance sheet. a. True b. False

Q: which of the following would not be an adjustment to net income using the indirect method? a.depreciation expense b.an increase in prepaid insurance c.amortization expense d.an increase in land

Q: which of the following would be added to net income using the indirect method? a.an increase in accounts receivable b.an increase in prepaid expenses c.depreciation expense d.a decrease in accounts payable

Q: The cost of replacing an engine in a truck is an example of ordinary maintenance. a. True b. False

Q: the net income reported on the income statement for the current year was $1,260,000. depreciation recorded on plant assets was $57,000. accounts receivable and inventories increased by $12,000 and $48,000, respectively. prepaid expenses and accounts payable decreased by $6,000 and $66,000, respectively. how much cash was provided by operating activities? a.$1,140,000 b.$1,260,000 c.$1,197,000 d.$1,476,000

Q: The double-declining-balance method of depreciation uses a declining percentage rate in determining the depreciation amount. a. True b. False

Q: a company had net income of $242,000. depreciation expense is $26,000. during the year, accounts receivable and inventory increased $15,000 and $40,000, respectively. prepaid expenses and accounts payable decreased $2,000 and $4,000, respectively. there was also a loss on the sale of equipment of $3,000. how much cash was provided by operating activities? a.$214,000 b.$207,000 c.$274,000 d.$295,000

Q: The double-declining-balance depreciation method computes depreciation each year by taking twice the straight-line rate times the book value of the asset at the beginning of each year. a. True b. False

Q: Functional depreciation occurs when a fixed asset is no longer able to provide services at the level for which it was intended. a. True b. False

Q: the net income reported on the income statement for the current year was $440,000. depreciation was $100,000. accounts receivable and inventories decreased by $20,000 and $60,000, respectively. prepaid expenses and accounts payable increased, respectively, by $2,000 and $16,000. how much cash was provided by operating activities? a.$562,000 b.$634,000 c.$602,000 d.$478,000

Q: The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value. a. True b. False

Q: the net income reported on the income statement for the current year was $410,000. depreciation recorded on plant assets was $76,000. accounts receivable and inventories increased by $4,000 and $16,000, respectively. prepaid expenses and accounts payable decreased by $2,000 and $22,000, respectively. how much cash was provided by operating activities? a.$370,000 b.$446,000 c.$410,000 d.$478,000

Q: Capital expenditures are costs that are charged to stockholders' equity accounts. a. True b. False

Q: the net income reported on the income statement for the current year was $210,000. depreciation was $25,000. accounts receivable and inventories decreased by $5,000 and $15,000, respectively. prepaid expenses and accounts payable increased, respectively, by $500 and $4,000. how much cash was provided by operating activities? a.$240,500 b.$250,500 c.$258,500 d.$219,500

Q: Equipment acquired at a cost of $126,000 has a book value of $42,000. Journalize the disposal of the equipment under the following independent assumptions:a. The equipment had no market value and was discarded.b. The equipment is sold for $54,000.c. The equipment is sold for $24,000.d. The equipment is traded in for a similar asset. The list price of the new equipment is $63,000. The buyer gave no cash in the exchange. The transaction lacks commercial substance.

Q: the indirect and direct methods of preparing the statement of cash flows are identical except for the a.significant noncash activity section b.operating activities section c.investing activities section d.financing activities section

Q: Equipment was acquired at the beginning of the year at a cost of $75,000. The equipment was depreciated using the straight-line method based on an estimated useful life of 6 years and an estimated residual value of $7,500.a. Compute the depreciation expense for the first year.b. Assuming the equipment was sold at the end of the second year for $59,000, determine the gain or loss on sale of the equipment.c. Journalize the entry for the sale.

