Question 1

If the calculation of cash flows from operating activities starts with net income, the company:

Accepted Answer

A)  is using the net income method. 
B)  will remove the effects of all noncash items included in the calculation of net income. 
C)  is using the direct method. 
D)  will add all noncash items not included in the calculation of net income. 
A)  is using the net income method. 
B)  will remove the effects of all noncash items included in the calculation of net income. 
C)  is using the direct method. 
D)  will add all noncash items not included in the calculation of net income.

Question 2

Darnell, Inc.'s balance sheet indicated that the cash account increased by $5,400 during the past year. Net cash provided by operating activities was $14,000 and net cash used in investing activities was $6,100. What was the net cash flow effect of the company's financing activities?

Accepted Answer

A)  Net cash provided of $2,500 
B)  Net cash used of $2,500 
C)  Net cash used of $14,700 
D)  Net cash provided of $14,700 
A)  Net cash provided of $2,500 
B)  Net cash used of $2,500 
C)  Net cash used of $14,700 
D)  Net cash provided of $14,700

Question 3

How is the change in cash classified on the statement of cash flows?

Accepted Answer

A)  It is found in the investing activities section of the statement. 
B)  It is found in the operating activities section of the statement. 
C)  It is found in the financing activities section of the statement. 
D)  It is the sum of the investing, operating, and financing activities sections. 
A)  It is found in the investing activities section of the statement. 
B)  It is found in the operating activities section of the statement. 
C)  It is found in the financing activities section of the statement. 
D)  It is the sum of the investing, operating, and financing activities sections.

Question 4

The starting point for preparing the operating activities section using the indirect method is:

Accepted Answer

A)  current assets. 
B)  current liabilities. 
C)  net income. 
D)  ending cash balance. 
A)  current assets. 
B)  current liabilities. 
C)  net income. 
D)  ending cash balance.

Question 5

When preparing the operating activities section of the statement of cash flows using the indirect method, accumulated depreciation is added to net income in the operating section

Accepted Answer

A) True 
 B)False

Question 6

Depreciation Expense is not reported on the statement of cash flows when prepared using the direct method

Accepted Answer

A) True 
 B)False

Question 7

If Salaries and Wages Expense is $450,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $18,000 and $16,500, respectively, the cash paid to employees is:

Accepted Answer

A)  $450,000. 
B)  $433,500. 
C)  $448,500. 
D)  $451,500. 
A)  $450,000. 
B)  $433,500. 
C)  $448,500. 
D)  $451,500.

Question 8

Equipment with a cost of $80,000 and accumulated depreciation of $75,000 is sold for $12,000 cash.
Required:
Part a. Prepare the journal entry to record this transaction.
Part b. Explain how this transaction would be reported on the statement of cash flows prepared using the indirect method.

Accepted Answer

Part a @#IMG-DLM& Part b
The gain on disposal in t

Question 9

When the indirect method is used, if a prepaid expense account decreases during the accounting period, the change in the prepaid expense account is:

Accepted Answer

A)  added to the change in the cash account. 
B)  subtracted from net income. 
C)  added to net income. 
D)  subtracted from the change in the cash account. 
A)  added to the change in the cash account. 
B)  subtracted from net income. 
C)  added to net income. 
D)  subtracted from the change in the cash account.

Question 10

Braden and Sons, Inc. paid cash to purchase equipment costing $342,000 this year. Also this year, the company sold for $70,000 cash, equipment that originally cost $230,000 five years ago. How should these transactions be listed in the statement of cash flows?

Accepted Answer

A)  Braden can combine the transactions and show a decrease to cash for $112,000. 
B)  Braden can combine the transactions and show a decrease to cash for $272,000. 
C)  The purchases and the sales of equipment must be shown separately as a decrease to cash for $572,000 (purchase) and an increase of $70,000 (sale). 
D)  The purchases and the sales of equipment must be shown separately as a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale). 
A)  Braden can combine the transactions and show a decrease to cash for $112,000. 
B)  Braden can combine the transactions and show a decrease to cash for $272,000. 
C)  The purchases and the sales of equipment must be shown separately as a decrease to cash for $572,000 (purchase) and an increase of $70,000 (sale). 
D)  The purchases and the sales of equipment must be shown separately as a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale).

Question 11

Which of the following statements about the statement of cash flows is not correct?

Accepted Answer

A)  It does not replace the income statement. 
B)  It provides details as to how cash changed during a period. 
C)  It provides information about cash receipts and cash payments over a period of time. 
D)  It measures profitability. 
A)  It does not replace the income statement. 
B)  It provides details as to how cash changed during a period. 
C)  It provides information about cash receipts and cash payments over a period of time. 
D)  It measures profitability.

