QUESTION: 1741

The following information should be used according to the provisions of SFAS 95 (Statement of Cash flows) and using the following data.

Net Income $50,000
Provision for bad debts $2,000

Increase in Inventory $1,000
Increase in accounts payable $2,000
Purchase of new equipment $15,000
Sale of equipment for $10,000 gain $20,000
Depreciation expense $5,000
Repurchase of common stock $10,000
Payment of dividend $4,000
Interest payment $3,000

What is net cash flow from investing?

$10,000
($15,000)
($5,000)
$5,000

Answer(s): D

Explanation:

Outflow of $15,000 for new equipment and $20,000 inflow from sale.

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QUESTION: 1742

The portion of the supplies inventory that has been consumed during the fiscal period is classified as

an expense
an increase in retained earnings
a liability
an asset

Answer(s): A

Explanation:

In accordance with the matching rule, the amount of an asset such as supplies that has been consumed during the accounting period must be recorded and classified as an expense for the period.

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QUESTION: 1743

New Gestalt, Inc., a software firm had a net income of 1.7 million last year. It has 200,000 common shares and 300,000 convertible bonds with face value of 100 outstanding. The convertible bonds carry a coupon of 4% and can be converted one-for-one. The average stock price last year was 39 and the maximum price was 57. The effective interest rate on the convertible debt is 8%. New Gestalt issued 100,000 preferred shares with face value 100 and a coupon of 5% on March 31st of last year. Assume the convertible bonds are dilutive and that New Gestalt faces a 30% tax rate. Given the above, if New Gestalt had 300,000 warrants with a strike of 36 outstanding instead of the convertible bonds, the number of shares used in Diluted EPS would equal ________.

200,000
223,077
312,648
500,000

Answer(s): B

Explanation:

Since the strike price of 36 on the warrants is less than the average stock price of 39, the warrants are dilutive.
Using the Treasury stock method, the additional shares due to warrant exercise = 300,000*(1 - 36/39) = 23,077.
Total number of shares used in Diluted EPS = 200,000 + 23,077 = 223,077.

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QUESTION: 1744

Which of the following best describes an income statement?

It reports revenues and expenses for a specific accounting period.
It reports the amount and composition of assets and liabilities for a specific accounting period.
None of these answers.
It reports investment activities for a specified accounting period.
It reports cash receipts and cash disbursements for a specific accounting period.

Answer(s): A

Explanation:

An income statement measures a company's financial performance between balance sheet dates and, hence, reflects a period of time. It lists revenues, expenses, gains, and losses of a company over a time period.

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QUESTION: 1741

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QUESTION: 1742

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QUESTION: 1744

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