Q: if $240,000 of bonds are issued during the year but $400,000 of old bonds are retired during the year, the statement of cash flows will show a(n) a.net increase in cash of $160,000 b.net decrease in cash of $160,000 c.increase in cash of $240,000 and a decrease in cash of $400,000 d.net loss on retirement of bonds of $160,000

Q: Eagle Country Club has acquired a lot to construct a clubhouse. Eagle had the following costs related to the construction:Architects’ fees $ 45,000Construction labor 80,000Engineers’ fees 15,000Fences around building 9,000Grading and leveling 10,000Insurance costs incurred during construction 7,000Interest on money borrowed for construction 5,000Land 73,000Building materials 237,000Sales taxes 6,000Trees and shrubs 6,000​Determine the cost of the clubhouse to be reported on the balance sheet.

Q: if $120,000 of bonds are issued during the year but $200,000 of old bonds are retired during the year, the statement of cash flows will show a(n) a.net increase in cash of $80,000 b.net decrease in cash of $80,000 c.increase in cash of $120,000 and a decrease in cash of $200,000 d.net loss on retirement of bonds of $80,000

Q: Equipment was purchased on January 5, Year 1, at a cost of $90,000. The equipment had an estimated useful life of 8 years and an estimated residual value of $8,000. After using the equipment for 3 years, the useful life was revised to a total of 10 years and the residual value was reduced to $2,004.Determine the straight-line depreciation expense for Year 4 and the following years.

Q: which of the following changes in retained earnings during a period will be reported in the financing activities section of the statement of cash flows? 1>declaration and payment of a cash dividend during the period. 2>net income for the period. a.1 b.2 c.neither 1 nor 2 d.both 1 and 2

Q: Carter Co. acquired drilling rights for $18,550,000. The oil deposit is estimated at 74,200,000 gallons. During the current year, 6,000,000 gallons were drilled. Journalize the adjusting entry at December 31 to recognize the depletion expense.

Q: the statement of cash flows a.is prepared instead of an income statement under generally accepted accounting principles b.is used to assess an entity's ability to pay dividends and meet obligations c.is prepared from comparative income statements d.reflects earnings per share figures on a cash basis and on an accrual basis in the body of the statement

Q: Prior to adjustment at the end of the year, the balance in Trucks is $300,900 and the balance in Accumulated Depreciation—Trucks is $88,200. Details of the subsidiary ledger are as follows:​Truck No.​​Cost​Estimated Residual Value​Estimated Useful LifeAccumulated Depreciation at Beginning of Year​Miles Operated During Year1$100,000$13,000300,000—30,000272,9009,900300,000$60,00025,000338,0003,000200,0008,05045,000490,00013,000200,00020,15040,000​a. Based on the units-of-activity method, determine the depreciation rates per mile and the amount to be credited to the Accumulated Depreciation section of each of the subsidiary accounts for the miles operated during the current year. Round rates to 1/10 of a cent.b. Journalize the adjusting entry to record depreciation for the year.

Q: in preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of a.the adjusted trial balance b.the current period's retained earnings statement c.a comparative balance sheet d.a comparative income statement

Q: the statement of cash flows will not provide insight into a.why dividends were not increased b.whether cash flow is greater than net income c.the exact proceeds of a future bond issue d.how the retirement of debt was accomplished

Q: An asset was purchased for $58,000 and originally estimated to have a useful life of 10 years with a residual value of $3,000. After 2 years of straight-line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $2,000. a. Determine the amount of the annual depreciation for the first 2 years.b. Determine the book value at the end of Year 2.c. Determine the depreciation expense for each of the remaining years after revision

Q: A double-declining-balance rate for computing depreciation expense is determined by doubling the straight-line rate. Assuming that an asset has a useful life of 25 years, determine the rate to be used under the double-declining-balance method.

Q: when equipment is sold for cash, the amount received is reflected as a cash a.inflow in the operating section b.inflow in the financing section c.inflow in the investing section d.outflow in the operating section

Q: Machinery acquired at a cost of $80,000 and on which there is accumulated depreciation of $55,000 (including depreciation for the current year to date) is exchanged for similar machinery. Assume that the transaction has commercial substance. Journalize the entries for the exchange of the machinery under each of the following assumptions:a. Price of new, $120,000; trade-in allowance on old, $4,000; balance paid in cash.b. Price of new, $120,000; trade-in allowance on old, $34,000; balance paid in cash.

