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COMPREHENSIVE EXAMINATION F

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COMPREHENSIVE EXAMINATION F

Problem F-I — Multiple Choice Questions.

    1.     Which of the following transactions would be considered a financing activity in preparing a statement of cash flows?

            a.   Amortizing a discount on bonds payable

            b.   Recording net income from operations

            c.   Selling common stock

            d.   Purchasing inventory

 

    2.     The net income for the year ended December 31, 2013, for Tax Consultants INC. was $920,000. Additional information is as follows:

 

                  Capital expenditures                                                                           $1,200,000

                  Depreciation on plant assets                                                                    450,000

                  Cash dividends paid on common stock                                                  180,000

                  Increase in noncurrent deferred tax liability                                              45,000

                  Amortization of patents                                                                              21,000

 

            Based on the information given above, what should be the net cash provided by operating activities in the statement of cash flows for the year ended December 31, 2013?

            a.   $1,256,000.

            b.   $1,346,000.

            c.   $1,391,000.

            d.   $1,436,000.

 

    3.     Information concerning the debt of Cole Company is as follows:

            Short-term borrowings:

                  Balance at December 31, 2012                                                                   $525,000

                  Proceeds from borrowings in 2013                                                               325,000

                  Payments made in 2013                                                                              (450,000)

                  Balance at December 31, 2013                                                                   $400,000

            Current portion of long-term debt:

                  Balance at December 31, 2012                                                                $1,625,000

                  Transfers from caption "Long-Term Debt"                                                    500,000

                  Payments made in 2013                                                                           (1,225,000)

                  Balance at December 31, 2013                                                                $   900,000

            Long-term debt:

                  Balance at December 31, 2012                                                                $9,000,000

                  Proceeds from borrowings in 2013                                                            2,250,000

                  Transfers to caption "Current Portion of Long-Term Debt"                          (500,000)

                  Payments made in 2013                                                                           (1,500,000)

                  Balance at December 31, 2013                                                                $9,250,000

 

            In preparing a statement of cash flows for the year ended December 31, 2013, for Cole Company, cash flows from financing activities would reflect

                      Outflow            

            a.   $2,000,000

            b.   $2,250,000

            c.   $2,575,000

            d.   $3,175,000

 

Problem F-I — (cont.)

    4.     In considering interim financial reporting, how did the Accounting Principles Board conclude that such reporting should be viewed?

a.   As a "special" type of reporting that need not follow generally accepted accounting principles.

b.   As useful only if activity is evenly spread throughout the year so that estimates are unnecessary.

            c.   As reporting for a basic accounting period.

            d.   As reporting for an integral part of an annual period.

 

    5.     Which of the following items represents a potential use of cash?

            a.   Patent amortization

            b.   Sale of plant assets at a loss

            c.   Net loss from operations

            d.   Declaration of a stock dividend

 

    6.     Worthington Company purchased a machine on January 1, 2010, for $4,800,000. At the date of acquisition, the machine had an estimated useful life of six years with no salvage. The machine is being depreciated on a straight-line basis. On January 1, 2013, Worthington determined, as a result of additional information, that the machine had an estimated useful life of eight years from the date of acquisition with no salvage. An accounting change was made to reflect this additional information. What amount of depreciation expense should be reported in Worthington’s income statement for the year ended December 31, 2013?

            a.   $800,000

            b.   $600,000

            c.   $480,000

            d.   $300,000

 

    7.     On January 7, 2011, Yoder Corporation acquired machinery at a cost of $1,500,000. Yoder adopted the sum-of-the-years’-digits method of depreciation for this machine and had been recording depreciation over an estimated life of five years, with no residual value. At the beginning of 2013, a decision was made to change to the straight-line method of depreciation for this machine. Assuming a 30% tax rate, the cumulative effect of this accounting change, net of tax, is

            a.   $0

            b.   $200,000

            c.   $210,000

            d.   $300,000

 

   *8.     Information from Collins Company’s balance sheet is as follows:

 

            Current assets:

                  Cash                                                                                    $  12,000,000

                  Short-term investments                                                          20,000,000

                  Accounts receivable                                                               50,000,000

                  Inventories                                                                              66,000,000

                  Prepaid expenses                                                                     2,000,000

                  Total current assets                                                            $150,000,000

 

 

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COMPREHENSIVE EXAMINATION F 1. Which of the following transactions would be considered a financing activity in preparing a statement of cash flows? a. Amortizing a discount on bonds payable b. Recording net income from operations c. Selling common stock d. Purchasing inventory 2. The net income for the year ended December 31, 2013, for Tax Consultants INC. was $920,000. Additional information is as follows: Capital expenditures $1,200,000 ...
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