1. What is the primary objective of accrual accounting?
A. To measure the cash flow of an entity.
B. To measure economic performance of an entity.
C. To predict future cash flows of an entity.
D. To predict future economic performance of an entity.
2. What information does cash accounting provide about an entity?
A. It measures economic performance.
B. It measures management performance.
C. It is useful in assessing liquidity.
D. It is useful in assessing profitability.
3. Which of the following would cause net income to be higher than cash flow from operations?
A. Store staff worked the last week of the year until December 31, but will not be paid until January 15.
B. The company amortizes intangible assets over their useful lives.
C. The company made sales to customers on credit that will be paid in the next fiscal period.
D. The company purchased new display shelves for the store.
4. Which of the following would cause net income to be lower than cash flow from operations?
A. Store staff worked the last week of the year until December 31, but will not be paid until January 15.
B. The company bought and paid for a two-year insurance policy.
C. The company made sales to customers on credit that will be paid for in the next fiscal period.
D. On December 31st, the company purchased new display shelves for the store.
5. On average a company has goods on hand for 120 days before they sell them. They buy their goods on credit with 30-day terms and they sell their goods by offering 20 days to pay. What is their inventory conversion period?
A. 90 days
B. 110 days
C. 120 days
D. 140 days
6. On average a company has goods on hand for 120 days before they sell them. They buy their goods on credit with 30-day terms and they sell their goods by offering 20 days to pay. What is their inventory self-financing period?
A. 90 days
B. 110 days
C. 120 days
D. 140 days
7. On average a company has goods on hand for 120 days before they sell them. They buy their goods on credit with 30-day terms and they sell their goods by offering 20 days to pay. What is their payables deferral period?
A. 30 days
B. 90 days
C. 110 days
D. 120 days
8. On average a company has goods on hand for 120 days before they sell them. They buy their goods on credit with 30-day terms and they sell their goods by offering 20 days to pay. What is their receivables conversion period?
A. 20 days
B. 30 days
C. 90 days
D. 140 days
9. On average a company has goods on hand for 120 days before they sell them. They buy their goods on credit with 30-day terms and they sell their goods by offering 20 days to pay. How many days are there between receiving the inventory from suppliers and receiving cash from customers?
A. 90 days
B. 110 days
C. 120 days
D. 140 days
10. Norquay Inc. manufactures computers. The company tries to minimize the amount of inventory it must carry and therefore only purchases required components after a customer order is received. The computers are usually completed within two days of the customer order and then shipped to the customer on the fourth day following the purchase of materials. Supplier's terms dictate that all purchases must be paid for within 30 days. Norquay offers a deferred financing plan to all of its customers that allow them a 60-day period of no payments or interest. Most of the customers pay their entire balance on the 60th
day following delivery of the computer. What is Norquay's payable deferral period?
A. 2 days
B. 4 days
C. 30 days
D. 60 days