Question 1

Which of the following adjustments would be in error if made to net income when computing cash from operations using the indirect method?

Accepted Answer

A) Add an increase in Accounts Payable 
B) Add Depreciation Expense 
C) Add an increase in Accounts Receivable 
D) None of the above 
A) Add an increase in Accounts Payable 
B) Add Depreciation Expense 
C) Add an increase in Accounts Receivable 
D) None of the above

Question 2

If $200,000 of a company's own stock is sold,it is shown in the investing activities section.

Accepted Answer

A) True 
 B)False

Question 3

Operating expenses other than depreciation expense for the year were $335,000.Prepaid expenses increased by $7,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

A) $335,000. 
B) $342,000. 
C) $328,000. 
D) $7,000. 
A) $335,000. 
B) $342,000. 
C) $328,000. 
D) $7,000.

Question 4

Carmen's Candies' Net Income was $40,000.Other accounts that changed included: Accounts Receivable decreased by $30,000;Merchandise Inventory increased by $20,000;Accounts Payable increased by $4,000;and Salaries Payable increased by $1,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Accepted Answer

A) $33,000. 
B) $47,000. 
C) $55,000. 
D) $61,000. 
A) $33,000. 
B) $47,000. 
C) $55,000. 
D) $61,000.

Question 5

Depreciation Expense is reported on the statement of cash flows only when using the direct method of preparing a statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

According to GAAP,the statement of cash flows is one of four major financial statements.

Accepted Answer

A) True 
 B)False

Question 7

Carolina Company sold a machine for $13,000 cash,which had an original cost of $19,000 and accumulated depreciation of $6,000.The amount of cash provided by this sale is:

Accepted Answer

A) $12,000. 
B) $13,000. 
C) $18,000. 
D) $19,000. 
A) $12,000. 
B) $13,000. 
C) $18,000. 
D) $19,000.

Question 8

Under the direct method of the statement of cash flows,cash paid for salaries would result in:

Accepted Answer

A) a decrease of cash flow from operating activities. 
B) a decrease of cash flow from investing activities. 
C) an increase of cash flow from financing activities. 
D) a decrease of cash flow from financing activities. 
A) a decrease of cash flow from operating activities. 
B) a decrease of cash flow from investing activities. 
C) an increase of cash flow from financing activities. 
D) a decrease of cash flow from financing activities.

Question 9

The balance of Supplies has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

Accepted Answer

A) It is already included in the net income. 
B) It would affect the operations section positively. 
C) It would affect the operations section negatively. 
D) Does not affect the cash flow from operations. 
A) It is already included in the net income. 
B) It would affect the operations section positively. 
C) It would affect the operations section negatively. 
D) Does not affect the cash flow from operations.

Question 10

An outflow of cash from investing activities would be:

Accepted Answer

A) the issuance of stock. 
B) the sale of investment in equity securities. 
C) interest received on loans. 
D) the purchase of fixed assets. 
A) the issuance of stock. 
B) the sale of investment in equity securities. 
C) interest received on loans. 
D) the purchase of fixed assets.

Question 11

When preparing the statement of cash flows by the indirect method,if an accrued payable decreases,the difference is:

Accepted Answer

A) added to net income. 
B) added to investments. 
C) deducted from net income. 
D) not considered in the statement of cash flows using the indirect method. 
A) added to net income. 
B) added to investments. 
C) deducted from net income. 
D) not considered in the statement of cash flows using the indirect method.

Question 12

The net income reported on the income statement for the current year was $40,000.Depreciation Expense recorded on fixed assets was $21,000.What is the net cash flow from operations that would appear on a cash flow statement using the indirect method?

Accepted Answer

A) $40,000 
B) $61,000 
C) $21,000 
D) $19,000 
A) $40,000 
B) $61,000 
C) $21,000 
D) $19,000

Question 13

To determine cash received from customers for the cash flow statement using the direct method,an increase in accounts receivable is added to sales.

