Exam 3: Understanding Financial Statements and Cash Flows

In order to be conservative,accrual accounting requires that expenses be recorded when incurred,but revenues are recorded only after the cash has been received.

Common-sized income statements are used to compare companies that have the same amount of revenues.

Please refer to Table 3-1 for the following questions. Table 3-1 Jones Company Financial Information -Based on the information in Table 3-1,assuming that no common stock was repurchased during the year,the firm issued how much new common stock during 2010?

Liquidity refers to the ability to quickly convert an asset into cash without lowering the selling price.

Company A and Company B both report the same level of sales and net income.Therefore,

Rogue Industries reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000.Rogue's gross profit is equal to

Which of the following accounts belongs in the liability section of a balance sheet?

The balance sheet reflects the accounting equation: Assets = Liabilities + Owners' Equity.

An income statement may be represented as follows:

Owners equity increases each period by the amount of the corporation's positive net cash flow.

Which of the following accounts belongs on the asset side of a balance sheet?

All of the following are equity accounts on a balance sheet EXCEPT

A corporation's operating profit margin is equal to

Which of the following statements about International Financial Reporting Standards (IFRS)is NOT true?

Please refer to Table 3-1 for the following questions. Table 3-1 Jones Company Financial Information -Based on the information in Table 3-1,calculate the amount of dividends paid by Jones Company in 2010 (no assets were disposed of during the year,and there was no change in interest payable or taxes payable).

On an accrual basis income statement,revenues equal cash receipts and expenses equal cash expenditures.

Mr.Wizard's Magic Shoppe had the following condensed balance sheet at the end of operation for 2010: Mr.Wizard's Magic Shoppe Balance Sheet December 31,2010 During 2011,the following occurred a.Mr.Wizard's sold some of its investments for $13,000 which resulted in a gain of $300 after taxes.The gain (net of taxes)has been included in the company's 2011 net income. b.Additional land for a plant expansion was purchased for $25,000. c.Bonds payable were paid in the amount of $10,000. d.An additional $35,000 in capital stock was issued. e.Dividends of $15,000 were paid to stockholders. f.Net income for 2011 was $48,000 after allowing for $15,000 in depreciation. g.A second parcel of land was purchased through the issuance of $10,000 in bonds, and $5,000 in long-term notes payable. Required: a.Prepare a statement of cash flows for the year ended 12/31/2011. (check figure: ending cash balance = $72,500) b.Prepare a condensed balance sheet for Mr.Wizard's at December 31,2011.

Two companies have identical assets and operating activities.Which of the follow statements is true?

Given the following financial statements for ACME Corporation,what amount did the company pay in dividends for 2010?

The accounting book value of an asset represents the historical cost of the asset rather than its current market value or replacement cost.