Question 1

Which of the following statements about financing activities is not correct?

Accepted Answer

A)  Cash dividends paid to a company's stockholders are reported as cash outflows from financing activities. 
B)  When a company issues stock for cash, it reports a cash inflow from financing activities. 
C)  When a company repurchases stock with cash, it reports a cash outflow for financing activities. 
D)  When a company repays a loan, it reports a cash inflow from financing activities. 
A)  Cash dividends paid to a company's stockholders are reported as cash outflows from financing activities. 
B)  When a company issues stock for cash, it reports a cash inflow from financing activities. 
C)  When a company repurchases stock with cash, it reports a cash outflow for financing activities. 
D)  When a company repays a loan, it reports a cash inflow from financing activities.

Question 2

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in Income Taxes Payable is added to net income

Accepted Answer

A) True 
 B)False

Question 3

Complete the last two columns in the following table by indicating whether each transaction would be reported:
Part a. In the operating (O), investing (I), or financing (F) activities section of the statement of cash flows or if the transaction would be reported instead as a noncash investing and/or financing transaction (Noncash).
Part b. As a cash inflow (+) or a cash outflow (-) on the statement of ash flows. (Leave this cell blank if you entered "Noncash" for part a.)

Accepted Answer

The answer of Complete the last two columns in the...

Question 4

Which of the statements below is correct when comparing the direct and indirect methods of reporting operating cash flows?

Accepted Answer

A)  The direct method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations. 
B)  The indirect method starts with cash collected from customers and details cash inflows and outflows from operations. 
C)  The indirect method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations. 
D)  The net cash provided by or used in operations will be different depending on whether the direct or indirect method is useD.
The indirect method starts with net income and makes adjustments, such as adding back depreciation, to arrive at the net cash provided by or used in operations. The direct method starts with cash collected from customers and details cash inflows and outflows from operations to arrive at the net cash provided by or used in operations. Both methods will arrive at the same net cash provided by or used in operations. 
A)  The direct method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations. 
B)  The indirect method starts with cash collected from customers and details cash inflows and outflows from operations. 
C)  The indirect method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations. 
D)  The net cash provided by or used in operations will be different depending on whether the direct or indirect method is useD.
The indirect method starts with net income and makes adjustments, such as adding back depreciation, to arrive at the net cash provided by or used in operations. The direct method starts with cash collected from customers and details cash inflows and outflows from operations to arrive at the net cash provided by or used in operations. Both methods will arrive at the same net cash provided by or used in operations.

Question 5

Free cash flow may be used for all of the following except:

Accepted Answer

A)  expanding the business. 
B)  paying off debt. 
C)  building up the cash balance. 
D)  paying employees. 
A)  expanding the business. 
B)  paying off debt. 
C)  building up the cash balance. 
D)  paying employees.

Question 6

Maya Company's purchase of 100 shares of Labrador Inc. common stock would be reported as a financing activity on its statement of cash flows

Accepted Answer

A) True 
 B)False

Question 7

A healthy company typically shows positive cash flows in the financing activities section of the statement of cash flows

Accepted Answer

A) True 
 B)False

Question 8

Dover Co.'s comparative balance sheet indicated that the Equipment account increased by $40,000. Upon further investigation of the account changes, it is determined that Dover purchased equipment totaling $70,000 for the year. It also sold equipment with an original cost of $30,000 for $8,000 cash. Assuming these are the only transactions affecting the investing activities, Dover will report net cash flows provided by (used in) investing activities of:

Accepted Answer

A)  ($40,000). 
B)  ($70,000). 
C)  ($32,000). 
D)  ($62,000). 
A)  ($40,000). 
B)  ($70,000). 
C)  ($32,000). 
D)  ($62,000).

Question 9

In arriving at cash from operating activities, subtracting a decrease in Salaries and Wages Payable from net income includes the cash effects of transactions that:

Accepted Answer

A)  increased cash, but did not affect net income. 
B)  increased cash and increased net income. 
C)  decreased cash, but did not affect net income. 
D)  decreased cash and decreased net income. 
A)  increased cash, but did not affect net income. 
B)  increased cash and increased net income. 
C)  decreased cash, but did not affect net income. 
D)  decreased cash and decreased net income.