Question 12

If a company's Cost of Goods Sold is $158,000 for the period, beginning and ending Inventory balances are $18,000 and $13,000, respectively, and the beginning and ending Accounts Payable balances are $19,000 and $7,500, respectively, what is the amount of the cash paid to suppliers?

Accepted Answer

A)  $157,000 
B)  $163,500 
C)  $164,500 
D)  $151,500 
A)  $157,000 
B)  $163,500 
C)  $164,500 
D)  $151,500

Question 13

To determine net cash provided by or used in financing activities, one must analyze the:

Accepted Answer

A)  Notes Receivable and Bonds Payable accounts. 
B)  Cash account. 
C)  Common Stock and Retained Earnings accounts. 
D)  Interest Expense and Dividend Income accounts. 
A)  Notes Receivable and Bonds Payable accounts. 
B)  Cash account. 
C)  Common Stock and Retained Earnings accounts. 
D)  Interest Expense and Dividend Income accounts.

Question 14

The accounting records for the Helen Co. show that its cost of goods sold for the year was $600,000. In addition, it had an increase in inventory of $10,000 and a decrease in accounts payable of $12,000. As a result under the direct method, the amount of cash paid to suppliers for the year was:

Accepted Answer

A)  $602,000. 
B)  $610,000. 
C)  $612,000. 
D)  $622,000. 
A)  $602,000. 
B)  $610,000. 
C)  $612,000. 
D)  $622,000.

Question 15

Which of the following are used to determine cash flows from financing activities?

Accepted Answer

A)  Short-term debt, Accrued Liabilities, Common Stock, and Notes Payable 
B)  Long-term debt, Common Stock, and Retained Earnings 
C)  Short-term debt, Accrued Liabilities, Retained Earnings, and Bonds Payable 
D)  Long-term debt, Notes Payable, Interest Expense, and Bonds Payable 
A)  Short-term debt, Accrued Liabilities, Common Stock, and Notes Payable 
B)  Long-term debt, Common Stock, and Retained Earnings 
C)  Short-term debt, Accrued Liabilities, Retained Earnings, and Bonds Payable 
D)  Long-term debt, Notes Payable, Interest Expense, and Bonds Payable

Question 16

Which of the following classifications is not used on the statement of cash flows?

Accepted Answer

A)  Operating 
B)  Investing 
C)  Financing 
D)  Spending 
A)  Operating 
B)  Investing 
C)  Financing 
D)  Spending

Question 17

Which of the following statements about calculation of cash flows from operating activities under the indirect method is correct?

Accepted Answer

A)  When the indirect method is used, changes in current liabilities are subtracted while changes in current assets are added to convert net income to net cash flow from operating activities. 
B)  When the indirect method is used, depreciation expense is added to net income as a step in the process of calculating net cash flow provided by operating activities. 
C)  When the indirect method is used, changes in long-term assets are added to convert net income to net cash flow provided by operating activities. 
D)  When the indirect method is used, changes in long-term liabilities are subtracted to convert net income to net cash flow provided by operating activities. 
A)  When the indirect method is used, changes in current liabilities are subtracted while changes in current assets are added to convert net income to net cash flow from operating activities. 
B)  When the indirect method is used, depreciation expense is added to net income as a step in the process of calculating net cash flow provided by operating activities. 
C)  When the indirect method is used, changes in long-term assets are added to convert net income to net cash flow provided by operating activities. 
D)  When the indirect method is used, changes in long-term liabilities are subtracted to convert net income to net cash flow provided by operating activities.

Question 18

The payment of interest on bonds is classified as a cash outflow from operating activities on the statement of cash flows

Accepted Answer

A) True 
 B)False

Question 19

The net cash flow provided by operating activities is an inflow of $37,042, the net cash flow used in investing activities is $16,831, and the net cash flow used in financing activities is $26,397. If the beginning cash account balance is $11,283, what is the ending cash account balance?

Accepted Answer

A)  $5,097 
B)  ($6,186) 
C)  $38,759 
D)  $27,476 
A)  $5,097 
B)  ($6,186) 
C)  $38,759 
D)  $27,476

Question 20

The management team of Wickersham Brothers Inc. is preparing its annual financial statements. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statements are summarized.   Other information from the company's records includes the following:
• Bought equipment for cash, $50,000.
• Paid $10,000 on long-term note payable.
• Issued new shares of common stock for $20,000 cash.
• Cash dividends of $16,000 were declared and paid to stockholders.
• Accounts Payable arose from inventory purchases on credit.
• Income Tax Expense ($4,000) and Interest Expense ($3,000) were paid in full at the end of both years and are included in Other Expenses.
Required:
Part a. Prepare the statement of cash flows using the indirect method. Include any supplemental disclosures.
Part b. Interpret the statement of cash flows by explaining the main sources and uses of cash during the year.

