7 Cash provided by operating activities a may be larger than net income b ,equal
ID: 2601021 • Letter: 7
Question
7 Cash provided by operating activities a may be larger than net income b ,equals the change in cash for the year 6 summanzes cash fiows relating to the purchase and sale of tong e assets d decreases when long-term delt is repaid Billy's Cookie Shop reported equipment "t S1 20 000 and $24,000 accumulated depreciation on its December 31, 108, balance sheet Dunng 1909 they purchased equipment conting 320,000 and sold equipment costing 35,000 (book value $3.600) for 91.000 On December 31, 190 n equipment was 167,400 Using the indirect methon, bily s would repon depreciation expense on its statement of cash fows for 1990 of 8 _ 347,600 b $27.200 c 323.600 d $25,000 9 Short-term liquidity ratios include the a profit margin ratio b. payout ratio c debt to total assets ratio d acid-test ratio 10. Parker Paint reported sales of $300,000, total assets of $150,000, total owners' equity of $80,000, current assets of $50,000, current liabilities of $20,000, and cash of $12,000. In a common size balance sheet, cash would be shown as a 60% b, C. d. 89. 2496. 4% 11.. The use of common size financial statements is an example of a ratio analysis b vertical analysis c. liquidity analysis d. horizontal analysis. The purchase of an office building by issuing long-term notes payable should be reported as a a cash outflow in the financing section of the statement of cash flows 12. b. cash outflow in the investing section of the statement of cash flows cash outflow in the operating section of the statement of cash flows c. d. noncash investing and financing activity As an indicator of financial health, a low ratio is desirable for the a. asset turnover ratio b. return on assets ratio. c. acid-test ratio d. debt to total assets ratio 13.Explanation / Answer
Answer 7 is a.
Cash provided by operating activities may be larger than net income.
Sum of cash provided by operating activities, investing activities and financing activities is equal to the change in cash for the year.
Cash flows related to purchase and sale of long-lived assets is summarized in investing activities.
Decrease in long-term debt is summarized in financing activities.
Answer 8 is d.
Ending Equipment = Beginning Equipment + Equipment Purchase - Cost of Equipment Sold
Ending Equipment = $120,000 + $20,000 - $5,000
Ending Equipment = $135,000
Ending Accumulated Depreciation = Ending Equipment - Net Equipment
Ending Accumulated Depreciation = $135,000 - $87,400
Ending Accumulated Depreciation = $47,600
Ending Accumulated Depreciation = Beginning Accumulated Depreciation + Depreciation Expense - Depreciation on Equipment sold
$47,600 = $24,000 + Depreciation Expense - $1,400
Depreciation Expense = $25,000
Answer 9 is d.
Acid-test ratio is liquidity ratio.
Profit margin ratio and payout ratio is profitability ratios.
Debt to total assets ratio is leverage ratio.
Answer 10 is b.
Percentage of Cash = Cash / Total Assets
Percentage of Cash = $12,000 / $150,000
Percentage of Cash = 8%
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