Additional FA Exam

Cash INFLOWS from investing activities include which of the following?

Cash received from selling assets and collecting loans

Cash OUTFLOWS from investing activities include which of the following?

Cash paid for loans, acquiring assets, and paying into investment pools

Why are dividends paid classified as a financing activity?

Because they are directly tied to equity financing

What does Cash Flow from Financing Activities (CFF) show?

How a company raises and spends money through financing activities

Why are investment gains listed under “other revenues and gains” on the income statement?

Because they are not part of the company’s main operating activities

When does a company have controlling interest in another company?

When it owns more than 50% (a majority) of the company’s stock

Which of the following best describes treasury stock?

Shares that a company has repurchased; a contra-equity account that reduces stockholders’ equity

When does a bond sell at a premium?

When the bond’s interest rate is higher than the market rate

When does a bond sell at a discount?

When the bond’s interest rate is lower than the market rate

Book value of an asset is calculated as:

Historical cost – accumulated depreciation

An asset has a historical cost of $10,000 and accumulated depreciation of $6,000.
What is its book value?

$4,000

Why does GAAP require the allowance method for uncollectible accounts?

Because it gives a more accurate representation of the realizable value of receivables

On the last day of the period, Alan Cesska Company buys a $900 machine on credit. This transaction will affect the ……

balance sheet only

 Payment of an account payable affects the components of the accounting equation in the following way.

Decreases assets and Decreases liabilities

 A trial balance will not balance if:

100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100.

To find net income you only need

Revenues and expenses

Adjustments for accrued revenues

Have an assets and revenues account relationship

Accumulated Depreciation

A contra asset account

Adjustments for prepaid expenses:

Decreases assets and increases expenses

Which of the following statements about the accrual basis of accounting is TRUE?

Recognize revenue in the accounting period in which the performance   obligation is satisfied.

In a classified balance sheet, assets are usually classified using the following categories:

current assets; long-term investments; property, plant, and equipment; and intangible assets.

An account that will have a zero balance after closing

entries have been journalized and posted is:

Service Revenue

 When a company uses the periodic inventory system:

The company does not know cost of goods sold without taking a physical inventory.

Under a perpetual inventory system, when goods are purchased for resale by a company:

purchases on account are debited to Inventory.

Gross profit will result if:

sales revenues are greater than cost of goods sold

In periods of rising prices, LIFO will produce

lower net income than FIFO

You are the Human Resources Manager for ECW, Inc. You want to improve internal controls over cash disbursements and cash receipts. Therefore, you would implement the following rules:

Require employees to take vacations