Question 1

Which of the following would be added to net income when determining cash flows from operating activities under the indirect method?

Accepted Answer

A) A decrease in accounts payable. 
B) Patent amortization expense. 
C) An increase in prepaid insurance. 
D) A gain on the sale of a depreciable asset. 
A) A decrease in accounts payable. 
B) Patent amortization expense. 
C) An increase in prepaid insurance. 
D) A gain on the sale of a depreciable asset.

Question 2

Under the indirect method,depreciation expense is added to net income because it decreases net income but does not affect cash flow.

Accepted Answer

A) True 
 B)False

Question 3

A company reported net income of $200,000 during 2019.The company reported depreciation expense of $35,000,patent amortization of $10,000 and a $5,000 loss on the sale of equipment.Using the indirect method,how much is the company's net cash flow from operating activities?

Accepted Answer

A) $245,000. 
B) $250,000. 
C) $240,000. 
D) $235,000. 
A) $245,000. 
B) $250,000. 
C) $240,000. 
D) $235,000.

Question 4

Which of the following would be subtracted from net income when determining cash flows from operating activities under the indirect method?

Accepted Answer

A) A decrease in utilities payable. 
B) Patent amortization expense. 
C) A decrease in prepaid rent. 
D) A loss on the sale of a depreciable asset. 
A) A decrease in utilities payable. 
B) Patent amortization expense. 
C) A decrease in prepaid rent. 
D) A loss on the sale of a depreciable asset.

Question 5

When a company borrows $150 million during the year and also repays $120 million of debt,the company reports the $30 million net amount as excess of borrowings over repayments in the financing activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is reported as a cash flow from investing activities?

Accepted Answer

A) Cash received from dividends on investments. 
B) Purchasing land in exchange for common stock. 
C) Selling a long-term investment at a loss for cash. 
D) Cash received from interest earned. 
A) Cash received from dividends on investments. 
B) Purchasing land in exchange for common stock. 
C) Selling a long-term investment at a loss for cash. 
D) Cash received from interest earned.

Question 7

Which statement regarding the indirect method is false?

Accepted Answer

A) Depreciation expense is added to net income. 
B) An increase in accounts receivable is added to net income. 
C) An increase in accounts payable is added to net income. 
D) An increase in merchandise inventory is subtracted from net income. 
A) Depreciation expense is added to net income. 
B) An increase in accounts receivable is added to net income. 
C) An increase in accounts payable is added to net income. 
D) An increase in merchandise inventory is subtracted from net income.

Question 8

Which of the following statements about the quality of income ratio is incorrect?

Accepted Answer

A) An increase in operating assets and a decrease in liabilities will reduce operating cash flows and thereby reduce the quality of income ratio. 
B) Seasonal variations in sales and purchases of inventory can cause wide deviations in the quality of income ratio. 
C) When sales are growing,receivables and inventory normally increase at a faster rate than accounts payable,which often causes cash flows from operating activities to be less than net income. 
D) Aggressive revenue recognition tends to increase the quality of income ratio. 
A) An increase in operating assets and a decrease in liabilities will reduce operating cash flows and thereby reduce the quality of income ratio. 
B) Seasonal variations in sales and purchases of inventory can cause wide deviations in the quality of income ratio. 
C) When sales are growing,receivables and inventory normally increase at a faster rate than accounts payable,which often causes cash flows from operating activities to be less than net income. 
D) Aggressive revenue recognition tends to increase the quality of income ratio.

Question 9

Use the following information to prepare a statement of cash flows for Stable Equipment Company for the year ended December 31,2019.Use the indirect method for the operating activities section of the statement.
Net income for the year 2019 was $5,000.Accounts receivable decreased $2,000,while inventories increased $4,000,and accounts payable decreased $7,000.Depreciation expense included in net income was $8,000.
During the year,a piece of land held for future expansion was sold for its book value of $8,000 and a new service truck was purchased for $14,000.
The company borrowed $18,000 on a two-year note from the bank.Dividends of $6,000 were paid in cash.Preferred stock was issued to retire $7,000 of long-term notes payable.
The beginning cash balance was $22,000 and the ending balance was $32,000.

Accepted Answer

@#IMG-DLM& Schedule of significant nonca

Question 10

Which of the following transactions would be reported within the investing section of the cash flow statement?

Accepted Answer

A) The cash purchase of land at a price in excess of appraised value. 
B) The purchase of a building in exchange for common stock. 
C) The receipt of a stock dividend from a stock investment. 
D) The cash receipt of a dividend from a stock investment. 
A) The cash purchase of land at a price in excess of appraised value. 
B) The purchase of a building in exchange for common stock. 
C) The receipt of a stock dividend from a stock investment. 
D) The cash receipt of a dividend from a stock investment.

Question 11

Which of the following transactions does not result in either a cash inflow or a cash outflow?

Accepted Answer

A) A company purchased some of its own stock from a stockholder. 
B) Amortization of a patent. 
C) Payment of a cash dividend. 
D) Sale of equipment at book value. 
A) A company purchased some of its own stock from a stockholder. 
B) Amortization of a patent. 
C) Payment of a cash dividend. 
D) Sale of equipment at book value.

Question 12

Madison Company had sales of $154,000.Additional information from the balance sheet is below:   How much cash was collected from customers?

Accepted Answer

A) $148,000. 
B) $150,000. 
C) $154,000. 
D) $160,000. 
A) $148,000. 
B) $150,000. 
C) $154,000. 
D) $160,000.

Question 13

Atkins Corporation has provided the following information for the year ended December 31,2019: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year.
• The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year.
• Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
• Depreciation expense recorded on the equipment during the year was $65,000.
-
What was the amount of the investing activities cash inflow from the sale of the equipment? Assume that the equipment purchase and sale resulted in cash flows.

