Question 1

The primary objective of the statement of cash flows is to ________.

Accepted Answer

A)  provide information about a company's cash receipts and cash payments for operating, financing, and investing activities over a period of time 
B)  disclose changes in asset and equity accounts over a period of time 
C)  disclose changes in working capital over a period of time 
D)  provide information about a company's cash-basis revenue and expenses activities over a period of time 
A)  provide information about a company's cash receipts and cash payments for operating, financing, and investing activities over a period of time 
B)  disclose changes in asset and equity accounts over a period of time 
C)  disclose changes in working capital over a period of time 
D)  provide information about a company's cash-basis revenue and expenses activities over a period of time A

Question 2

In a statement of cash flows, the cash flows from investing activities section should report ________.

Accepted Answer

A)  the factoring of accounts receivable 
B)  a major overhaul of equipment 
C)  stock dividends received 
D)  the issuance of common stock in exchange for a factory building 
A)  the factoring of accounts receivable 
B)  a major overhaul of equipment 
C)  stock dividends received 
D)  the issuance of common stock in exchange for a factory building B

Question 3

Which of the following is not a required disclosure item for the statement of cash flows?

Accepted Answer

A)  interest and taxes paid when the indirect method is used 
B)  reconciliation of net income to net cash provided by operating activities under the direct method 
C)  all noncash investing and financing activities 
D)  policy regarding cash equivalents 
A)  interest and taxes paid when the indirect method is used 
B)  reconciliation of net income to net cash provided by operating activities under the direct method 
C)  all noncash investing and financing activities 
D)  policy regarding cash equivalents C

Question 4

A decrease in a liability generally results in an increase in cash.

Accepted Answer

A) True 
 B)False

Question 5

Explain how the treatment of gains and losses on the sale of long-term assets differ between the indirect and direct methods when preparing the statement of cash flows.

Accepted Answer

Under the indirect method, firms treat g

Question 6

List and briefly describe the various sections of the statement of cash flows.

Accepted Answer

• Operating activities include cash flow

Question 7

When preparing the statement of cash flows using the indirect method, which of the following is added to net income to determine cash flows from operations?

Accepted Answer

A)  payments to suppliers 
B)  receipts from customers 
C)  bond premium amortization 
D)  unrealized losses from trading securities 
A)  payments to suppliers 
B)  receipts from customers 
C)  bond premium amortization 
D)  unrealized losses from trading securities

Question 8

In 2019, BayKing Company sold used equipment for $20,000. The equipment had an original cost of $80,000 and accumulated depreciation as of the date of sale was $60,000. BayKing also purchased held-to-maturity securities for $5,000. Net income for the year was $74,000. There were no other transactions conducted during the period. What are the net investing cash flows for BayKing?

Accepted Answer

A)  $25,000 
B)  $20,000 
C)  $5,000 
D)  $15,000 
A)  $25,000 
B)  $20,000 
C)  $5,000 
D)  $15,000

Question 9

PipCo financial statements included the following amounts for the current year: $$\begin{array} { | l | r | } 
\hline \text { Retired preferred stock } & \$ 60,000 \
\hline \text { Loaned cash to key supplier } & 17,000 \
\hline \text { Dividends paid } & 23,000 \
\hline \text { Sold used delivery truck } & 44,000 \
\hline \text { Issued new bonds } & 71,000 \
\hline
\end{array}$$ 
Based on this information, what is the amount of net cash flows from financing activities?

Accepted Answer

A)  $88,000 net inflow 
B)  $12,000 net inflow 
C)  $12,000 net outflow 
D)  $11,000 net outflow 
A)  $88,000 net inflow 
B)  $12,000 net inflow 
C)  $12,000 net outflow 
D)  $11,000 net outflow

Question 10

Changes in current assets excluding cash are reflected in the operating activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 11

Ralirali Corporation's financial statements included the following amounts for the current year: $$\begin{array} { | l | r | } 
\hline \text { Issued new shares of preferred stock } & \$ 98,000 \
\hline \text { Loaned cash to key supplier } & 24,000 \
\hline \text { Bought new delivery truck for cash } & 59,000 \
\hline \text { Proceeds from the sale of used production machinery } & 29,000 \
\hline \text { Sold treasury stock } & 31,000 \
\hline
\end{array}$$
 Based on this information, what is the amount of net cash provided (used) by investing activities?

