Chapter Review Questions For each of the following multiple choice questions, select the most correct answer. 1 Which of the following sources of income is generally assessed on a cash basis? a Business income derived by a trading enterprise. b Net Capital Gains. (c) Business income derived by a sole practitioner professional. p) Fees invoiced by a builder. e) None of the above. Which of the following sources of income is generally assessed on an accrual basis? a) Interest received in cash. b) Interest credited by the bank. c Salary received from an employer. p) Invoice issued to a business client. e) None of the above. Which of the following is not a consideration in determining when an outgoing is incurred? a) There is a presently existing liability. b The taxpayer is definitively committed. c The taxpayer is a resident for tax purposes. p The outgoing is properly referable to the income year e) None of the above Which of the following has the same accounting and taxation treatment? a) Fees and penalties. b) Annual leave provided. c Doubtful debts a Depreciation. e) None of the above. 5 An exception to the rule that prepayments must be apportioned over the eligible service period applies to: a) Amounts over $1,000. b Payments of salary and wages. (c Conference booking. p) Equipment leases. e) None of the above. Find the answers in t
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Which of the following sources of income is generally assessed on a cash basis? The correct answer is (c) Business income derived by a sole practitioner professional. Show more…
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QUESTION 1 The Cash Flow Cycle includes which of the following activities: A. Setup B. Production C. Sales D. All of the above QUESTION 2 The Pumice Stone Company has the following measurements ready for its Statement of Cash Flows: Beginning Cash Balance $125,300 Acquisitions $400,000 Net cash flow from Operating Activities $297,600 Net cash flow from Investing Activities ($328,400) (negative/use) Net cash flow from Financing Activities $250,000 A. $344,500 B. $232,600 C. $55,700 D. ($205,100) QUESTION 3 Free Cash Flow is defined as: A. A measure of ongoing cash flow from normal business activities (including CapEx) B. A list of dividend payments made to shareholders. C. Any cash flow given as bonus compensation to executives. D. Cash flows raised from debt and equity offerings. QUESTION 4 Capital Expenditures is the amount spent for contract labor used in the business, and reported under Cash for Investing. True False QUESTION 5 Which of the following transactions does NOT lower Cash: A. Paying salaries B. Paying for equipment C. Paying off a loan balance D. Receiving money from investors QUESTION 6 Most small businesses, and all large ones, favor accrual basis books over cash basis books for all of the following reasons EXCEPT: A. They're concerned about the profit margin on products they sell. B. They want to know when they're making money and when they're not. C. Accrual basis accounting always shows a higher profit than cash basis of accounting. D. They're required by lenders, investors or government authorities to report their activities using accrual basis accounting QUESTION 7 The BesTest Sprinkler Company engaged in the following Financing Activities during the year 2020: Issuance of new Debt $10,000,000 Repayment of Debt $7,000,000 Payment of Dividends $750,000 Sale of Stock $2,500,000 What are the Net Borrowings? A. $3,000,000 B. $5,500,000 C. $10,000,000 D. $4,750,000 QUESTION 8 A cash flow statement is basically a reconciliation of the company's purchase log. True False QUESTION 9 The Cash Flow Statement measures "how much money, net of everything else, have I made this year, and how much will I have going forward next year", according to Jack Welch. True False QUESTION 10 Earnings per Share is a more important financial measure than cash flow for private equity firms. True False
Akash M.
1a. A company's Inventory balance at the end of the year was $198,800 and $212,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $96,000 and $90,800 at the beginning of the year, and its cost of goods sold for the year was $732,000. The company's total amount of cash payments for merchandise inventory during the year equals: a. $724,000 b. $732,000 c. $750,400 d. $713,600 e. $740,000 1b. Use the following information to calculate cash paid for income taxes during the year: Income tax expense $ 68,000 Income tax payable, January 1 16,600 Income tax payable, December 31 20,200 a. $68,000 b. $84,600 c. $31,200 d. $64,400 e. $88,200 1c. An examination of the company's income statement showed the following: net income, $125,000; depreciation expense, $35,500; and gain on sale of long-term plant assets, $9500. An examination of the company's current assets and current liabilities showed the following changes: accounts receivable decreased $10,500; merchandise inventory increased $23,500; prepaid expenses increased $7,300; accounts payable increased $4,500. Using the indirect method, calculate the net cash provided by or used by operating activities. a. $147,800 b. $154,600 c. $175,800 d. $149,800 e. $135,200
Madhur L.
Which of the following activities impacts the long-term cash flow? A. Purchase inventory B. Pay taxes C. Pay rent and utilities D. Purchase PP&E Which of the following strategies is most likely to shorten the working capital funding gap? A. Keep more inventory on hand B. Provide discounts for customers C. Extend credit for customers D. Extend payment to suppliers What's the company's working capital funding gap in days based on the information below? Receivable days: 47.2 Inventory days: 34.5 Payable days: 45.6 Days in the period: 365 A. 36.1 B. 41.3 C. 32.9 D. 58.3 The cash conversion cycle measures: A. The number of days it takes for a company to turn its resource inputs into cash B. The composition of inventory in a manufacturing facility C. The number of days cash is in the bank D. The amount of cash needed to cover the operating and investing expenses Calculate the net cash provided by the operating activities based on the information below: Net income: 60,000 Depreciation: 25,000 Increase in accounts receivable: 12,000 Increase in inventory: 8,000 Increase in accounts payable: 15,000 A. 120,000 B. 90,000 C. 70,000 D. 80,000
Supreeta N.
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