Question

1. Which of the following sections of the statement of cash flows include activities that increase and decrease long-term liabilities and stockholders' equity? A) the investing section B) the non-cash investing and financing section C) the financing section D) the operating section 2. Walker Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Walker Corp. Comparative Balance Sheet December 31, 2014 and 2013 2014 2013 Increase/degrease Cash $45,000 $27,000 $18,000 Accounts Receivable 48,000 45,000 3,000 Inventory 180,000 132,000 48,000 Total assets $273,000 $204,000 $69,000 How will the change in Accounts Receivable be shown on the statement of cash flows? A) positive cash flow under the financing activities section B) negative cash flow under the operating activities section C) negative cash flow under the investing activities section D) positive cash flow under the operating activities section -3. Which of the following items is a measure of a company's ability to collect receivables? A) current ratio B) day's sales in receivables C) inventory tumover ratio D) account receivable balance 4. Which of the following will happen to a stockholder's percentage ownership in the stock of a corporation when the corporation declares a stock dividend? A) The stockholder's percentage ownership remains unchanged. B) The stockholder's percentage ownership decreases. C) The stockholder's percentage ownership increases. D) The stockholder's percentage ownership can increase or decrease. 5. A corporation has 2,000 shares, 10% preferred stock of $50 par, and 6,000 shares of common stock outstanding. The net income for the year is $250,000. Calculate eamings per share. A) $40 B) $42 C) $125 D) $50

Answer 1

1.C The financing section

Financing activities involves those cash flows that result from changes in long term liability and stockholder's equity.

2.B negative cash flow under the operating activities section

Under indirect method increase in accounts receivable show that less money was collected than the sales made,receivables rise as the customer are taking more time to pay,this would result in lower cash balance.

3.B day's sales in receivable

Day's sales in receivable depicts that what amout of time would a company take to collect its receivables.

4.A The stockholder's ownership percentage remains unchanged

The declaration of stock dividend would not affect stockholder's equity percentage in the corporation but it would reduce retained earnings.