Q: which of the following would not be needed to determine net cash provided by operating activities? a.depreciation expense b.change in accounts receivable c.payment of cash dividends d.change in prepaid expenses

Q: On July 1, Hartford Construction purchases a bulldozer for $228,000. The equipment has a 9-year life with a residual value of $16,000. Hartford uses the units-of-activity method of depreciation, and the bulldozer is expected to yield 26,500 operating hours.a. Compute the depreciation expense per hour of operation.b. The bulldozer is operated 1,250 hours in the first year, 2,755 hours in the second year, and 1,225 hours in the third year of operations. Journalize the depreciation expense for each year.

Q: to determine the net cash provided (used) by operating activities, it is necessary to analyze a.the current year's income statement b.a comparative balance sheet c.additional information d.all of the above

Q: Chasteen Company acquired mineral rights for $9,100,000. The mineral deposit is estimated at 65,000,000 tons. During the current year, 18,375,000 tons were mined and sold.a. Determine the amount of depletion expense for the current year.b. Journalize the adjusting entry to recognize the depletion expense.

Q: land costing $125,000 was sold for $155,000 cash. the gain on the sale was reported on the income statement as other income. on the statement of cash flows, what amount should be reported as an investing activity from the sale of land? a.$125,000 b.$155,000 c.$185,000 d.$30,000

Q: if a loss of $20,000 is incurred in selling (for cash) office equipment having a book value of $80,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a.$60,000 b.$80,000 c.$100,000 d.$20,000

Q: Equipment acquired on January 2, Year 1, at a cost of $525,000 has an estimated useful life of 8 years and an estimated residual value of $45,000.a. Compute the annual amount of depreciation for the first 3 years, assuming the straight-line method of depreciation is used.b. Determine the book value of the equipment on January 1, Year 4.c. Assuming that the equipment is sold on January 2, Year 4, for $326,000, journalize the entry for the sale.d. Assuming that the equipment is sold on January 2, Year 4, for $394,000, journalize the entry for the sale.

Q: Champion Company purchased and installed carpet in its new general offices on March 31 for a total cost of $18,000. The carpet is estimated to have a 15-year useful life and no residual value.a. Journalize the March 31 purchase of the new carpet.b. Journalize the December 31 adjusting entry for the partial-year depreciation of the carpet, assuming that Champion Company uses the straight-line method.

Q: if a gain of $10,000 is incurred in selling (for cash) office equipment having a book value of $100,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a.$90,000 b.$110,000 c.$100,000 d.$10,000

Q: The following information was taken from a recent annual report of Harrison Company (in millions): Current YearPreceding YearLand and buildings$726$361Machinery, equipment, and internal-use software595470Office furniture and equipment9481Other fixed assets related to leases760569Accumulated depreciation and amortization894644a. Compute the book value of the fixed assets for the current year and the preceding year and explain the differences, if any.b. Would you normally expect the book value of fixed assets to increase or decrease during the year?

Q: if a loss of $62,000 is incurred in selling (for cash) office equipment having a book value of $200,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a.$138,000 b.$200,000 c.$262,000 d.$62,000

Q: For each of the following fixed assets, determine the depreciation expense for Year 3.Disposal date is N/A if asset is still in use.Method: SL = straight-line; DDB = double-declining-balanceAssume the estimated life is 5 years for each asset.​Item​CostResidual Value​Purchase Date​Disposal Date​Depr. MethodDepr.Expense Year 3A$40,000 $ 4,000 July 1, Year 3 N/ASL B50,0005,000 Jan. 1, Year 1 Aug. 31,Year 3SL C60,0002,000 Oct. 1, Year 3 N/ADDB D80,00010,000 Jan. 1, Year 2 Apr. 1, Year 3DDB

Q: if a gain of $27,000 is incurred in selling (for cash) office equipment having a book value of $180,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a.$153,000 b.$180,000 c.$207,000 d.$27,000

Q: Financial statement data for the years ended December 31 for Parker Corporation are as follows:​Current YearPrior YearSales$2,595,600$2,409,498Fixed assets (net):​​ Beginning of year901,070820,000 End of year829,330901,070​a. Determine the fixed asset turnover ratio for the current and prior years.b. Does the change in fixed asset turnover ratio from the prior year to the current year indicate a favorable or unfavorable change?

