Question 1

Under the indirect method, net income is considered the primary source of cash from operating activities.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following adjustments would NOT be made to net income when computing cash from operating activities?

Accepted Answer

A)  add an increase in Accrued Interest Payable 
B)  deduct the purchase of store equipment 
C)  add the decrease in Merchandise Inventory 
D)  add the reduction in Accounts Receivable 
A)  add an increase in Accrued Interest Payable 
B)  deduct the purchase of store equipment 
C)  add the decrease in Merchandise Inventory 
D)  add the reduction in Accounts Receivable

Question 3

A statement of cash flows is prepared from the

Accepted Answer

A)  balance sheet from the beginning and the end of the period. 
B)  general journal. 
C)  accounts receivable ledger. 
D)  accounts payable ledger. 
A)  balance sheet from the beginning and the end of the period. 
B)  general journal. 
C)  accounts receivable ledger. 
D)  accounts payable ledger.

Question 4

If $10,000 was generated from operations, $4,000 used for investing activities, and $6,000 provided by financing activities, the cash balance must have increased by

Accepted Answer

A)  $6,000. 
B)  $8,000. 
C)  $12,000. 
D)  $20,000. 
A)  $6,000. 
B)  $8,000. 
C)  $12,000. 
D)  $20,000.

Question 5

Prepare a statement of cash flow for the year ended December 31, 20-B.

Accepted Answer

The answer of Prepare a statement of cash flow for...

Question 6

Match the terms with the definitions.
-A method of preparing the statement of cash flows in which the revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or paid for each item.

Accepted Answer

A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows 
A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows

Question 7

An example of a cash inflow from investing activities is

Accepted Answer

A)  interest received on loans. 
B)  the purchase of plant and equipment. 
C)  the sale of investments in equity securities. 
D)  the issuance of stock. 
A)  interest received on loans. 
B)  the purchase of plant and equipment. 
C)  the sale of investments in equity securities. 
D)  the issuance of stock.

Question 8

The accuracy of the statement of cash flows can be verified by computing the change in the balance of the cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 9

Transactions involving the purchase and sale of long-term assets, investing in equity securities, lending money, and collecting the principal on related loans are called

Accepted Answer

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

Question 10

(Appendix) The following information is from the 20-B and 20-A financial statements for Bay Village Paving Company.
Income statement data:   ​
Required:
Compute the amount of cash paid for operating expenses in 20-B.

Accepted Answer

The answer of (Appendix) The following information is from the...

Question 11

Under the direct and indirect methods of reporting the statement of cash flows, only

Accepted Answer

A)  the operating activities section is different. 
B)  the financing activities section is different. 
C)  the investing activities section is different. 
D)  the operating and financing activities sections are different. 
A)  the operating activities section is different. 
B)  the financing activities section is different. 
C)  the investing activities section is different. 
D)  the operating and financing activities sections are different.

Question 12

Match the terms with the definitions.
-Transactions and events associated with selling a product or providing a service. They are related to the revenues and expenses reported on the income statement.

Accepted Answer

A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows 
A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows

Question 13

(Appendix) The following activities took place at Austin Company during the most recent year. Indicate whether each activity is a cash inflow (+) or cash outflow (−) and whether it is an operating (O), investing (I), or financing (F) activity.

Accepted Answer

The answer of (Appendix) The following activities took place at...

Question 14

An example of a cash inflow from financing activities is

Accepted Answer

A)  the sale of common stock. 
B)  interest paid on notes payable. 
C)  payment for additional inventory. 
D)  buying debt and equity securities. 
A)  the sale of common stock. 
B)  interest paid on notes payable. 
C)  payment for additional inventory. 
D)  buying debt and equity securities.

Question 15

Under the indirect method, Depreciation Expense must be added to net income when computing cash from operating activities.

Accepted Answer

A) True 
 B)False

Question 16

If dividends begin to exceed the cash generated from operating activities, it could imply that the business is about to liquidate.

