Question 1

Cash flows from investing activities on the statement of cash flows include receipts of cash from the sale of investments and from issuing bonds.

Accepted Answer

A) True 
 B)False

Question 2

On the statement of cash flows, cash receipts of dividends are classified as investing activities under U.S. GAAP.

Accepted Answer

A) True 
 B)False

Question 3

Under U.S. GAAP, which of the following may be included in the financing activities section of the cash flow statement?

Accepted Answer

A)  receipt of dividends 
B)  payment of dividends 
C)  receipt of interest 
D)  payment of interest 
A)  receipt of dividends 
B)  payment of dividends 
C)  receipt of interest 
D)  payment of interest

Question 4

Larkin Company reported net income of $500,000 for the current year. Included in the computation of net income were:
 $$\begin{array} { | l | r | } 
\hline \text { Depreciation expense } & \$ 100,000 \
\hline \text { Amortization of a patent } & 30,000 \
\hline \text { Income from an equity-method investment } & 50,000 \
\hline \text { Dividend received from equity-method investment } & 5,000 \
\hline \text { Amortization of a bond discount } & 40,000 \
\hline \text { Paid a dividend on preferred stock } & 80,000 \
\hline
\end{array}$$ 
What is the amount of net cash provided by operating activities that would be reported as a result of these transactions?

Accepted Answer

Net income  @#LAT-DLM& @#LAT-DLM& @#LAT-DLM& @#LAT-DLM& @#LAT-DLM& @#LAT-DLM&  @#LAT-DLM& @#LAT-DLM&@#LAT-DLM&$500,000
+ Depreciat

Question 5

When computing cash interest paid under the direct method, firms subtract the sum of bond discount amortization and the increase in interest payable from interest expense.

Accepted Answer

A) True 
 B)False

Question 6

Changes in current liabilities are reflected in the financing activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not treated differently for the direct and indirect methods of reporting cash flows on the statement of cash flows?

Accepted Answer

A)  share based compensation 
B)  bad debts expense 
C)  unrealized gains or losses for available-for-sale securities 
D)  income from equity method investment 
A)  share based compensation 
B)  bad debts expense 
C)  unrealized gains or losses for available-for-sale securities 
D)  income from equity method investment

Question 8

Disclosures about noncash financing and investing activities must be presented in a summary schedule below the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 9

Under the direct method, bad debt expense is ignored because it is a noncash expense.

Accepted Answer

A) True 
 B)False

Question 10

On the statement of cash flows, cash payments of the principal portion of promissory notes are classified as financing activities.

Accepted Answer

A) True 
 B)False

Question 11

Income from equity method investments must be added to net income to determine cash flows from operations under the indirect method.

Accepted Answer

A) True 
 B)False

Question 12

A company reconciles net income to net cash flow from operating activities when using the direct method.

Accepted Answer

A) True 
 B)False

Question 13

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash flows from operating activities?

Accepted Answer

A)  gain on sale of long-term asset 
B)  decrease in deferred tax liability 
C)  bond discount amortization 
D)  All of the above 
A)  gain on sale of long-term asset 
B)  decrease in deferred tax liability 
C)  bond discount amortization 
D)  All of the above

Question 14

How is net income adjusted for pension costs under the indirect method of preparing the statement of cash flows?

Accepted Answer

A)  If pension expense is greater than the amount funded, the difference between the two is added to net income. 
B)  If pension expense is less than the amount funded, the difference between the two is added to net income. 
C)  If pension expense is greater than the amount funded, the sum of the two is added to net income. 
D)  If pension expense is less than the amount funded, the sum of the two is added to net income. 
A)  If pension expense is greater than the amount funded, the difference between the two is added to net income. 
B)  If pension expense is less than the amount funded, the difference between the two is added to net income. 
C)  If pension expense is greater than the amount funded, the sum of the two is added to net income. 
D)  If pension expense is less than the amount funded, the sum of the two is added to net income.

Question 15

Changes in which of the following are included in financing activities on the statement of cash flows?

