Question 1

All of the following might be used to evaluate cash flow performance, except:

Accepted Answer

A)  the absolute amount of cash flow. 
B)  whether cash flow is positive or negative. 
C)  the relationship between net income and cash flow. 
D)  the trend in sales and operating expenses. 
A)  the absolute amount of cash flow. 
B)  whether cash flow is positive or negative. 
C)  the relationship between net income and cash flow. 
D)  the trend in sales and operating expenses.

Question 2

Flynn Corporation had the following cash flows for the current year. The company uses the direct method in preparing the statement of cash flows.   What is the net cash provided by (used in) investing activities?

Accepted Answer

A)  ($200,000) 
B)  $420,000 
C)  $410,000 
D)  ($190,000) 
A)  ($200,000) 
B)  $420,000 
C)  $410,000 
D)  ($190,000)

Question 3

Condensed financial data of Monopoly Corporation appear below:       A cash dividend was declared and paid in full to stockholders during the year.
Required:
Solve for the missing numbers and summarize your answers in the table below. Be sure to indicate in parentheses ( ) if the missing number is negative (that is, a cash outflow).

Accepted Answer

The answer of Condensed financial data of Monopoly Corporation appear...

Question 4

When the direct method is used to determine the cash flows from operating activities, other operating expenses are converted into cash outflows by:

Accepted Answer

A)  adding changes in prepaid expenses and accrued liabilities to other expenses. 
B)  subtracting increases in prepaid expenses and subtracting decreases in accrued liabilities from other expenses. 
C)  adding increases in prepaid expenses and adding decreases in accrued liabilities to other expenses. 
D)  subtracting changes in prepaid expenses and accrued liabilities from other expenses. 
A)  adding changes in prepaid expenses and accrued liabilities to other expenses. 
B)  subtracting increases in prepaid expenses and subtracting decreases in accrued liabilities from other expenses. 
C)  adding increases in prepaid expenses and adding decreases in accrued liabilities to other expenses. 
D)  subtracting changes in prepaid expenses and accrued liabilities from other expenses.

Question 5

Which of the following statements about cash flows from investing activities is correct?

Accepted Answer

A)  The proceeds from sales of investments are reported as cash inflows from investing activities. 
B)  Cash flows from investing activities are calculated by making adjustments to net income. 
C)  Cash paid to acquire long-lived assets is reported as a cash inflow from investing activities. 
D)  Cash received from issuing a long-term payable is reported as a cash inflow from investing activities. 
A)  The proceeds from sales of investments are reported as cash inflows from investing activities. 
B)  Cash flows from investing activities are calculated by making adjustments to net income. 
C)  Cash paid to acquire long-lived assets is reported as a cash inflow from investing activities. 
D)  Cash received from issuing a long-term payable is reported as a cash inflow from investing activities.

Question 6

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of each component of operating transactions that result in either a debit or a credit to cash?

Accepted Answer

A)  Direct 
B)  Indirect 
C)  Accrual 
D)  Cash 
A)  Direct 
B)  Indirect 
C)  Accrual 
D)  Cash

Question 7

During the current year, Todd Electronics had $610,000 in cash sales and $2,220,000 in credit sales. The Accounts Receivable balance was $530,000 at the beginning of the year and $425,000 at the end of the year. What was the total cash collected from customers during the year?

Accepted Answer

A)  $2,935,000 
B)  $2,830,000 
C)  $2,725,000 
D)  $2,325,000 
A)  $2,935,000 
B)  $2,830,000 
C)  $2,725,000 
D)  $2,325,000

Question 8

Assume a company uses the direct method to prepare its statement of cash flows. If the company's Accounts Receivable increase during the accounting period, the change in Accounts Receivable is:

Accepted Answer

A)  added to the change in the Cash account to calculate cash collected from customers. 
B)  subtracted from Sales Revenue to calculate the cash collected from customers. 
C)  added to Sales Revenue to calculate the cash collected from customers. 
D)  subtracted from the change in the Cash account to calculate cash collected from customers. 
A)  added to the change in the Cash account to calculate cash collected from customers. 
B)  subtracted from Sales Revenue to calculate the cash collected from customers. 
C)  added to Sales Revenue to calculate the cash collected from customers. 
D)  subtracted from the change in the Cash account to calculate cash collected from customers.

Question 9

Brighton, Inc. uses the indirect method to determine its cash flow from operations. During the course of the year, Brighton, Inc.'s Accounts Receivable increased by $10,000 and its Accounts Payable decreased by $5,000. As a result of these two items, the net addition (or subtraction) to convert net income to cash flow from operations equals:

Accepted Answer

A)  $5,000. 
B)  ($5,000). 
C)  $15,000. 
D)  ($15,000). 
A)  $5,000. 
B)  ($5,000). 
C)  $15,000. 
D)  ($15,000).

Question 10

Which of the following journal entries has an effect on cash provided by (used in) operating activities?