Question 10

Treasury stock purchases made with cash are classified as cash outflows from financing activities on the statement of cash flows

Accepted Answer

A) True 
 B)False

Question 11

ABC Company issued 30,000 shares of common stock in January. In August, the company repurchased 5,000 shares for the treasury. When reporting these transactions in the statement of cash flows, ABC Company ______ combine them into one transaction in the ______ activities section.

Accepted Answer

A)  can; financing 
B)  cannot; financing 
C)  cannot; investing 
D)  can; investing 
A)  can; financing 
B)  cannot; financing 
C)  cannot; investing 
D)  can; investing

Question 12

Assume a company uses the indirect method to prepare its statement of cash flows. If Inventory decreases and Unearned Revenue increases during an accounting period, what does the company do with the changes in these accounts to calculate cash flows from operating activities?

Accepted Answer

A)  Both are added to net income. 
B)  The change in inventory is added to net income; the change in unearned revenue is subtracted. 
C)  Both are subtracted from net income. 
D)  The change in unearned revenue is added to net income; the change in inventory is subtracteD.
Decreases in current assets (Inventory) and increases in current liabilities (Unearned Revenue) are added to convert net income to cash flows from operating activities. 
A)  Both are added to net income. 
B)  The change in inventory is added to net income; the change in unearned revenue is subtracted. 
C)  Both are subtracted from net income. 
D)  The change in unearned revenue is added to net income; the change in inventory is subtracteD.
Decreases in current assets (Inventory) and increases in current liabilities (Unearned Revenue) are added to convert net income to cash flows from operating activities.

Question 13

The company would report net cash provided by (used in) financing activities of:

Accepted Answer

A)  ($2,500). 
B)  $2,000. 
C)  $5,000. 
D)  $6,000. 
A)  ($2,500). 
B)  $2,000. 
C)  $5,000. 
D)  $6,000.

Question 14

Which of the following would be included in cash flows from operating activities?

Accepted Answer

A)  Cash received from customers 
B)  Cash received from an issuance of bonds 
C)  Cash dividends paid to stockholders 
D)  Cash used for purchases of equipment 
A)  Cash received from customers 
B)  Cash received from an issuance of bonds 
C)  Cash dividends paid to stockholders 
D)  Cash used for purchases of equipment

Question 15

The T-account approach:

Accepted Answer

A)  may be used with the direct method. 
B)  creates one big T-account for cash that replaces separate schedules to show all the changes in the cash account. 
C)  shows cash provided as credits and cash used as debits. 
D)  does not determine the change in each balance sheet account. 
A)  may be used with the direct method. 
B)  creates one big T-account for cash that replaces separate schedules to show all the changes in the cash account. 
C)  shows cash provided as credits and cash used as debits. 
D)  does not determine the change in each balance sheet account.

Question 16

A company took out $665,000 of new debt this year and repaid $1,000,000 of older debt in the same year. The company also issued stock for $442,000 cash and paid dividends of $99,000 for the year. The company's financing cash flows appearing the statement of cash flows will show:

Accepted Answer

A)  Net cash used in financing activities of $434,000 
B)  Net cash used in financing activities of $335,000 
C)  Net cash provided by financing activities of $8,000 
D)  Net cash provided by financing activities of $107,000 
A)  Net cash used in financing activities of $434,000 
B)  Net cash used in financing activities of $335,000 
C)  Net cash provided by financing activities of $8,000 
D)  Net cash provided by financing activities of $107,000

Question 17

Under the indirect method, changes in current assets are used in determining cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities

Accepted Answer

A) True 
 B)False

Question 18

Investing activities include receiving cash from the sale of land and also the resulting gain or loss on the sale

Accepted Answer

A) True 
 B)False

Question 19

When the direct method is used to determine the cash flows from operating activities, which of the following adjustments must be made to interest expense to determine total interest payments?