Accepted Answer

A) True 
 B)False

Question 14

The following information is given for Sunny Corporation:
 $$\begin{array} { l r } 
\text { Net income } & \$ 40,000 \
\text { Depreciation expense } & 6,000 \
\text { Decrease in accounts receivable } & 5,000 \
\text { Increase in supplies on hand } & 2,000 \
\text { Sale of common stock } & 40,000 \
\text { Purchase of equipment for cash } & 40,000 \
\text { Payment of dividends } & 6,000 \
\text { Increase in accounts payable } & 5,000
\end{array}$$ 
The indirect method is used.The beginning Cash balance is $23,000.
Required:
Answer the following questions with the information provided above.
a)The cash flow from operating activities is ________.
b)The cash flow from investing activities is ________.
c)The cash flow from financing activities is ________.
d)The net change in cash is ________.
e)The ending balance of cash is ________.

Accepted Answer

a)$40,000 + 6,000 + 5,000 - 2,

Question 15

Which of the following is reported in the statement of cash flows?

Accepted Answer

A) net cash flow from managing activities 
B) net cash flow from illegal activities 
C) net cash flow from start-up activities 
D) net cash flow from financing activities 
A) net cash flow from managing activities 
B) net cash flow from illegal activities 
C) net cash flow from start-up activities 
D) net cash flow from financing activities

Question 16

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { Col 1 } \
\text { Operating } \
\text { Direct }
\end{array} & \begin{array} { c } 
\text { Col 2 } \
\text { Operating } \
\text { Indirect }
\end{array} & \begin{array} { c } 
\text { Col 3 } \
\text { Investing }
\end{array} & \begin{array} { c } 
\text { Col 4 } \
\text { Financing }
\end{array} \
\hline \text { Sale of land } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 17

The difference between the direct and indirect methods of computing the cash flow statement occurs in the:

Accepted Answer

A) financing activities section. 
B) operating activities section. 
C) investing activities section. 
D) managing activities section. 
A) financing activities section. 
B) operating activities section. 
C) investing activities section. 
D) managing activities section.

Question 18

If 2,000 shares of stock were sold for $10 per share,cash flow from financing activities would increase $20,000.

Accepted Answer

A) True 
 B)False

Question 19

An example of operating activities is the payment of dividends.

Accepted Answer

A) True 
 B)False

Question 20

The activity that is probably the most important indicator of financial health is the net cash flow from:

Accepted Answer

A) buying and selling activities. 
B) financing activities. 
C) operating activities. 
D) investing activities. 
A) buying and selling activities. 
B) financing activities. 
C) operating activities. 
D) investing activities.

Exam 21: Statement of Cash Flows

Which of the following adjustments would be in error if made to net income when computing cash from operations using the indirect method?

If $200,000 of a company's own stock is sold,it is shown in the investing activities section.

Operating expenses other than depreciation expense for the year were $335,000.Prepaid expenses increased by $7,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Depreciation Expense is reported on the statement of cash flows only when using the direct method of preparing a statement of cash flows.

According to GAAP,the statement of cash flows is one of four major financial statements.

Carolina Company sold a machine for $13,000 cash,which had an original cost of $19,000 and accumulated depreciation of $6,000.The amount of cash provided by this sale is:

Under the direct method of the statement of cash flows,cash paid for salaries would result in:

The balance of Supplies has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

An outflow of cash from investing activities would be:

When preparing the statement of cash flows by the indirect method,if an accrued payable decreases,the difference is:

The net income reported on the income statement for the current year was $40,000.Depreciation Expense recorded on fixed assets was $21,000.What is the net cash flow from operations that would appear on a cash flow statement using the indirect method?

To determine cash received from customers for the cash flow statement using the direct method,an increase in accounts receivable is added to sales.

Which of the following is reported in the statement of cash flows?

The difference between the direct and indirect methods of computing the cash flow statement occurs in the:

If 2,000 shares of stock were sold for $10 per share,cash flow from financing activities would increase $20,000.

An example of operating activities is the payment of dividends.

The activity that is probably the most important indicator of financial health is the net cash flow from:

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: the Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes:

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property,plant,equipment,and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values,dividends,treasury Stocks,

Corporations and Bonds Payable

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

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