Question 1

Which of the following statements about the capital acquisitions ratio is correct?

Accepted Answer

A)  A high ratio indicates less need for outside financing of property, plant and equipment. 
B)  The ratio is computed by dividing cash flow from operating activities by the average net property, plant, and equipment. 
C) A low ratio may indicate a failure to update property, plant, and equipment, which can limit a company's ability to compete in the future. 
D) The ratio is comparable across industries. 
A)  A high ratio indicates less need for outside financing of property, plant and equipment. 
B)  The ratio is computed by dividing cash flow from operating activities by the average net property, plant, and equipment. 
C) A low ratio may indicate a failure to update property, plant, and equipment, which can limit a company's ability to compete in the future. 
D) The ratio is comparable across industries.

Question 2

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 3

A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common stock (par $10 per share; no market price was quoted). How should this be reported on the statement of cash flows?

Accepted Answer

A)  Report $12,000 as inflow and outflow of cash. 
B)  Report $12,000 as an inflow of cash. 
C) The transaction should not be reported on the statement of cash flows. 
D) Report in a schedule of significant noncash investing and financing activities. 
A)  Report $12,000 as inflow and outflow of cash. 
B)  Report $12,000 as an inflow of cash. 
C) The transaction should not be reported on the statement of cash flows. 
D) Report in a schedule of significant noncash investing and financing activities.

Question 4

A company reported an increase in accrued sales revenues and a decrease in unearned sales revenues during 2014. Which of the following statements is correct?

Accepted Answer

A)  When determining cash collected from customers, both the increase in accrued revenues and the decrease in unearned revenues are subtracted from sales revenues. 
B)  When determining cash collected from customers, both the increase in accrued revenues and the decrease in unearned revenues are added to sales revenues. 
C) When determining cash collected from customers, the increase in accrued revenues is subtracted from sales revenues and the decrease in unearned revenues is added to sales revenues. 
D) When determining cash collected from customers, the increase in accrued revenues is added to sales revenues and the decrease in unearned revenues is subtracted from sales revenues. 
A)  When determining cash collected from customers, both the increase in accrued revenues and the decrease in unearned revenues are subtracted from sales revenues. 
B)  When determining cash collected from customers, both the increase in accrued revenues and the decrease in unearned revenues are added to sales revenues. 
C) When determining cash collected from customers, the increase in accrued revenues is subtracted from sales revenues and the decrease in unearned revenues is added to sales revenues. 
D) When determining cash collected from customers, the increase in accrued revenues is added to sales revenues and the decrease in unearned revenues is subtracted from sales revenues.

Question 5

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

Accepted Answer

A)  The cash sale of land at a loss. 
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 sale of land at a loss. 
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 6

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method?

Accepted Answer

A)  An increase in wages payable will be added to net income. 
B)  A gain on the sale of a depreciable asset will be subtracted from net income. 
C) An increase in prepaid expenses will be subtracted from net income. 
D) An increase in income taxes payable will be subtracted from net income. 
A)  An increase in wages payable will be added to net income. 
B)  A gain on the sale of a depreciable asset will be subtracted from net income. 
C) An increase in prepaid expenses will be subtracted from net income. 
D) An increase in income taxes payable will be subtracted from net income.

Question 7

When a company sells equipment for cash at a loss, cash flows from investing activities decreases.

Accepted Answer

A) True 
 B)False

Question 8

Collection of principal on a note receivable is a cash flow from financing activities.

Accepted Answer

A) True 
 B)False

Question 9

Brooks Company reported net income of $40,000, which included depreciation expense and amortization expense of $21,000 and $18,000, respectively. The following changes also occurred during 2014: $$\begin{array} { l r l } 
\text { Inventory } & \$ 10,000 & \text { decrease } \
\text { Accounts payable } & 5,000 & \text { increase } \
\text { Notes payable (long-term) } & 15,000 & \text { decrease } \
\text { Income tax payable } & 7,000 & \text { increase } \
\text { Accounts receivable } & 10,000 & \text { increase }
\end{array}$$ Required:
Calculate net cash flows from operating activities, using the indirect method.

Accepted Answer

Net cash provided by

Question 10

A company reported an increase in accounts receivable and an increase in unearned sales revenues during 2014. Which of the following statements is correct?

Accepted Answer

A)  Cash collected from customers equals sales revenues plus both the increase in accounts receivable and the increase in unearned sales revenues. 
B)  Cash collected from customers equals sales revenues minus both the increase in accounts receivable and the increase in unearned sales revenues. 
C) Cash collected from customers equals sales revenues plus the increase in accounts receivable, minus the increase in unearned sales revenues. 
D) Cash collected from customers equals sales revenues minus the increase in accounts receivable, plus the increase in unearned sales revenues. 
A)  Cash collected from customers equals sales revenues plus both the increase in accounts receivable and the increase in unearned sales revenues. 
B)  Cash collected from customers equals sales revenues minus both the increase in accounts receivable and the increase in unearned sales revenues. 
C) Cash collected from customers equals sales revenues plus the increase in accounts receivable, minus the increase in unearned sales revenues. 
D) Cash collected from customers equals sales revenues minus the increase in accounts receivable, plus the increase in unearned sales revenues.

Question 11

Which of the following is correct?

Accepted Answer

A)  Repayments of principal and interest reduce financing activities cash flows. 
B)  Purchase of common stock shares for treasury is a cash outflow connected to investing activities. 
C) If a company borrows $450 million in long-term notes and repays $380 million of long-term notes, these items must both be disclosed separately and not netted against each other in the financing section of the cash flow statement. 
D) Issuing common stock in exchange for the purchase of a building creates both a financing activity and investing activity cash flow. 
A)  Repayments of principal and interest reduce financing activities cash flows. 
B)  Purchase of common stock shares for treasury is a cash outflow connected to investing activities. 
C) If a company borrows $450 million in long-term notes and repays $380 million of long-term notes, these items must both be disclosed separately and not netted against each other in the financing section of the cash flow statement. 
D) Issuing common stock in exchange for the purchase of a building creates both a financing activity and investing activity cash flow.

