ACCT 2 Exam 2

This is copy from https://knowt.com/flashcards/07aa1d2d-069f-4472-a5ad-0c4859c14d05?share=direct because I have changed a few things. ACCT 211 at Black Hills State University

Bond are a debt instrument that pays both a regular interest payment and an insurance premium for market volatility

FALSE - not a insurance premium

Which of these is a bond that can be repurchased by the issuer at a prearranged price

Callable

The time value of money is the concept that recognizes the effect of interest on the present and future values of money

True

The present value is how much a future value is in the present day if interest is factored out – called rebating

Present Value-False

A lease is a contractual agreement between an owner of property and a purchaser of property

False

Which of these market quotes show a bond issued at a premium

102

A company issues 10 bonds, 5-year, 10% at 102, what is the journal entry

Cash     102,000
     Premium         2,000
     Bonds Payable    100,000

The payment at maturity for 10 bonds, 5-year, 10% issued at 100

100,000

Which of the following have a robust secondary market in which to buy and sell

Bonds and Stock

Which of these is not prepared according to accrual accounting rules

Cash Flow Statement

Which item is found in the financing section of the cash flow statement

dividends

Large investing and/or financing activities that do not affect cash are found in what section of the cash flow statement

Significant noncash activities

The three activity sections is equal to the difference between cash at the beginning and end of the period

True

The cash flow statement method that starts with net income and adjusts for the cash effect of various balance sheet accounts is called the

indirect

The operating activities section of the cash flow statement starts with

net income

In the operating activities section of the cash flow statement, the second item to be considered is

depreciation

In the operating activities section, we add gains and subtract losses

False

The rule of thumb for assets is that cash moves the opposite way of the asset

True

The rule of thumb for liabilities and equity is that cash moves the opposite way as the liability or equity

ROT for liabilities- False

In the investing section, with a sale of a long-term asset, the cash portion goes in the investing section and the gain or loss goes in which section

operating activities

In the financing section, an increase in a long-term liability such as notes payable results in an increase in cash

Financing section -True

In the financing section, an increase in an equity item such as common stock results in a decrease in cash

False

In the financing section, an increase in a dividend results in a decrease in cash

True

For a healthy company, we expect that the majority of positive cash flow will come from which activity

Operating activity

Sustainable income has both positive and negative nonrecurring items removed

Sustainable-True

Which is not an item associate with the evaluation of sustainable income

significant noncash activities is not an associate item

Discontinued operations refers to the temporary interruption of a significant component of a business such as a division

False

Which is not a component of discontinued operations

restatement for the prior 3 years

Discontinued operations is listed where on the income statement

below income from continuing operations net of tax

Comprehensive income records all gains and losses

False

Which of these qualify as a change in accounting principles

moving from FIFO to LIFO

Quality of earnings is an evaluation of a company's financial statements regarding its transparency and reliability

True

Which is not a factor that affects quality of earnings

mortgage notes payable

Alternative accounting methods refers to the use of different accounting methods to improve comparability and increase readability

False

Channel stuffing (offering discounts to bring forward sales) is an example of

improper recognition

Horizontal analysis looks at % changes between year, and vertical analysis looks at % differences within a year

True

Which set of ratios measures the short-term ability of the company to pay its maturing obligation and needs for cash

liquidity

Long-term liabilities are obligations that a company expects to pay more than a year in the future

Long Term liabilities- true

Which is not a main attribute of a bond provided to bondholders

Amortized value

The future value is how much a present day value is in the future if interest is added in – called compounding

True

When a bond is issued at a discount, the market rate is lower than the bond rate

False

A company issues 10 bonds, 5-year, 10% at 100, what is the journal entry

Cash     100,000
     Bonds Payable    100,000

A company issues 10 bonds, 5-year, 10% at 97, what is the journal entry

Cash     97,000
Discount      3,000
     Bonds Payable    100,000

The annual cash interest payment for 10 bonds, 5-year, 10% issued at 100

1,000

A mortgage note payable is a long-term loan that is secured by real estate or property as collateral

True

A lease is a contractual agreement between an owner of property and a purchaser of property

false

Which item is not part of the calculation for cash flow from operations

Dividends

Which is not an item included in the investing section

common stock?

Pro forma income is an income statement that does not follow GAAP

True

Which set of ratios measures the ability of the company to survive over a long period of time

solvency

Which set of ratios measure the operating success of a company for a given period of time

profitability

Comprehensive income records all gains and losses

False