Accepted Answer

A)  $30,000 net inflow 
B)  $54,000 net inflow 
C)  $54,000 net outflow 
D)  $5,000 net outflow 
A)  $30,000 net inflow 
B)  $54,000 net inflow 
C)  $54,000 net outflow 
D)  $5,000 net outflow

Question 12

Comparative financial statements for Tomtric Company follow:

$\begin{array}{c}
 \text {Tomtric Company }\
 \text {Income Statement }\
 \text {For the year ended December 31, 2019}\
\begin{array}{|l|r|}
\hline \text { Sales } & \$ 70,000 \
\hline \text { Cost of goods sold } & \underline{40,000} \
\hline \text { Gross margin } & 30,000 \
\hline \text { Depreciation expense } & 5,000 \
\hline \text { Other operating expenses } & \underline{15,000} \
\hline \text { Operating income } & 10,000 \
\hline \text { Loss on sale of equipment } & \underline{4,000} \
\hline \text { Income before taxes } & 6,000 \
\hline \text { Income tax expense } & \underline{2,400} \
\hline \text { Net income } & \underline{\$ 3,600} \
\hline
\end{array}\end{array}$
Additional data on activities during 2019 are as follows:
• During 2019, Tomtric Company sold used equipment for $3,000 that had cost $15,000 with accumulated depreciation of $8,000.
• New equipment was purchased for $12,000 cash.
• Cash dividends totaling $8,000 were paid.
• Long-term investments that had cost $18,000 when purchased were sold for $18,000.
• Common stock was issued for $10,000.
Required:
Prepare the financing activities section of the statement of cash flows.

Accepted Answer

Financing activities:
Sale of

Question 13

In determining net cash flow from operating activities, an increase in merchandise inventory during a period ________.

Accepted Answer

A)  requires a subtraction adjustment to financing cash flows under the indirect method 
B)  requires a subtraction adjustment to sales to customers under the direct method 
C)  requires an addition adjustment to net income under the indirect method 
D)  requires an addition adjustment to payments for merchandise under the direct method 
A)  requires a subtraction adjustment to financing cash flows under the indirect method 
B)  requires a subtraction adjustment to sales to customers under the direct method 
C)  requires an addition adjustment to net income under the indirect method 
D)  requires an addition adjustment to payments for merchandise under the direct method

Question 14

Decreases in current assets cause operating cash flows to be higher than accrual-basis net income.

Accepted Answer

A) True 
 B)False

Question 15

Horton Industries reported net income of $150,000 for the current year. The balances in its accounts receivable and allowance for bad debts accounts are shown below:
 $$\begin{array} { | l | r | r | } 
\hline  { \text { Account } } & \mathbf { 1 2 / 3 1 / 2 0 1 9 } &  { \mathbf { 1 / 1 / 2 0 1 9 } } \
\hline \text { Accounts Receivable } & \$ 52,000 & \$ 45,000 \
\hline \text { Allowance for Uncollectible Accounts } & 10,000 & 7,000 \
\hline & & \
\hline
\end{array}$$ 
In addition, the company recorded $11,000 of bad debt expense and wrote off $8,000 of uncollectible accounts. There are no other relevant transactions or account balances. Prepare the operating section of the cash flow statement under the indirect method.

Accepted Answer

\[\begin{array} { | l | r | } 
\hline \t

Question 16

Bad debt expense and share-based compensation expense must be added to net income to determine cash flows from operations under the indirect method.