Question 12

Which of the following statements about the statement of cash flows is correct?

Accepted Answer

A)  A company with a net loss on the income statement will always have a net cash outflow from operating activities. 
B)  A purchase of equipment is classified as a cash inflow from investing activities. 
C) Cash dividends received on stock investments are classified as cash flows from operating activities. 
D) Cash dividends paid are classified as cash flows from operating activities. 
A)  A company with a net loss on the income statement will always have a net cash outflow from operating activities. 
B)  A purchase of equipment is classified as a cash inflow from investing activities. 
C) Cash dividends received on stock investments are classified as cash flows from operating activities. 
D) Cash dividends paid are classified as cash flows from operating activities.

Question 13

DJ Company, a manufacturer, uses the indirect method for preparing its statement of cash flows. The company has provided the following information pertaining to its recent year of operation: • Cash flow from operating activities, $272,000
• Accounts payable decreased $21,000
• Prepaid assets increased $15,000
• Depreciation expense was $27,000
• Accounts receivable decreased $21,000
• Loss on sale of a depreciable asset was $16,000
• Wages payable increased $10,000
• Unearned revenue decreased $16,000
• Patent amortization expense was $10,000
How much was DJ's net income?

Accepted Answer

A)  $256,000. 
B)  $210,000. 
C) $198,000. 
D) $240,000. 
A)  $256,000. 
B)  $210,000. 
C) $198,000. 
D) $240,000.

Question 14

Which of the following would not be considered a cash equivalent?

Accepted Answer

A)  A 30-day certificate of deposit. 
B)  A ten-year treasury note purchased over nine years ago, which matures in two months. 
C) A three-month Treasury bill. 
D) A ten-year Treasury note purchased two months before maturity. 
A)  A 30-day certificate of deposit. 
B)  A ten-year treasury note purchased over nine years ago, which matures in two months. 
C) A three-month Treasury bill. 
D) A ten-year Treasury note purchased two months before maturity.

Question 15

RM Company, a manufacturer, has provided the following information pertaining to its recent year of operation: • Net income, $300,000
• Accounts payable increased $24,000
• Prepaid rent decreased $10,000
• Depreciation expense was $35,000
• Accounts receivable increased $34,000
• Gain on sale of a building was $11,000
• Wages payable decreased $21,000
• Unearned revenue increased $44,000
Using the indirect method, how much was RM's net cash provided by operating activities?

Accepted Answer

A)  $259,000. 
B)  $327,000. 
C) $347,000. 
D) $358,000. 
A)  $259,000. 
B)  $327,000. 
C) $347,000. 
D) $358,000.

Question 16

Complete the following statement of cash flows using the indirect method:

Accepted Answer

The answer of Complete the following statement of cash flows...

Question 17

Brice Corporation reported the following information:   Required:
Compute Brice Corporation's cash collected from customers for 2014.

Accepted Answer

The answer of Brice Corporation reported the following information: ...

Question 18

Allen Company's 2014 income statement reported total revenues, $850,000 and total expenses (including $40,000 depreciation) of $720,000. The 2013 balance sheet reported the following: accounts receivable-beginning balance, $50,000 and ending balance, $40,000; accounts payable-beginning balance, $22,000 and ending balance, $28,000. Therefore, based only on this information, how much was the 2014 net cash provided by operating activities?

Accepted Answer

A)  $126,000. 
B)  $166,000. 
C) $174,000. 
D) $186,000. 
A)  $126,000. 
B)  $166,000. 
C) $174,000. 
D) $186,000.

Question 19

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 20

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

Accepted Answer

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

Which of the following statements about the capital acquisitions ratio is correct?

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

A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common stock (par $10 per share; no market price was quoted). How should this be reported on the statement of cash flows?

A company reported an increase in accrued sales revenues and a decrease in unearned sales revenues during 2014. Which of the following statements is correct?

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

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method?

When a company sells equipment for cash at a loss, cash flows from investing activities decreases.

Collection of principal on a note receivable is a cash flow from financing activities.

A company reported an increase in accounts receivable and an increase in unearned sales revenues during 2014. Which of the following statements is correct?

Which of the following is correct?

Which of the following statements about the statement of cash flows is correct?

Which of the following would not be considered a cash equivalent?

Complete the following statement of cash flows using the indirect method:

Brice Corporation reported the following information: Required: Compute Brice Corporation's cash collected from customers for 2014.

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

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

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 Bonds

Reporting and Interpreting Owners 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 statements about the capital acquisitions ratio is correct?

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

A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common stock (par $10 per share; no market price was quoted). How should this be reported on the statement of cash flows?

A company reported an increase in accrued sales revenues and a decrease in unearned sales revenues during 2014. Which of the following statements is correct?

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

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method?

When a company sells equipment for cash at a loss, cash flows from investing activities decreases.

Collection of principal on a note receivable is a cash flow from financing activities.

A company reported an increase in accounts receivable and an increase in unearned sales revenues during 2014. Which of the following statements is correct?

Which of the following is correct?

Which of the following statements about the statement of cash flows is correct?

Which of the following would not be considered a cash equivalent?

Complete the following statement of cash flows using the indirect method:

Brice Corporation reported the following information: Required: Compute Brice Corporation's cash collected from customers for 2014.

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

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

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 Bonds

Reporting and Interpreting Owners Equity

Analyzing Financial Statements

Reporting and Interpreting Investments in Other Corporations

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