Question 1

Free cash flow is cash from operating activities less dividends.

Accepted Answer

A) True 
 B)False

Question 2

Peninsula Company reported net income of $290,000 for the year. During the year, accounts receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expense of $45,000 was recorded. Net cash provided by operating activities for the year is

Accepted Answer

A) $305,000. 
B) $275,000. 
C) $257,000. 
D) $290,000. 
A) $305,000. 
B) $275,000. 
C) $257,000. 
D) $290,000.

Question 3

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

Accepted Answer

A) deducted from net income. 
B) added to net income. 
C) ignored because it does not affect income. 
D) ignored because it does not affect expenses. 
A) deducted from net income. 
B) added to net income. 
C) ignored because it does not affect income. 
D) ignored because it does not affect expenses.

Question 4

On the statement of cash flows, the cash flows from operating activities section would be affected by

Accepted Answer

A) receipts from the issuance of capital stock. 
B) receipts from the sale of investments. 
C) payments for the acquisition of investments. 
D) cash receipts from sales activities. 
A) receipts from the issuance of capital stock. 
B) receipts from the sale of investments. 
C) payments for the acquisition of investments. 
D) cash receipts from sales activities.

Question 5

A statement of cash flows indicates the sources and uses of cash during a period.

Accepted Answer

A) True 
 B)False

Question 6

If a company reports a net loss, it

Accepted Answer

A) may still have a net increase in cash. 
B) will not be able to pay cash dividends. 
C) will not be able to get a loan. 
D) will not be able to make capital expenditures. 
A) may still have a net increase in cash. 
B) will not be able to pay cash dividends. 
C) will not be able to get a loan. 
D) will not be able to make capital expenditures.

Question 7

In Jackson Jones Company, land decreased $270,000 because of a cash sale for $270,000, the equipment account increased $90,000 as a result of a cash purchase, and Bonds Payable increased $300,000 from issuance for cash at face value. The net cash provided by investing activities is

Accepted Answer

A) $270,000. 
B) $480,000. 
C) $180,000. 
D) $210,000. 
A) $270,000. 
B) $480,000. 
C) $180,000. 
D) $210,000.

Question 8

During 2017, Ecuyer Industries reported cash provided by operations of $794,000, cash used in investing of $686,000, and cash used in financing of $190,000. In addition, cash spent for fixed assets during the period was $276,000. Average current liabilities were $650,000 and average total liabilities were $1,716,000. No dividends were paid. Based on this information, what was Ecuyer's free cash flow?

Accepted Answer

A) ($144,000). 
B) $108,000. 
C) $518,000. 
D) ($604,000). 
A) ($144,000). 
B) $108,000. 
C) $518,000. 
D) ($604,000).

Question 9

If a company has both an inflow and outflow of cash related to property, plant, and equipment, the ______________ in the investing activities section.

Accepted Answer

A) two cash effects must be netted and presented as one item 
B) cash inflow and cash outflow must be reported separately 
C) cash outflow is only is presented 
D) cash inflow and cash outflow can either be reported separately or presented as one item 
A) two cash effects must be netted and presented as one item 
B) cash inflow and cash outflow must be reported separately 
C) cash outflow is only is presented 
D) cash inflow and cash outflow can either be reported separately or presented as one item

Question 10

Which of the following would be added to net income using the indirect method?

Accepted Answer

A) An increase in accounts receivable. 
B) An increase in prepaid expenses. 
C) Depreciation expense. 
D) A decrease in accounts payable. 
A) An increase in accounts receivable. 
B) An increase in prepaid expenses. 
C) Depreciation expense. 
D) A decrease in accounts payable.

Question 11

Using the indirect method, patent amortization expense for the period

Accepted Answer

A) is deducted from net income. 
B) causes cash to increase. 
C) causes cash to decrease. 
D) is added to net income. 
A) is deducted from net income. 
B) causes cash to increase. 
C) causes cash to decrease. 
D) is added to net income.

Question 12

If a gain of $225,000 is incurred in selling (for cash) a building having a book value of $900,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

A) $675,000. 
B) $900,000. 
C) $1,125,000. 
D) $225,000. 
A) $675,000. 
B) $900,000. 
C) $1,125,000. 
D) $225,000.

