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Chapters 1-4The Accounting Cycle
Chapters 5-8Current Assets
Chapters 9-11Long-Term Assets
Chapters 12-14Liabilities/Equities
Chapters 15-16Using Information
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20Managerial/Cost
Chapters 21-24Budgeting/Decisions

Chapters 1-4The Accounting Cycle
Chapters 5-8Current Assets
Chapters 9-11Long-Term Assets
Chapters 12-14Liabilities/Equities
Chapters 15-16Using Information
- Chapter 15: Financial Reporting and Concepts
- Chapter 16: Financial Analysis and the Statement of Cash Flows
Chapters 17-20Managerial/Cost
Chapters 21-24Budgeting/Decisions

Chapter 16 – Multiple Choice

By admin / February 15, 2016

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Question 1 of 11

1. Question
Zhang Corporation had net income of $100,000, paid income taxes of $30,000, and had interest expense of $8,000. What was Zhang’s times interest earned ratio?
- 12.5
- 16.25
- 17.25
- 17.85
Correct

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Question 2 of 11

2. Question
Selected information for 20X1 for the Bernstein Company is as follows:

Cost of goods sold

$6,000,000

Average inventory

$2,000,000

Net sales

$8,000,000

Average receivables

$3,000,000

Net income

$1,000,000

Assuming a 360-day business year, what was the inventory turnover ratio for Bernstein?
- 3
- 4
- 5
- 6
Correct

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Question 3 of 11

3. Question
Thompson Corporation wrote off a $200 uncollectible account receivable against the $2,400 balance in its Allowance for Bad Debts account. Compare the current ratio before the write-off (X) with the current ratio after the write-off (Y).
- X greater than Y
- X equals Y
- X less than Y
- Cannot be determined
Correct

Incorrect
Question 4 of 11

4. Question
Ames Corporation’s net accounts receivable were $750,000 on December 31, 20X1, and $1,250,000 on December 31, 20X2. Net cash sales for 20X2 were $3,300,000. The accounts receivable turnover ratio for 20X2 was 16. What were the total net sales for 20X2?
- $12,800,000
- $16,000,000
- $16,100,000
- $19,300,000
Correct

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Question 5 of 11

5. Question
Which of the following activities would generally be regarded as a financing activity in preparing a statement of cash flows?
- Dividend distribution
- Proceeds from the sale of stocks of other firms
- Loans made by the entity to other businesses
- Employees' salaries and wages paid
Correct

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Question 6 of 11

6. Question
For purposes of calculating cash receipts from customers, which of the following adjustments should be made to convert accrual basis sales to cash basis sales?
- Add an increase in accounts receivable to accrual basis sales
- Subtract an increase in accounts receivable from accrual basis sales
- Add cash in bank to accrual basis sales
- Add the change in cash to the accrual basis sales
Correct

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Question 7 of 11

7. Question
If the indirect approach to the statement of cash flows is presented, which of the following items should be subtracted from accrual basis net income to derive cash flow from operating activities?
- Gains on the sale of long-term investments
- Losses on the sale of long-term investments
- Depreciation expense
- Amortization expense
Correct

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Question 8 of 11

8. Question
As a generalization, the adjustment of accrual basis income to cash provided by operating activities requires which of the following to be added?
- Increases in current assets related to operating activities
- Increases in current liabilities related to operating activities
- Decreases in current liabilities related to operating activities
- Both (a) and (c) are correct
Correct

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Question 9 of 11

9. Question
Wilkin Corporation reported accrual basis sales of $200,000, cost of goods sold of $80,000, and operating expenses, taxes, and interest summing to $30,000. In evaluating Wilkin’s comparative balance sheets, it is determined that accounts receivable increased $10,000, inventory increased $5,000, and accounts payable decreased $7,000. There were no changes in prepaid expenses nor were there any interest or taxes payable at the beginning or end of the year. How much was cash basis income for Wilkin Corporation for the year?
- $68,000
- $82,000
- $105,000
- $112,000
Correct

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Question 10 of 11

10. Question
Dixon Corporation reported 20X1 accrual basis net income of $50,000. Relevant information to adjust accrual basis income to cash basis income follows.

Depreciation expense

$12,000

Loss on the sale of land

  16,000

Increase in accounts receivable

    8,000

Decrease in merchandise inventory

    4,000

Increase in accounts payable

    3,000

Increase in taxes payable

    2,000

How much is net cash provided by operating activities?
- $47,000
- $49,000
- $51,000
- $79,000
Correct

Incorrect
Question 11 of 11

11. Question
In preparing a work sheet for the statement of cash flows, the lower portion corresponds to a statement of cash flows prepared using the indirect method. Items in the debit column of this lower portion most closely correspond to items which:
- Explain increases in cash.
- Explain decreases in cash.
- Relate to financing activities.
- Relate to investing activities.
Correct

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