Accepted Answer

A)  Add all changes in Interest Payable 
B)  Add decreases in Interest Payable and subtract increases in Interest Payable 
C)  Add increases in Interest Payable and subtract decreases in Interest Payable 
D)  Subtract all changes in Interest Payable 
A)  Add all changes in Interest Payable 
B)  Add decreases in Interest Payable and subtract increases in Interest Payable 
C)  Add increases in Interest Payable and subtract decreases in Interest Payable 
D)  Subtract all changes in Interest Payable

Question 20

Free cash flow is a positive cash flow from operating activities:

Accepted Answer

A)  beyond what is needed to replace current property, plant, and equipment and pay cash dividends. 
B)  across all three activity components of the statement of cash flows. 
C)  beyond what has been allotted for future property, plant, and equipment replacement and expansion. 
D)  across both financing and investing activities. 
A)  beyond what is needed to replace current property, plant, and equipment and pay cash dividends. 
B)  across all three activity components of the statement of cash flows. 
C)  beyond what has been allotted for future property, plant, and equipment replacement and expansion. 
D)  across both financing and investing activities.

Which of the following statements about financing activities is not correct?

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in Income Taxes Payable is added to net income

Which of the statements below is correct when comparing the direct and indirect methods of reporting operating cash flows?

Free cash flow may be used for all of the following except:

Maya Company's purchase of 100 shares of Labrador Inc. common stock would be reported as a financing activity on its statement of cash flows

A healthy company typically shows positive cash flows in the financing activities section of the statement of cash flows

In arriving at cash from operating activities, subtracting a decrease in Salaries and Wages Payable from net income includes the cash effects of transactions that:

Treasury stock purchases made with cash are classified as cash outflows from financing activities on the statement of cash flows

ABC Company issued 30,000 shares of common stock in January. In August, the company repurchased 5,000 shares for the treasury. When reporting these transactions in the statement of cash flows, ABC Company combine them into one transaction in the activities section.

Assume a company uses the indirect method to prepare its statement of cash flows. If Inventory decreases and Unearned Revenue increases during an accounting period, what does the company do with the changes in these accounts to calculate cash flows from operating activities?

The company would report net cash provided by (used in) financing activities of:

Which of the following would be included in cash flows from operating activities?

The T-account approach:

A company took out $665,000 of new debt this year and repaid $1,000,000 of older debt in the same year. The company also issued stock for $442,000 cash and paid dividends of $99,000 for the year. The company's financing cash flows appearing the statement of cash flows will show:

Under the indirect method, changes in current assets are used in determining cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities

Investing activities include receiving cash from the sale of land and also the resulting gain or loss on the sale

When the direct method is used to determine the cash flows from operating activities, which of the following adjustments must be made to interest expense to determine total interest payments?

Free cash flow is a positive cash flow from operating activities:

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

Exam 12: Statement of Cash Flows

Which of the following statements about financing activities is not correct?

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in Income Taxes Payable is added to net income

Which of the statements below is correct when comparing the direct and indirect methods of reporting operating cash flows?

Free cash flow may be used for all of the following except:

Maya Company's purchase of 100 shares of Labrador Inc. common stock would be reported as a financing activity on its statement of cash flows

A healthy company typically shows positive cash flows in the financing activities section of the statement of cash flows

In arriving at cash from operating activities, subtracting a decrease in Salaries and Wages Payable from net income includes the cash effects of transactions that:

Treasury stock purchases made with cash are classified as cash outflows from financing activities on the statement of cash flows

ABC Company issued 30,000 shares of common stock in January. In August, the company repurchased 5,000 shares for the treasury. When reporting these transactions in the statement of cash flows, ABC Company ______ combine them into one transaction in the ______ activities section.

Assume a company uses the indirect method to prepare its statement of cash flows. If Inventory decreases and Unearned Revenue increases during an accounting period, what does the company do with the changes in these accounts to calculate cash flows from operating activities?

The company would report net cash provided by (used in) financing activities of:

Which of the following would be included in cash flows from operating activities?

The T-account approach:

A company took out $665,000 of new debt this year and repaid $1,000,000 of older debt in the same year. The company also issued stock for $442,000 cash and paid dividends of $99,000 for the year. The company's financing cash flows appearing the statement of cash flows will show:

Under the indirect method, changes in current assets are used in determining cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities

Investing activities include receiving cash from the sale of land and also the resulting gain or loss on the sale

When the direct method is used to determine the cash flows from operating activities, which of the following adjustments must be made to interest expense to determine total interest payments?

Free cash flow is a positive cash flow from operating activities:

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

ABC Company issued 30,000 shares of common stock in January. In August, the company repurchased 5,000 shares for the treasury. When reporting these transactions in the statement of cash flows, ABC Company combine them into one transaction in the activities section.