Accepted Answer

A)  accounts payable 
B)  bonds payable 
C)  accounts receivable 
D)  property, plant, and equipment 
A)  accounts payable 
B)  bonds payable 
C)  accounts receivable 
D)  property, plant, and equipment

Question 16

When preparing the statement of cash flows, IFRS will allow companies to classify some cash flows classified as investing or financing activities under U.S. GAAP as operating activities under IFRS.

Accepted Answer

A) True 
 B)False

Question 17

Svengool Inc. financial statements included the following amounts for the current year: $$\begin{array} {| l | r |} 
\hline \text { Retired bonds } & \$ 68,000 \
\hline \text { Proceeds from collection of note receivable } & 40,000 \
\hline \text { Dividends received } & 11,000 \
\hline \text { Acquired production machinery } & 59,000 \
\hline \text { Sold treasury stock } & 42,000 \
\hline
\end{array}$$ 
Based on this information, what is the amount of net cash flows from financing activities?

Accepted Answer

A)  $110,000 net inflow 
B)  $93,000 net inflow 
C)  $42,000 net outflow 
D)  $26,000 net outflow 
A)  $110,000 net inflow 
B)  $93,000 net inflow 
C)  $42,000 net outflow 
D)  $26,000 net outflow

Question 18

In 2019, BayKing Company sold used equipment for $20,000. The equipment had an original cost of $90,000 and accumulated depreciation as of the date of sale was $69,000. BayKing also purchased held-to-maturity securities for $7,000. What is the gain or loss on the sale of the equipment?

Accepted Answer

A)  $14,000 loss 
B)  $34,000 gain 
C)  $1,000 loss 
D)  $21,000 gain 
A)  $14,000 loss 
B)  $34,000 gain 
C)  $1,000 loss 
D)  $21,000 gain

Question 19

The indirect method of formatting the statement of cash flow is also referred to as the income statement format.

Accepted Answer

A) True 
 B)False

Question 20

On the statement of cash flows, cash flows from investing activities should include ________.

Accepted Answer

A)  the factoring of accounts receivable 
B)  the receipt of stock dividends 
C)  the issuance of common stock in exchange for land 
D)  the major repair of a fixed asset 
A)  the factoring of accounts receivable 
B)  the receipt of stock dividends 
C)  the issuance of common stock in exchange for land 
D)  the major repair of a fixed asset

Exam 22: The Statement of Cash Flows

Cash flows from investing activities on the statement of cash flows include receipts of cash from the sale of investments and from issuing bonds.

On the statement of cash flows, cash receipts of dividends are classified as investing activities under U.S. GAAP.

Under U.S. GAAP, which of the following may be included in the financing activities section of the cash flow statement?

When computing cash interest paid under the direct method, firms subtract the sum of bond discount amortization and the increase in interest payable from interest expense.

Changes in current liabilities are reflected in the financing activities section of the statement of cash flows.

Which of the following is not treated differently for the direct and indirect methods of reporting cash flows on the statement of cash flows?

Disclosures about noncash financing and investing activities must be presented in a summary schedule below the statement of cash flows.

Under the direct method, bad debt expense is ignored because it is a noncash expense.

On the statement of cash flows, cash payments of the principal portion of promissory notes are classified as financing activities.

Income from equity method investments must be added to net income to determine cash flows from operations under the indirect method.

A company reconciles net income to net cash flow from operating activities when using the direct method.

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash flows from operating activities?

How is net income adjusted for pension costs under the indirect method of preparing the statement of cash flows?

Changes in which of the following are included in financing activities on the statement of cash flows?

When preparing the statement of cash flows, IFRS will allow companies to classify some cash flows classified as investing or financing activities under U.S. GAAP as operating activities under IFRS.

In 2019, BayKing Company sold used equipment for $20,000. The equipment had an original cost of $90,000 and accumulated depreciation as of the date of sale was $69,000. BayKing also purchased held-to-maturity securities for $7,000. What is the gain or loss on the sale of the equipment?

The indirect method of formatting the statement of cash flow is also referred to as the income statement format.

On the statement of cash flows, cash flows from investing activities should include ________.

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

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