Accounting 102 Module Exam
Module Exam III Chapters 16 and 17 True / False Questions 1. The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period. True False 2. The statement of cash flows reports and proves the net change in cash for a reporting period. True False 3. To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash. True False 4. The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents. True False 5. Internal users of the statement of cash flows often use cash flow information to plan day-to-day operating activities and make long-term investment and financing decisions. True False 6. A cash equivalent must be readily convertible to a known amount of cash, and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes. True False 7. Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows. True False 8. Financing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans. True False 9. Cash paid for merchandise is an operating activity. True False 10. The purchase of stock in another company is classified as a financing activity. True False 11. Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the direct method. Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows: 12. Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method. 13. Financial statement analysis is the application of analytical tools to general-purpose financial statements and related data for making business decisions. True False 14. Financial statement analysis lessens the need for expert judgment. True False 15. Financial statement analysis may be used for personal investment decisions. True False 16. The evaluation of company performance and financial condition includes evaluation of (1) past and current performance, (2) current financial position, and (3) future performance and risk. True False 17. External users of accounting information make the strategic and operating decisions of a company. True False 18. One purpose of financial statement analysis for internal users is to provide information helpful in improving the company’s efficiency and effectiveness in providing products and services. True False 19. Evaluation of company performance does not include analysis of (1) past and current performance, (2) current financial position, and (3) future performance and risk. True False 20. A company’s board of directors analyzes financial statements to assess future company prospects for making operating decisions. True False 21. Financial analysis only refers to the communication of relevant financial information to decision makers. True False 22. Profitability is the ability to generate future revenues and meet long-term obligations. True False 23. Comparative statements for Kool Corporation are shown below: Calculate trend percentages for all income statement amounts shown and comment on the results. Use 2010 as the base year. Comment on the results. 24. Calculate the percent increases for each of the following selected balance sheet items. 25. The comparative balance sheet for Golden Co. is shown below. Express the balance sheet in common-size percents.