21) In finance, we separate operating decisions from financing decisions and thus exclude ________ as a part of operating income from the income statement.
A) cash flow
B) dividends
C) interest expense
D) earnings
22) Which of the following statements is FALSE?
A) The income statement is put together at a specific point in time (end of a business quarter, or business year) and so the sale could be in one period and the cash received in another period.
B) The income statement contains the set of expenses associated with the products or services sold during the current operating period, with those expenses not associated with current cash flow labeled as non-cash expense items.
C) Depreciation is a current expense of a cash outflow in the current period.
D) Companies depreciate fixed assets (such as office furniture, equipment, machinery, and buildings) over an assigned time period, but the initial cash outlay for the fixed asset typically occurs at the time the asset is acquired by the firm.
23) To find operating cash flow for the business for the year, add depreciation expense to EBIT and then ________.
A) subtract the interest expenses
B) add the taxes
C) subtract the taxes
D) add interest expenses
24) Which of the statements below is FALSE?
A) The cash account is much like your individual checkbook, because it tells you how much money you currently have for paying bills or spending on new items.
B) Current assets are accounts that will normally be turned into cash over the course of the operating or business cycle of the firm, and current liabilities are the accounts that will come due for payment over the operating or business cycle.
C) The long-term capital asset accounts of the balance sheet represent the capital investment of the company and reflect assets that the company owns and that provide the basis for producing goods and services for sale.
D) The Plant, Property and Equipment account is straightforward in its description, yet it cannot tell you the accumulated depreciation.
25) Which of the statements below is FALSE?
A) The cash account is much like your individual checkbook, because it tells you how much money you currently have for paying bills or spending on new items.
B) Long-term assets are accounts that will normally be turned into cash over the course of the operating or business cycle of the firm, and current liabilities are the accounts that will come due for payment over the operating or business cycle.
C) The long-term capital asset accounts of the balance sheet represent the capital investment of the company and reflect assets that the company owns and that provide the basis for producing goods and services for sale.
D) The Plant, Property and Equipment account is straightforward in its description, yet it really contains two pieces: the original value (purchase price) of the equipment and the accumulated depreciation.
26) Debts to be paid more than one year from now are claims against the firm’s assets: in other words, they are long-term liabilities. These claims are from ________ who have provided capital to the firm but whose entire repayment is not due during the coming year or operating cycle.
A) banks and bondholders
B) banks and stockholders
C) stockholders and bondholders
D) all long-term lenders
27) Which of the statements below is TRUE?
A) The ownership accounts or owners’ equity section of the balance sheet reflects the owners’ stake in the firm.
B) The ownership accounts or owners’ equity section of the balance sheet is made up of common stock but not retained earnings.
C) The retained earnings amount on the balance sheet really reflect retained earnings and other stockholder equity, but not treasury stock.
D) The Statement of Retained Earnings is used to show the distribution of the interest paid for the past period.
28) The basic accounting identity that assets equal liabilities plus owners’ equity usually, but not always, holds.
Answer: FALSE
Diff: 1
Topic: 2.1 Financial Statements
AACSB : 3 Analytic Skills
29) Equity on the balance sheet refers to what the owners receive after liabilities have been satisfied.
AACSB : 3 Analytic Skills
30) In double-entry bookkeeping, every time an economic transaction is recorded, equal debit and credit