Q: when using the indirect method to compute cash provided by operating activities a.income taxes paid may be ignored b.amortization expense is added to net income c.decreases in inventory are subtracted from net income d.increases in accounts receivable are added to net income

Q: A machine costing $57,000 with a 6-year life and $54,000 depreciable cost was purchased on January 1. Compute the yearly depreciation expense using straight-line depreciation.

Q: barber company reported net income of $120,000 for the year ended december 31, 2012. during the year, inventories decreased by $24,000, accounts payable decreased by $36,000, depreciation expense was $40,000 and a gain on disposal of equipment of $18,000 was recorded. net cash provided by operating activities in 2012 using the indirect method was a.$238,000 b.$130,000 c.$154,000 d.$110.000

Q: On January 1, Golden Sales bought $135,000 in fixed assets associated with sales equipment. The residual value of these assets is estimated at $10,000 at the end of their 4-year service life. Golden Sales managers want to evaluate the options of depreciation.​a. Compute the annual straight-line depreciation, and journalize the sample depreciation entry to be recorded at the end of each of the 4 years.b. Compute the double-declining-balance depreciation, and journalize the depreciation entries to be recorded at the end of each of the 4 years.

Q: a transaction involving a gain on the sale of equipment affects cash provided (used) by a.financing and investing activities b.operating and financing activities c.operating and investing activities d.operating, financing, and investing activities

Q: Computer equipment (office equipment) purchased 6½ years ago for $170,000, with an estimated life of 8 years and a residual value of $10,000, is now sold. (Appropriate entries for depreciation had been made for the first 6 years of use.) a. Journalize the depreciation for the one-half year prior to the sale, using the straight-line method.b. Journalize the sale of the equipment, assuming it is sold for $60,000 cash.c. Journalize the sale of the equipment, assuming it is sold for $25,000 cash.

Q: the current cash debt coverage ratio is computed by dividing a.average current liabilities by cash provided by operating activities b.cash provided by operating activities by average current liabilities c.ending current liabilities by cash provided by operating activities d.cash provided by operating activities by ending current liabilities

Q: each of the following is an adjustment to convert net income to net cash provided by operating activities except a.adding back noncash expenses b.adding gains and deducting losses c.analyzing changes to noncash current asset and current liability accounts d.all of the above are adjustments

Q: Journalize each of the following transactions:a. A wing costing $2,345,000 was added to the building. A new mortgage was issued for the cost.b. Equipment was upgraded to increase its capacity to produce widgets. The upgrade cost of $11,500 was paid in cash.c. A major overhaul costing $8,000 on a machine increased the useful life by 4 years. The payment was made in cash.

Q: all of the following adjustments would be deducted in determining net cash provided by operating activities except a(n) a.increase in inventories b.depreciation expense c.gain on sale of plant assets d.decrease in accrued expenses payable

Q: all of the following adjustments are added to net income in computing net cash provided by operating activities except a.amortization expense b.a decrease in accounts receivable c.an increase in accounts payable d.an increase in prepaid expenses

Q: Fill in the missing numbers using the formula for the fixed asset turnover ratio: Company ACompany BCompany CCompany DSales$5,000,000$720,000$900,000?Beginning fixed assets$450,000$275,000?$380,000Ending fixed assets$800,000?$310,000$420,000Fixed asset turnover ratio?2.43.02.6

Q: during 2012, jennifer industries reported cash provided by operations of $280,000,000, cash used in investing of $343,000,000, and cash used in financing of $45,000,000. in addition, cash spent for fixed assets during the period was $138,000,000. average current liabilities were $325,000,000 and average total liabilities were $858,000,000. no dividends were paid. based on this information, what was jennifer's free cash flow? a.($63,000,000) b.$108,000,000 c.$142,000,000 d.($246,000,000)

Q: On December 31, it was estimated that goodwill of $65,000 was impaired. On July 1, a patent with an estimated useful economic life of 10 years was acquired for $60,000.​a. Journalize the adjusting entry on December 31 for the impaired goodwill.b. Journalize the adjusting entry on December 31 for the amortization of the patent rights.