Question 13

Seachest Company reports the following:   If cost of goods sold for the year is $240,000, the amount of cash paid to suppliers using the direct method is

Accepted Answer

A) $245,000. 
B) $235,000. 
C) $205,000. 
D) $280,000. 
A) $245,000. 
B) $235,000. 
C) $205,000. 
D) $280,000.

Question 14

Land costing $125,000 was sold for $355,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

Accepted Answer

A) $155,000. 
B) $355,000. 
C) $310,000. 
D) $230,000. 
A) $155,000. 
B) $355,000. 
C) $310,000. 
D) $230,000.

Question 15

Which of the following statements concerning the statement of cash flows is true?

Accepted Answer

A) The statement of cash flows is usually more accurate when using the indirect method. 
B) If the direct method is used, a supplementary schedule reconciling the net income to net cash from operating activities must still be provided. 
C) The statement of cash flows reflects both earnings per share and cash per share. 
D) The statement of cash flows is an optional financial statement for external reporting purposes. 
A) The statement of cash flows is usually more accurate when using the indirect method. 
B) If the direct method is used, a supplementary schedule reconciling the net income to net cash from operating activities must still be provided. 
C) The statement of cash flows reflects both earnings per share and cash per share. 
D) The statement of cash flows is an optional financial statement for external reporting purposes.

Question 16

Under the indirect method, gains and losses from the sale of equipment used in operations would be included in the cash flows from operating activities section on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 17

Colie Company had an increase in inventory of $120,000. The cost of goods sold was $560,000. There was a $30,000 decrease in accounts payable from the prior period. Using the direct method of reporting cash flows from operating activities, what were Colie's cash payments to suppliers?

Accepted Answer

A) $710,000. 
B) $650,000. 
C) $440,000. 
D) $380,000. 
A) $710,000. 
B) $650,000. 
C) $440,000. 
D) $380,000.

Question 18

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is not emphasized.

Accepted Answer

A) True 
 B)False

Question 19

Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, dividends received on securities held would be reported on the statement of cash flows.

Accepted Answer

A) Operating activities section. 
B) Investing activities section. 
C) Financing activities section. 
D) Does not represent a cash flow. 
A) Operating activities section. 
B) Investing activities section. 
C) Financing activities section. 
D) Does not represent a cash flow.

Question 20

Significant noncash transactions would not include

Accepted Answer

A) conversion of bonds into common stock. 
B) asset acquisition through bond issuance. 
C) treasury stock acquisition. 
D) exchange of plant assets. 
A) conversion of bonds into common stock. 
B) asset acquisition through bond issuance. 
C) treasury stock acquisition. 
D) exchange of plant assets.

Exam 11: Statement of Cash Flows

Free cash flow is cash from operating activities less dividends.

Peninsula Company reported net income of $290,000 for the year. During the year, accounts receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expense of $45,000 was recorded. Net cash provided by operating activities for the year is

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

On the statement of cash flows, the cash flows from operating activities section would be affected by

A statement of cash flows indicates the sources and uses of cash during a period.

If a company reports a net loss, it

In Jackson Jones Company, land decreased $270,000 because of a cash sale for $270,000, the equipment account increased $90,000 as a result of a cash purchase, and Bonds Payable increased $300,000 from issuance for cash at face value. The net cash provided by investing activities is

If a company has both an inflow and outflow of cash related to property, plant, and equipment, the ______________ in the investing activities section.

Which of the following would be added to net income using the indirect method?

Using the indirect method, patent amortization expense for the period

If a gain of $225,000 is incurred in selling (for cash) a building having a book value of $900,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Seachest Company reports the following: If cost of goods sold for the year is $240,000, the amount of cash paid to suppliers using the direct method is

Land costing $125,000 was sold for $355,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

Which of the following statements concerning the statement of cash flows is true?

Under the indirect method, gains and losses from the sale of equipment used in operations would be included in the cash flows from operating activities section on the statement of cash flows.

Colie Company had an increase in inventory of $120,000. The cost of goods sold was $560,000. There was a $30,000 decrease in accounts payable from the prior period. Using the direct method of reporting cash flows from operating activities, what were Colie's cash payments to suppliers?

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is not emphasized.

Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, dividends received on securities held would be reported on the statement of cash flows.

Significant noncash transactions would not include

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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