38.Sellingnewstockisan equitytransaction;it doesnotaffectanyassetor liabilityaccountandtherefore,doesnot appearonthestatementofcashflows. a.True b.False False ANSWER: Medium DIFFICULTY: Financingactivities TOPICS: 39.Otherthingsheldconstant,whichofthefollowingwillnotaffectthequickratio?(Assumethatcurrentassetsequal currentliabilities.) a.Fixedassetsaresoldforcash. b.Cashis usedto purchaseinventories. c.Cashisusedtopayoffaccountspayable. d.Accountsreceivablearecollected. e.Long-termdebtis issuedto payoffashort-termbankloan. d ANSWER: RATIONALE: Thequickratioiscalculatedasfollows: The only action that doesn'taffectthequickratioisstatementd.Whilethisactiondecreasesreceivables(acurrent asset),itincreasescash(alsoacurrentasset).Theneteffectisnochangeinthequickratio. Easy DIFFICULTY: TYPE:Conceptual Quickratio TOPICS: 40.Onewouldcalculatechangesinbalancesheetaccountsfor a.A typicalratioanalysis. b. Proformabalancesheetconstruction. c.Statementof cashflowsconstruction. d.Profitandlossanalysis. e.Proformaincomestatementconstruction. c ANSWER: Easy DIFFICULTY: Statementofcashflows TOPICS:
38.Sellingnewstockisan equitytransaction;it doesnotaffectanyassetor liabilityaccountandtherefore,doesnot appearonthestatementofcashflows. a.True b.False ANSWER: False DIFFICULTY: Medium TOPICS: Financingactivities 39.Otherthingsheldconstant,whichofthefollowingwillnotaffectthequickratio?(Assumethatcurrentassetsequal currentliabilities.) a.Fixedassetsaresoldforcash. b.Cashis usedto purchaseinventories. c.Cashisusedtopayoffaccountspayable. d.Accountsreceivablearecollected. e.Long-termdebtis issuedto payoffashort-termbankloan. ANSWER: d RATIONALE: Thequickratioiscalculatedasfollows: The only action that doesn'taffectthequickratioisstatementd.Whilethisactiondecreasesreceivables(acurrent asset),itincreasescash(alsoacurrentasset).Theneteffectisnochangeinthequickratio. DIFFICULTY: Easy TYPE:Conceptual TOPICS: Quickratio 40.Onewouldcalculatechangesinbalancesheetaccountsfor a.A typicalratioanalysis. b. Proformabalancesheetconstruction. c.Statementof cashflowsconstruction. d.Profitandlossanalysis. e.Proformaincomestatementconstruction. ANSWER: c DIFFICULTY: Easy TOPICS: Statementofcashflows