Q: the cash debt coverage ratio is computed by dividing net cash provided by operating activities by a.average current liabilities b.net sales c.average long-term liabilities d.average total liabilities

Q: Williams Company acquired machinery on July 1, Year 1, at a cost of $130,000. The estimated useful life of the machinery was 10 years, and the estimated residual value was $10,000. Williams uses the double-declining-balance method of depreciation. On October 1, Year 4, Williams sold the equipment for $75,000.​a. Journalize the entry for the depreciation on this machinery for Year 1.b. Journalize the entry for the sale of the machinery.

Q: the current cash debt coverage ratio is used to evaluate a.solvency b.profitability c.liquidity d.earning power

Q: Sam’s Pest Control Products has the following information available.Net Income $15,000Average Total Liabilities 40,000Average Current Liabilities 18,000Cash Provided by Operations 24,000Cash Sales 65,000Capital Expenditures 11,000Dividends Paid 3,000What is the cash debt coverage ratio?a. .375 times.b. 1.33 times.c. .600 times.d. 1.625 times.

Q: Falcon Company acquired an adjacent lot to construct a new warehouse, paying $40,000 and giving a short-term note for $410,000. Legal fees paid were $13,275, delinquent taxes assessed were $14,500, and fees paid to remove an old building from the land were $15,800. Materials salvaged from the demolition of the building were sold for $6,800. A contractor was paid $890,000 to construct the new warehouse. Determine the cost of the land to be reported on the balance sheet and show your work.

Q: Sam’s Pest Control Products has the following information available.Net Income $15,000Average Total Liabilities 40,000Average Current Liabilities 18,000Cash Provided by Operations 24,000Cash Sales 65,000Capital Expenditures 11,000Dividends Paid 3,000what is the current cash debt coverage ratio?a.1.333 timesb..600 timesc..833 timesd..369 times

Q: Machinery is purchased on July 1 of the current fiscal year for $240,000. It is expected to have a useful life of 4 years, or 25,000 operating hours, and a residual value of $15,000. Compute the depreciation for the last 6 months of the current fiscal year ending December 31 by each of the following methods:​a. Straight-lineb. Double-declining-balancec. Units-of-activity (used for 1,600 hours during the current year)

Q: during 2012, jennifer industries reported cash provided by operations of $280,000,000, cash used in investing of $343,000,000, and cash used in financing of $45,000,000. in addition, cash spent for fixed assets during the period was $138,000,000. average current liabilities were $325,000,000 and average total liabilities were $858,000,000. no dividends were paid. based on this information, what was jennifer's current cash debt coverage ratio? a.1.16 times b.2.03 times c.0.82 times d.0.86 times

Q: A number of major structural repairs completed at the beginning of the current fiscal year at a cost of $1,000,000 are expected to extend the life of a building 10 years beyond the original estimate. The original cost of the building was $6,552,000, and it has been depreciated by the straight-line method for 25 years. Estimated residual value is negligible and has been ignored. The related accumulated depreciation account after the depreciation adjustment at the end of the preceding fiscal year is $4,550,000.a. What has the amount of annual depreciation been in past years?b. What was the original life estimate of the building?c. To what account should the $1,000,000 be debited?d. What is the book value of the building after the extraordinary repairs have been made?e. What is the expected remaining life of the building after the extraordinary repairs have been made?f. What is the amount of straight-line depreciation for the current year, assuming that the repairs were completed at the very beginning of the current year? Round to the nearest dollar.

Q: during 2012, jennifer industries reported cash provided by operations of $280,000,000, cash used in investing of $343,000,000, and cash used in financing of $45,000,000. in addition, cash spent for fixed assets during the period was $138,000,000. average current liabilities were $325,000,000 and average total liabilities were $858,000,000. no dividends were paid. based on this information, what was jennifer's cash debt coverage ratio? a.0.38 times b.0.33 times c.0.86 times d.0.40 times