Question 1

The conceptual model for the statement of cash flows is based on which of the following equations?

Accepted Answer

A)  Cash Flows = Operating Activities + Financing Activities - Investing Activities 
B)  Net Income = Revenues - Expenses + Gains - Losses 
C)  Assets = Liabilities + Equity 
D)  Change in Retained Earnings = Net Income - Dividends 
A)  Cash Flows = Operating Activities + Financing Activities - Investing Activities 
B)  Net Income = Revenues - Expenses + Gains - Losses 
C)  Assets = Liabilities + Equity 
D)  Change in Retained Earnings = Net Income - Dividends

Question 2

Which of the following is not a required section of the cash flow statement?

Accepted Answer

A)  financing activities section 
B)  operating activities section 
C)  funding activities section 
D)  investing activities section 
A)  financing activities section 
B)  operating activities section 
C)  funding activities section 
D)  investing activities section

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 total net cash flows 
C)  all significant 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 total net cash flows 
C)  all significant noncash investing and financing activities 
D)  policy regarding cash equivalents

Question 4

Under the indirect method, bond discount amortization is subtracted from net income to arrive at operating cash flows.

Accepted Answer

A) True 
 B)False

Question 5

An acquisition of a plant asset financed by the issuance of long-term debt is not incorporated into the body of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

Under the indirect method, firms treat gains/losses from the sale of long-term assets as decreases/increases to net income in the operating activities section of the cash flow statement.

Accepted Answer

A) True 
 B)False

Question 7

All of the following would appear as significant noncash investing and financing transactions in the notes or supplementary schedules to the financial statements except ________.

Accepted Answer

A)  issuing preferred stock for cash 
B)  converting bonds into capital stock 
C)  exchanging land for a building 
D)  signing a capital finance lease 
A)  issuing preferred stock for cash 
B)  converting bonds into capital stock 
C)  exchanging land for a building 
D)  signing a capital finance lease

Question 8

A company borrows $10,000 and signs a 90-day nontrade note payable. How would this event be reflected in the statement of cash flows?

Accepted Answer

A)  cash outflow from investing activities 
B)  cash inflow from investing activities 
C)  cash outflow from financing activities 
D)  cash inflow from financing activities 
A)  cash outflow from investing activities 
B)  cash inflow from investing activities 
C)  cash outflow from financing activities 
D)  cash inflow from financing activities

Question 9

Which of the following sections of the statement of cash flows includes cash flows that relate to the acquisition and disposal of noncurrent assets?

Accepted Answer

A)  financing activities section 
B)  operating activities section 
C)  funding activities section 
D)  investing activities section 
A)  financing activities section 
B)  operating activities section 
C)  funding activities section 
D)  investing activities section

Question 10

How does IFRS differ from U.S. GAAP with respect to disclosures for the statement of cash flows?

Accepted Answer

IFRS does not require a reconciliation o

Question 11

Which of the following is not a cash inflow from investing activities?

Accepted Answer

A)  sale of fixed assets 
B)  collection of notes receivable 
C)  purchase of treasury stock 
D)  sale of held-to-maturity bond investment 
A)  sale of fixed assets 
B)  collection of notes receivable 
C)  purchase of treasury stock 
D)  sale of held-to-maturity bond investment

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

One purpose of the cash flow statement is to determine the firm's need for external financing.

Accepted Answer

A) True 
 B)False

Question 14

Volutia Corporation's comparative financial statements included the following amounts for the current year: $$\begin{array} { | l | r |} 
\hline \text { Depreciation expense } & \$ 102,000 \
\hline \text { Loss on sale of fixed assets } & 38,000 \
\hline \text { Decrease in fixed assets } & 155,000 \
\hline \text { Increase in accounts receivable } & 37,000 \
\hline \text { Decrease in accounts payable } & 42,000 \
\hline \text { Decrease in inventory } & 71,000 \
\hline \text { Increase in taxes payable } & 19,000 \
\hline \text { Net income } & 72,000 \
\hline
\end{array}$$ 
Compute net cash provided by operating activities using the indirect method.

Accepted Answer

A)  $223,000 
B)  $22,000 
C)  $185,000 
D)  $68,000 
A)  $223,000 
B)  $22,000 
C)  $185,000 
D)  $68,000

Question 15

Which of the following is not a cash flow disclosure required by IFRS?

Accepted Answer

A)  a reconciliation of net income to net cash provided by operations under the direct method 
B)  any cash balances that are held but not available for use 
C)  policy regarding cash equivalents 
D)  all significant noncash investing and financing activities 
A)  a reconciliation of net income to net cash provided by operations under the direct method 
B)  any cash balances that are held but not available for use 
C)  policy regarding cash equivalents 
D)  all significant noncash investing and financing activities

Question 16

The conceptual model for the statement of cash flows is based on the income statement equation.

Accepted Answer

A) True 
 B)False

Question 17

Volutia Corporation's comparative financial statements included the following amounts for the current year:
 $$\begin{array} { | l | r |} 
\hline \text { Depreciation expense } & \$ 102,000 \
\hline \text { Loss on sale of fixed assets } & 38,000 \
\hline \text { Decrease in fixed assets } & 155,000 \
\hline \text { Increase in accounts receivable } & 37,000 \
\hline \text { Decrease in accounts payable } & 42,000 \
\hline \text { Decrease in inventory } & 65,000 \
\hline \text { Increase in taxes payable } & 19,000 \
\hline \text { Net income } & 720,000 \
\hline
\end{array}$$ 
Prepare the operating activities section of the statement of cash flows using the indirect method.

Accepted Answer

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

Question 18

Under both U.S. GAAP and IFRS, bank overdrafts are netted against the other positive balances included in cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 19

Contrast the differences between the indirect method and the direct method for the statement of cash flows by explaining each.

Accepted Answer

The indirect method adjusts accrual-basi

Question 20

IFRS, but not U.S. GAAP, requires that companies disclose any cash balances that are held but not available for use.

Accepted Answer

A) True 
 B)False

Exam 22: The Statement of Cash Flows

The conceptual model for the statement of cash flows is based on which of the following equations?

Which of the following is not a required section of the cash flow statement?

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

Under the indirect method, bond discount amortization is subtracted from net income to arrive at operating cash flows.

An acquisition of a plant asset financed by the issuance of long-term debt is not incorporated into the body of the statement of cash flows.

Under the indirect method, firms treat gains/losses from the sale of long-term assets as decreases/increases to net income in the operating activities section of the cash flow statement.

All of the following would appear as significant noncash investing and financing transactions in the notes or supplementary schedules to the financial statements except ________.

A company borrows $10,000 and signs a 90-day nontrade note payable. How would this event be reflected in the statement of cash flows?

Which of the following sections of the statement of cash flows includes cash flows that relate to the acquisition and disposal of noncurrent assets?

How does IFRS differ from U.S. GAAP with respect to disclosures for the statement of cash flows?

Which of the following is not a cash inflow from investing activities?

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

One purpose of the cash flow statement is to determine the firm's need for external financing.

Which of the following is not a cash flow disclosure required by IFRS?

The conceptual model for the statement of cash flows is based on the income statement equation.

Under both U.S. GAAP and IFRS, bank overdrafts are netted against the other positive balances included in cash and cash equivalents.

Contrast the differences between the indirect method and the direct method for the statement of cash flows by explaining each.

IFRS, but not U.S. GAAP, requires that companies disclose any cash balances that are held but not available for use.

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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