Accepted Answer

A)  Bad debts expense 
B)  Depreciation expense 
C)  Sale of an investment 
D)  Payment of interest on long-term notes payable 
A)  Bad debts expense 
B)  Depreciation expense 
C)  Sale of an investment 
D)  Payment of interest on long-term notes payable

Question 11

When a company uses the direct method to determine the cash flows from operating activities, cash flows from operating activities will:

Accepted Answer

A)  be identical to the amount reported using the indirect method. 
B)  be larger if there is a net cash inflow and smaller if there is a net cash outflow compared to the amount reported using the indirect method. 
C)  always be larger than the amount reported using the indirect method. 
D)  be larger if there is a net cash outflow and smaller if there is a net cash inflow compared to the amount reported using the indirect methoD.
The direct method and the indirect method produce the same result for net cash provided by or used in operating activities. 
A)  be identical to the amount reported using the indirect method. 
B)  be larger if there is a net cash inflow and smaller if there is a net cash outflow compared to the amount reported using the indirect method. 
C)  always be larger than the amount reported using the indirect method. 
D)  be larger if there is a net cash outflow and smaller if there is a net cash inflow compared to the amount reported using the indirect methoD.
The direct method and the indirect method produce the same result for net cash provided by or used in operating activities.

Question 12

Cash flows from financing activities:

Accepted Answer

A)  includes all cash inflows and outflows associated with a company's lending activities. 
B)  includes all cash inflows and outflows between a company and its stockholders. 
C)  are always negative because of the payments of cash dividends as well as interest and principal on debt. 
D)  are always positive unless the company is experiencing serious financial trouble. 
A)  includes all cash inflows and outflows associated with a company's lending activities. 
B)  includes all cash inflows and outflows between a company and its stockholders. 
C)  are always negative because of the payments of cash dividends as well as interest and principal on debt. 
D)  are always positive unless the company is experiencing serious financial trouble.

Question 13

A company purchases a $300,000 building, paying $200,000 in cash and signing a $100,000 promissory note. What will be reported on the statement of cash flows as a result of this transaction?

Accepted Answer

A)  A $300,000 cash outflow from investing activities 
B)  A $200,000 cash outflow from investing activities and a $100,000 cash inflow from financing activities 
C)  A $200,000 cash outflow from investing activities and a $100,000 noncash transaction 
D)  A $300,000 cash outflow from investing activities and a $100,000 cash inflow from financing activities 
A)  A $300,000 cash outflow from investing activities 
B)  A $200,000 cash outflow from investing activities and a $100,000 cash inflow from financing activities 
C)  A $200,000 cash outflow from investing activities and a $100,000 noncash transaction 
D)  A $300,000 cash outflow from investing activities and a $100,000 cash inflow from financing activities

Question 14

Which phrase below best describes the direct method for reporting operating cash flows?

Accepted Answer

A)  A method that incorporates financing and investing activities into cash flows from operations. 
B)  A method employing accrual-based accounting to convert cash flows to GAAP Net Income. 
C)  A summary of operating transactions resulting in either a debit or credit to cash. 
D)  A series of adjustments to Net Income to arrive at operating cash flows. 
A)  A method that incorporates financing and investing activities into cash flows from operations. 
B)  A method employing accrual-based accounting to convert cash flows to GAAP Net Income. 
C)  A summary of operating transactions resulting in either a debit or credit to cash. 
D)  A series of adjustments to Net Income to arrive at operating cash flows.

Question 15

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows. Why is a decrease in Accounts Receivable decrease added to sales revenue when computing cash collected from customers?

Accepted Answer

A)  There were more cash sales than credit sales during the year. 
B)  There were more collections of Accounts Receivable than sales on account during the year. 
C)  There were more credit sales than cash sales during the year. 
D)  There were more sales on account than collections of Accounts Receivable during the year. 
A)  There were more cash sales than credit sales during the year. 
B)  There were more collections of Accounts Receivable than sales on account during the year. 
C)  There were more credit sales than cash sales during the year. 
D)  There were more sales on account than collections of Accounts Receivable during the year.

Question 16

The reporting of financing activities is identical under the indirect and direct methods for the statement of cash flows on the statement of cash flows

Accepted Answer

A) True 
 B)False

Question 17

Which of the following items is considered to be a cash equivalent?

Accepted Answer

A)  An investment in a U. S. bond due in two years 
B)  A one-year certificate of deposit due in six weeks 
C)  A one-month Treasury bill due in two weeks 
D)  A promissory note due from a customer in 7 months 
A)  An investment in a U. S. bond due in two years 
B)  A one-year certificate of deposit due in six weeks 
C)  A one-month Treasury bill due in two weeks 
D)  A promissory note due from a customer in 7 months

Question 18

A general rule for the relationship between operating, investing, and financing cash flows and the financial statements is:

Accepted Answer

A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D 
A)  Option A 
B)  Option B 
C)  Option C 
D)  Option D

Question 19

Which of the following is included in the financing activities on a statement of cash flows?

