Question

Q1 - Cash flows from investing activities, as part of the statement of cash flows, include:

a. Collections from customers.

b. Receipts from the sale of land.

c. Issuing a company’s own stocks.

d. Paying dividends.

Q2 - The method that uses cash account to prepare cash flow from operating activities section of cash flow statement is:

a. Direct Method

b. Reciprocal Method

c. Indirect Method

d. Direct Write off Method

Q3- A company’s net sales and average accounts receivables during a particular year are amounted to be SR 1,012,500 and SR 112,500 respectively. The accounts receivable turnover ratio of the company will be:

a. 9

b. 7

c. 4

d. 8

Q4 - On December 1, Martin Company signed a SR 5,000 3-month 6% note payable, with the principle plus interest due on March 1 of the following year. What amount of interest expense is accrued at December 31 on the note?

a. SR 30

b. SR 75

c. SR 300

d. SR 25

Q5 - The gross sales and net sales of a company are amounted to be SR 2,250,000 and 2,047,500 respectively. What will be the company’s total asset turnover ratio if company’s average total assets are SR 975,000? a. 4.1

b. 4.25

c. 3.2

d. 2.1

Q6 - When all of the authorized shares have the same rights and characteristics, the stock is called:

a. Common Stock

b. Preferred stock

c. Stated Value Stock

d. Par value Stock

Q7 - Under which one of the following method, the rate of depreciation is charged at the rate which is double or twice the straight line rate?

a. Partial Year depreciation

b. Double declining balance Method

c. Straight line method

d. Units of Production method

Q8 - Owners of preferred stock often do not have:

a. Preference to dividends

b. The right to sell their stock on the open market

c. Voting Rights

d. Ownership rights to assets of the corporation

Q9 - The principal amount of a note is SR29,500 with an annual interest rate of 9% and maturity of 90 days. The amount of interest due at the time of maturity of note will be:

a. SR 525.75

b. SR 800.75

c. SR 663.75

d. SR 750.7

Q10 - Which of the following is NOT a current liability:

a. Taxes Payable

b. Bonds Payable

c. Accounts Payable

d. Unearned revenue

Answer 1

(1) b. Receipts from sale of land

Cash flow from investing activities shows the cash generated or spent relating to investment activities.

Investment activities involves purchase of physical assets sale of assets or securities, investment in securities.

(2) a. and c. Direct and Indirect method

Direct and indirect both methods are used to calculate cash flow from operating activities.

However, both methods produce same result.

(3) a. 9

Net sales= SR 1,012,500

Average account receivable= SR 112,500

Account receivable turnover ratio = Net sales/Average account receivable

= 1,012,500/112,500

= 9

(4) d. SR 25

Principle = SR 5,000

Rate of interest = 6%

On 1 December company signed on note

Interest accrued at December 31 on the note

=5000*6/100*1/12

=SR 25

(5) d. 2.1

Gross sales= SR 2,250,000

Net Sales = SR 2,047,500

Average total assets = SR 975,000

Total assets turnover ratio= Net sales / Average total assets

= 2,047,500/975,000

= 2.1

(6) a. Common stock

When all the authorized shares have the same rights and characteristics the stock is called common stock.

(7) b.Double declining balance method

Under double declining balance method rate of depreciation is twice of rate of depreciation under straight line method.

(8) c. Voting Rights

Often owners of preferred stock do not have voting rights

(9) c. SR 663.75

Principle amount = SR 29,500

Annual rate of interest°= 9%

Maturity= 90 days

The amount of interest due at the time of maturity of note = 29,500*9/100*90/360

SR 663.75

(10) EXPLANATION

If liabilities payable by the business in short term or accounting cycle generally it is the period of 12 months then it will be considered as current liability

Long term liability is payable in a long term i.e.more than 12 months

Hence, to determine the liability will be considered as current or not it depends on the

Period of payable of liability

(a) Taxes payable are almost always considered to be current liability because it is to be paid within 1 year

(b) Bonds payable that mature within one year then it will be reported as current liability if it mature in more than one year then it will be long term liability.

(c) Account Payable is always shown as current liability because it is paid during accounting cycle

(d) unearned revenue

If advance payment are made for services or goods due, to be provided within 12 months then it will be considered as current liability.

THANK YOU !