Accepted Answer

A) True 
 B)False

Question 17

(Appendix) Under the direct method, each line of the income statement is converted to cash paid or received.

Accepted Answer

A) True 
 B)False

Question 18

The sum of the cash generated or used by each section of the statement of cash flows should equal the difference between the beginning and ending balance of the cash and cash equivalent accounts.

Accepted Answer

A) True 
 B)False

Question 19

(Appendix) To determine the cash generated from operating activities under the direct method, cost of goods sold must be adjusted to reflect the cash paid to suppliers for merchandise.

Accepted Answer

A) True 
 B)False

Question 20

Match the terms with the definitions.
-Transactions dealing with the exchange of cash between the company and its owners (stockholders) and creditors.

Accepted Answer

A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows 
A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows

Exam 23: Statement of Cash Flows

Under the indirect method, net income is considered the primary source of cash from operating activities.

Which of the following adjustments would NOT be made to net income when computing cash from operating activities?

A statement of cash flows is prepared from the

If $10,000 was generated from operations, $4,000 used for investing activities, and $6,000 provided by financing activities, the cash balance must have increased by

Prepare a statement of cash flow for the year ended December 31, 20-B.

Match the terms with the definitions. -A method of preparing the statement of cash flows in which the revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or paid for each item.

An example of a cash inflow from investing activities is

The accuracy of the statement of cash flows can be verified by computing the change in the balance of the cash and cash equivalents.

Transactions involving the purchase and sale of long-term assets, investing in equity securities, lending money, and collecting the principal on related loans are called

(Appendix) The following information is from the 20-B and 20-A financial statements for Bay Village Paving Company. Income statement data: ​ Required: Compute the amount of cash paid for operating expenses in 20-B.

Under the direct and indirect methods of reporting the statement of cash flows, only

Match the terms with the definitions. -Transactions and events associated with selling a product or providing a service. They are related to the revenues and expenses reported on the income statement.

(Appendix) The following activities took place at Austin Company during the most recent year. Indicate whether each activity is a cash inflow (+) or cash outflow (−) and whether it is an operating (O), investing (I), or financing (F) activity.

An example of a cash inflow from financing activities is

Under the indirect method, Depreciation Expense must be added to net income when computing cash from operating activities.

If dividends begin to exceed the cash generated from operating activities, it could imply that the business is about to liquidate.

(Appendix) Under the direct method, each line of the income statement is converted to cash paid or received.

The sum of the cash generated or used by each section of the statement of cash flows should equal the difference between the beginning and ending balance of the cash and cash equivalent accounts.

(Appendix) To determine the cash generated from operating activities under the direct method, cost of goods sold must be adjusted to reflect the cash paid to suppliers for merchandise.

Match the terms with the definitions. -Transactions dealing with the exchange of cash between the company and its owners (stockholders) and creditors.

Introduction to Accounting

Analyzing Transactions: the Accounting Equation

The Double-Entry Framework

Journalizing and Posting Transactions

Adjusting Entries and the Work Sheet

Financial Statements and the Closing Process

Accounting for Cash

Payroll Accounting: Employee Earnings and Deductions

Payroll Accounting: Employer Taxes and Reports

Accounting for Sales and Cash Receipts

Accounting for Purchases and Cash Payments

Special Journals

Accounting for Merchandise Inventory

Adjustments and the Work Sheet for a Merchandising Business

Financial Statements and Year-End Accounting for a Merchandising Business

Accounting for Accounts Receivable

Accounting for Notes and Interest

Accounting for Long-Term Assets

Accounting for Partnerships

Corporations: Organization and Capital Stocks

Corporations: Earnings, Taxes, Distributions, and the Retained Earnings Statement

Corporations: Bonds

Analysis of Financial Statements

Departmental Accounting

Manufacturing Accounting: The Job Order Cost System

Manufacturing Accounting: The Work Sheet and Financial Statements

Filters

(Appendix) The following information is from the 20-B and 20-A financial statements for Bay Village Paving Company. Income statement data: Required: Compute the amount of cash paid for operating expenses in 20-B.