Accepted Answer

A)  Changes in accounts payable 
B)  Purchases of equipment 
C)  Paying interest to lenders 
D)  Cash dividends paid 
A)  Changes in accounts payable 
B)  Purchases of equipment 
C)  Paying interest to lenders 
D)  Cash dividends paid

Question 20

The cash flow statement should be evaluated by examining the cash flow pattern suggested by the:

Accepted Answer

A)  subtotals of each of the three main sections. 
B)  operating activities section since this section details the day to day operations of the business. 
C)  change in cash regardless of which section had the biggest impact on the change. 
D)  financing section since this section details how much debt the company has incurreD.
Unlike the income statement, which summarizes its detailed information in one number (net income), the statement of cash flows does not provide a summary measure of cash flow performance. Instead, it must be evaluated in terms of the cash flow pattern suggested by the subtotals of each of the three main sections. 
A)  subtotals of each of the three main sections. 
B)  operating activities section since this section details the day to day operations of the business. 
C)  change in cash regardless of which section had the biggest impact on the change. 
D)  financing section since this section details how much debt the company has incurreD.
Unlike the income statement, which summarizes its detailed information in one number (net income), the statement of cash flows does not provide a summary measure of cash flow performance. Instead, it must be evaluated in terms of the cash flow pattern suggested by the subtotals of each of the three main sections.

All of the following might be used to evaluate cash flow performance, except:

Flynn Corporation had the following cash flows for the current year. The company uses the direct method in preparing the statement of cash flows. What is the net cash provided by (used in) investing activities?

When the direct method is used to determine the cash flows from operating activities, other operating expenses are converted into cash outflows by:

Which of the following statements about cash flows from investing activities is correct?

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of each component of operating transactions that result in either a debit or a credit to cash?

During the current year, Todd Electronics had $610,000 in cash sales and $2,220,000 in credit sales. The Accounts Receivable balance was $530,000 at the beginning of the year and $425,000 at the end of the year. What was the total cash collected from customers during the year?

Assume a company uses the direct method to prepare its statement of cash flows. If the company's Accounts Receivable increase during the accounting period, the change in Accounts Receivable is:

Which of the following journal entries has an effect on cash provided by (used in) operating activities?

When a company uses the direct method to determine the cash flows from operating activities, cash flows from operating activities will:

Cash flows from financing activities:

A company purchases a $300,000 building, paying $200,000 in cash and signing a $100,000 promissory note. What will be reported on the statement of cash flows as a result of this transaction?

Which phrase below best describes the direct method for reporting operating cash flows?

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows. Why is a decrease in Accounts Receivable decrease added to sales revenue when computing cash collected from customers?

The reporting of financing activities is identical under the indirect and direct methods for the statement of cash flows on the statement of cash flows

Which of the following items is considered to be a cash equivalent?

A general rule for the relationship between operating, investing, and financing cash flows and the financial statements is:

Which of the following is included in the financing activities on a statement of cash flows?

The cash flow statement should be evaluated by examining the cash flow pattern suggested by the:

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost Behavior and Estimation

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Financial Statement Analysis

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Exam 12: Statement of Cash Flows

All of the following might be used to evaluate cash flow performance, except:

Flynn Corporation had the following cash flows for the current year. The company uses the direct method in preparing the statement of cash flows. What is the net cash provided by (used in) investing activities?

When the direct method is used to determine the cash flows from operating activities, other operating expenses are converted into cash outflows by:

Which of the following statements about cash flows from investing activities is correct?

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of each component of operating transactions that result in either a debit or a credit to cash?

During the current year, Todd Electronics had $610,000 in cash sales and $2,220,000 in credit sales. The Accounts Receivable balance was $530,000 at the beginning of the year and $425,000 at the end of the year. What was the total cash collected from customers during the year?

Assume a company uses the direct method to prepare its statement of cash flows. If the company's Accounts Receivable increase during the accounting period, the change in Accounts Receivable is:

Which of the following journal entries has an effect on cash provided by (used in) operating activities?

When a company uses the direct method to determine the cash flows from operating activities, cash flows from operating activities will:

Cash flows from financing activities:

A company purchases a $300,000 building, paying $200,000 in cash and signing a $100,000 promissory note. What will be reported on the statement of cash flows as a result of this transaction?

Which phrase below best describes the direct method for reporting operating cash flows?

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows. Why is a decrease in Accounts Receivable decrease added to sales revenue when computing cash collected from customers?

The reporting of financing activities is identical under the indirect and direct methods for the statement of cash flows on the statement of cash flows

Which of the following items is considered to be a cash equivalent?

A general rule for the relationship between operating, investing, and financing cash flows and the financial statements is:

Which of the following is included in the financing activities on a statement of cash flows?

The cash flow statement should be evaluated by examining the cash flow pattern suggested by the:

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost Behavior and Estimation

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Financial Statement Analysis

Filters