Accepted Answer

Part a @#IMG-DLM& Part b
Although operating activi

If the calculation of cash flows from operating activities starts with net income, the company:

Darnell, Inc.'s balance sheet indicated that the cash account increased by $5,400 during the past year. Net cash provided by operating activities was $14,000 and net cash used in investing activities was $6,100. What was the net cash flow effect of the company's financing activities?

How is the change in cash classified on the statement of cash flows?

The starting point for preparing the operating activities section using the indirect method is:

When preparing the operating activities section of the statement of cash flows using the indirect method, accumulated depreciation is added to net income in the operating section

Depreciation Expense is not reported on the statement of cash flows when prepared using the direct method

If Salaries and Wages Expense is $450,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $18,000 and $16,500, respectively, the cash paid to employees is:

Equipment with a cost of $80,000 and accumulated depreciation of $75,000 is sold for $12,000 cash. Required: Part a. Prepare the journal entry to record this transaction. Part b. Explain how this transaction would be reported on the statement of cash flows prepared using the indirect method.

When the indirect method is used, if a prepaid expense account decreases during the accounting period, the change in the prepaid expense account is:

Braden and Sons, Inc. paid cash to purchase equipment costing $342,000 this year. Also this year, the company sold for $70,000 cash, equipment that originally cost $230,000 five years ago. How should these transactions be listed in the statement of cash flows?

Which of the following statements about the statement of cash flows is not correct?

If a company's Cost of Goods Sold is $158,000 for the period, beginning and ending Inventory balances are $18,000 and $13,000, respectively, and the beginning and ending Accounts Payable balances are $19,000 and $7,500, respectively, what is the amount of the cash paid to suppliers?

To determine net cash provided by or used in financing activities, one must analyze the:

The accounting records for the Helen Co. show that its cost of goods sold for the year was $600,000. In addition, it had an increase in inventory of $10,000 and a decrease in accounts payable of $12,000. As a result under the direct method, the amount of cash paid to suppliers for the year was:

Which of the following are used to determine cash flows from financing activities?

Which of the following classifications is not used on the statement of cash flows?

Which of the following statements about calculation of cash flows from operating activities under the indirect method is correct?

The payment of interest on bonds is classified as a cash outflow from operating activities on the statement of cash flows

The net cash flow provided by operating activities is an inflow of $37,042, the net cash flow used in investing activities is $16,831, and the net cash flow used in financing activities is $26,397. If the beginning cash account balance is $11,283, what is the ending cash account balance?

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

If the calculation of cash flows from operating activities starts with net income, the company:

Darnell, Inc.'s balance sheet indicated that the cash account increased by $5,400 during the past year. Net cash provided by operating activities was $14,000 and net cash used in investing activities was $6,100. What was the net cash flow effect of the company's financing activities?

How is the change in cash classified on the statement of cash flows?

The starting point for preparing the operating activities section using the indirect method is:

When preparing the operating activities section of the statement of cash flows using the indirect method, accumulated depreciation is added to net income in the operating section

Depreciation Expense is not reported on the statement of cash flows when prepared using the direct method

If Salaries and Wages Expense is $450,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $18,000 and $16,500, respectively, the cash paid to employees is:

Equipment with a cost of $80,000 and accumulated depreciation of $75,000 is sold for $12,000 cash. Required: Part a. Prepare the journal entry to record this transaction. Part b. Explain how this transaction would be reported on the statement of cash flows prepared using the indirect method.

When the indirect method is used, if a prepaid expense account decreases during the accounting period, the change in the prepaid expense account is:

Braden and Sons, Inc. paid cash to purchase equipment costing $342,000 this year. Also this year, the company sold for $70,000 cash, equipment that originally cost $230,000 five years ago. How should these transactions be listed in the statement of cash flows?

Which of the following statements about the statement of cash flows is not correct?

If a company's Cost of Goods Sold is $158,000 for the period, beginning and ending Inventory balances are $18,000 and $13,000, respectively, and the beginning and ending Accounts Payable balances are $19,000 and $7,500, respectively, what is the amount of the cash paid to suppliers?

To determine net cash provided by or used in financing activities, one must analyze the:

The accounting records for the Helen Co. show that its cost of goods sold for the year was $600,000. In addition, it had an increase in inventory of $10,000 and a decrease in accounts payable of $12,000. As a result under the direct method, the amount of cash paid to suppliers for the year was:

Which of the following are used to determine cash flows from financing activities?

Which of the following classifications is not used on the statement of cash flows?

Which of the following statements about calculation of cash flows from operating activities under the indirect method is correct?

The payment of interest on bonds is classified as a cash outflow from operating activities on the statement of cash flows

The net cash flow provided by operating activities is an inflow of $37,042, the net cash flow used in investing activities is $16,831, and the net cash flow used in financing activities is $26,397. If the beginning cash account balance is $11,283, what is the ending cash account balance?

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