Accepted Answer

A) $30,000. 
B) $60,000. 
C) $40,000. 
D) $50,000. 
A) $30,000. 
B) $60,000. 
C) $40,000. 
D) $50,000.

Question 14

The payment of interest on a note payable is a cash flow from a financing activity.

Accepted Answer

A) True 
 B)False

Question 15

Under the indirect method,an increase in accounts receivable during the year will be added to net income.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following transactions would not create a cash flow from operating activities?

Accepted Answer

A) Collecting cash from a customer. 
B) Paying cash to a supplier. 
C) Paying cash to stockholders for dividends. 
D) Paying cash for a utility bill. 
A) Collecting cash from a customer. 
B) Paying cash to a supplier. 
C) Paying cash to stockholders for dividends. 
D) Paying cash for a utility bill.

Question 17

Cash flows associated with issuance and retirement of long-term debt and equity are reported as cash flows from investing activities.

Accepted Answer

A) True 
 B)False

Question 18

For each of the following items,indicate with the letter X whether the transaction would appear in the operating,investing,or financing activities section of the statement of cash flows,or is not reported in any one of these three categories.Assume the indirect method is used for reporting.

Accepted Answer

The answer of For each of the following items,indicate with...

Question 19

Which of the following statements regarding use of the direct and indirect methods of determining cash flows from operating activities is incorrect?

Accepted Answer

A) The indirect method starts with net income. 
B) The direct method calculates cash collected from customers. 
C) The majority of U.S.companies use the indirect method. 
D) The FASB recommends use of the indirect method. 
A) The indirect method starts with net income. 
B) The direct method calculates cash collected from customers. 
C) The majority of U.S.companies use the indirect method. 
D) The FASB recommends use of the indirect method.

Question 20

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000.
- What was the net cash flow from financing activities?

Accepted Answer

A) $2,300,000 outflow. 
B) $2,320,000 outflow. 
C) $2,530,000 outflow. 
D) $2,550,000 outflow. 
A) $2,300,000 outflow. 
B) $2,320,000 outflow. 
C) $2,530,000 outflow. 
D) $2,550,000 outflow.

Which of the following would be added to net income when determining cash flows from operating activities under the indirect method?

Under the indirect method,depreciation expense is added to net income because it decreases net income but does not affect cash flow.

A company reported net income of $200,000 during 2019.The company reported depreciation expense of $35,000,patent amortization of $10,000 and a $5,000 loss on the sale of equipment.Using the indirect method,how much is the company's net cash flow from operating activities?

Which of the following would be subtracted from net income when determining cash flows from operating activities under the indirect method?

When a company borrows $150 million during the year and also repays $120 million of debt,the company reports the $30 million net amount as excess of borrowings over repayments in the financing activities section of the statement of cash flows.

Which of the following is reported as a cash flow from investing activities?

Which statement regarding the indirect method is false?

Which of the following statements about the quality of income ratio is incorrect?

Which of the following transactions would be reported within the investing section of the cash flow statement?

Which of the following transactions does not result in either a cash inflow or a cash outflow?

Madison Company had sales of $154,000.Additional information from the balance sheet is below: How much cash was collected from customers?

The payment of interest on a note payable is a cash flow from a financing activity.

Under the indirect method,an increase in accounts receivable during the year will be added to net income.

Which of the following transactions would not create a cash flow from operating activities?

Cash flows associated with issuance and retirement of long-term debt and equity are reported as cash flows from investing activities.

For each of the following items,indicate with the letter X whether the transaction would appear in the operating,investing,or financing activities section of the statement of cash flows,or is not reported in any one of these three categories.Assume the indirect method is used for reporting.

Which of the following statements regarding use of the direct and indirect methods of determining cash flows from operating activities is incorrect?

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000. - What was the net cash flow from financing activities?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments,financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue,receivables,and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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Exam 12: Statement of Cash Flows

Which of the following would be added to net income when determining cash flows from operating activities under the indirect method?

Under the indirect method,depreciation expense is added to net income because it decreases net income but does not affect cash flow.

A company reported net income of $200,000 during 2019.The company reported depreciation expense of $35,000,patent amortization of $10,000 and a $5,000 loss on the sale of equipment.Using the indirect method,how much is the company's net cash flow from operating activities?

Which of the following would be subtracted from net income when determining cash flows from operating activities under the indirect method?

When a company borrows $150 million during the year and also repays $120 million of debt,the company reports the $30 million net amount as excess of borrowings over repayments in the financing activities section of the statement of cash flows.

Which of the following is reported as a cash flow from investing activities?

Which statement regarding the indirect method is false?

Which of the following statements about the quality of income ratio is incorrect?

Which of the following transactions would be reported within the investing section of the cash flow statement?

Which of the following transactions does not result in either a cash inflow or a cash outflow?

Madison Company had sales of $154,000.Additional information from the balance sheet is below: How much cash was collected from customers?

The payment of interest on a note payable is a cash flow from a financing activity.

Under the indirect method,an increase in accounts receivable during the year will be added to net income.

Which of the following transactions would not create a cash flow from operating activities?

Cash flows associated with issuance and retirement of long-term debt and equity are reported as cash flows from investing activities.

For each of the following items,indicate with the letter X whether the transaction would appear in the operating,investing,or financing activities section of the statement of cash flows,or is not reported in any one of these three categories.Assume the indirect method is used for reporting.

Which of the following statements regarding use of the direct and indirect methods of determining cash flows from operating activities is incorrect?

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000. - What was the net cash flow from financing activities?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments,financial Statements,and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue,receivables,and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property,plant,and Equipment;intangibles;and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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