Accepted Answer

A) True 
 B)False

Question 17

Increases in current liabilities cause operating cash flows to be lower than accrual-basis net income.

Accepted Answer

A) True 
 B)False

Question 18

In its first year of operations, Badonna Corp. reported Income Tax Expense of $50,000 and Income Tax Payable of $16,000. At the end of the year, Badonna reported a noncurrent Deferred Tax Liability of $5,000. What is the amount of cash paid for income taxes during the year?

Accepted Answer

Income Tax Expense  @#LAT-DLM& @#LAT-DLM& @#LAT-DLM& @#LAT-DLM&$50,000

Question 19

Under the indirect method, which of the following would be subtracted from net income when determining net cash flows from operations?

Accepted Answer

A)  gain on the sale of a used truck 
B)  amortization expense 
C)  decrease in prepaid rent 
D)  increase in salaries payable 
A)  gain on the sale of a used truck 
B)  amortization expense 
C)  decrease in prepaid rent 
D)  increase in salaries payable

Question 20

The calculation of cash flows from investing activities on the statement of cash flows begins with net income.

Accepted Answer

A) True 
 B)False

The primary objective of the statement of cash flows is to ________.

In a statement of cash flows, the cash flows from investing activities section should report ________.

Which of the following is not a required disclosure item for the statement of cash flows?

A decrease in a liability generally results in an increase in cash.

Explain how the treatment of gains and losses on the sale of long-term assets differ between the indirect and direct methods when preparing the statement of cash flows.

List and briefly describe the various sections of the statement of cash flows.

When preparing the statement of cash flows using the indirect method, which of the following is added to net income to determine cash flows from operations?

Changes in current assets excluding cash are reflected in the operating activities section of the statement of cash flows.

In determining net cash flow from operating activities, an increase in merchandise inventory during a period ________.

Decreases in current assets cause operating cash flows to be higher than accrual-basis net income.

Bad debt expense and share-based compensation expense must be added to net income to determine cash flows from operations under the indirect method.

Increases in current liabilities cause operating cash flows to be lower than accrual-basis net income.

In its first year of operations, Badonna Corp. reported Income Tax Expense of $50,000 and Income Tax Payable of $16,000. At the end of the year, Badonna reported a noncurrent Deferred Tax Liability of $5,000. What is the amount of cash paid for income taxes during the year?

Under the indirect method, which of the following would be subtracted from net income when determining net cash flows from operations?

The calculation of cash flows from investing activities on the statement of cash flows begins with net income.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

Filters

Exam 22: The Statement of Cash Flows

The primary objective of the statement of cash flows is to ________.

In a statement of cash flows, the cash flows from investing activities section should report ________.

Which of the following is not a required disclosure item for the statement of cash flows?

A decrease in a liability generally results in an increase in cash.

Explain how the treatment of gains and losses on the sale of long-term assets differ between the indirect and direct methods when preparing the statement of cash flows.

List and briefly describe the various sections of the statement of cash flows.

When preparing the statement of cash flows using the indirect method, which of the following is added to net income to determine cash flows from operations?

Changes in current assets excluding cash are reflected in the operating activities section of the statement of cash flows.

In determining net cash flow from operating activities, an increase in merchandise inventory during a period ________.

Decreases in current assets cause operating cash flows to be higher than accrual-basis net income.

Bad debt expense and share-based compensation expense must be added to net income to determine cash flows from operations under the indirect method.

Increases in current liabilities cause operating cash flows to be lower than accrual-basis net income.

In its first year of operations, Badonna Corp. reported Income Tax Expense of $50,000 and Income Tax Payable of $16,000. At the end of the year, Badonna reported a noncurrent Deferred Tax Liability of $5,000. What is the amount of cash paid for income taxes during the year?

Under the indirect method, which of the following would be subtracted from net income when determining net cash flows from operations?

The calculation of cash flows from investing activities on the statement of cash flows begins with net income.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

Filters