Question 1

Under certain conditions, an investment in common stock can be considered a cash equivalent.

Accepted Answer

A) True 
 B)False

Question 2

In terms of the statement of cash flows, cash includes actual cash items plus certain cash equivalents such as commercial paper, money market funds, and Treasury bills.

Accepted Answer

A) True 
 B)False

Question 3

The cash flow adequacy ratio can only be calculated if a company uses the direct method to report cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 4

Presented below is the operating activities section of the statement of cash flows for Golden Consulting for 2016:   Which method of preparing the operating activities section has Golden Consulting used?

Accepted Answer

A) The direct method. 
B) The indirect method. 
C) Either method. 
D) Cannot be determined without further information. 
A) The direct method. 
B) The indirect method. 
C) Either method. 
D) Cannot be determined without further information.

Question 5

The financial statement that primarily reflects events related to the operating activities of a business, or the selling of products or providing services is the .

Accepted Answer

The answer of The financial statement that primarily reflects events...

Question 6

Use the information below for Flora Inc.for 2015 and 2016 to answer the following question.   During 2016, Flora Inc.sold equipment with a cost of $30,000 and accumulated depreciation of $25,000.A gain of $3,000 was recognized on the sale of the equipment This was the only equipment sale during the year.
What was depreciation expense for 2016?

Accepted Answer

A) $ 9,000 
B) $16,000 
C) $21,000 
D) $30,000 
A) $ 9,000 
B) $16,000 
C) $21,000 
D) $30,000

Question 7

When using the indirect method, how would the declaration and payment of cash dividends be shown on the statement of cash flows?

Accepted Answer

A) Operating activities 
B) Investing activities 
C) Financing activities 
D) Noncash investing and financing activity 
A) Operating activities 
B) Investing activities 
C) Financing activities 
D) Noncash investing and financing activity

Question 8

Which of the following items is not a cash equivalent?

Accepted Answer

A) Commercial paper 
B) A three-year Treasury note purchased two months before its maturity 
C) Money market funds 
D) A corporate bond investment which has 5 years until maturity when they are purchased 
A) Commercial paper 
B) A three-year Treasury note purchased two months before its maturity 
C) Money market funds 
D) A corporate bond investment which has 5 years until maturity when they are purchased

Question 9

Which of the following statements is true?

Accepted Answer

A) If a company reports net income on its income statement, it should report an increase in cash on its statement of cash flows. 
B) If a company reports a net loss on its income statement, it should report a decrease in cash on its statement of cash flows. 
C) If a company uses the accrual basis of accounting, it will improve its cash position if it reports net income for the same period. 
D) If a company uses the accrual basis of accounting, its cash balance can increase even if it reports a net loss. 
A) If a company reports net income on its income statement, it should report an increase in cash on its statement of cash flows. 
B) If a company reports a net loss on its income statement, it should report a decrease in cash on its statement of cash flows. 
C) If a company uses the accrual basis of accounting, it will improve its cash position if it reports net income for the same period. 
D) If a company uses the accrual basis of accounting, its cash balance can increase even if it reports a net loss.

Question 10

Which of the following statements is true?

Accepted Answer

A) The method of preparing the operating activities section of a statement of cash flows which adjusts net income to remove the effects of deferrals and accruals for revenues and expenses is the direct method. 
B) The method of preparing the operating activities section of a statement of cash flows which reports major classes of gross cash receipts and cash payments for revenues and expenses is the indirect method. 
C) The FASB prefers the indirect method of preparing the operating activities section of the statement of cash flows. 
D) Most companies use the indirect method of preparing the operating activities section of the statement of cash flows. 
A) The method of preparing the operating activities section of a statement of cash flows which adjusts net income to remove the effects of deferrals and accruals for revenues and expenses is the direct method. 
B) The method of preparing the operating activities section of a statement of cash flows which reports major classes of gross cash receipts and cash payments for revenues and expenses is the indirect method. 
C) The FASB prefers the indirect method of preparing the operating activities section of the statement of cash flows. 
D) Most companies use the indirect method of preparing the operating activities section of the statement of cash flows.

Question 11

Which of the following items would be considered a cash equivalent if it was held at the balance sheet date?

Accepted Answer

A) U.S.Treasury bill purchased when there were 90 days until maturity. 
B) Commercial paper with a 6-month maturity which was purchased at the issue date. 
C) The common stock of a company traded on the New York Stock Exchange which was purchased 30 days before the balance sheet date. 
D) U.S.Treasury note which matures 2 years after it is issued and which was purchased 4 months before the balance sheet date. 
A) U.S.Treasury bill purchased when there were 90 days until maturity. 
B) Commercial paper with a 6-month maturity which was purchased at the issue date. 
C) The common stock of a company traded on the New York Stock Exchange which was purchased 30 days before the balance sheet date. 
D) U.S.Treasury note which matures 2 years after it is issued and which was purchased 4 months before the balance sheet date.

Question 12

When using the indirect method, the gain from selling a long-term investment is recognized in which of the following?

Accepted Answer

A) In the operating activity section and the investing activity section of the statement of cash flows. 
B) In the financing activity section of the statement of cash flows. 
C) In the noncash investing or financing activity supplemental section of the statement of cash flows. 
D) Gains are not recognized in the statement of cash flows under the indirect method. 
A) In the operating activity section and the investing activity section of the statement of cash flows. 
B) In the financing activity section of the statement of cash flows. 
C) In the noncash investing or financing activity supplemental section of the statement of cash flows. 
D) Gains are not recognized in the statement of cash flows under the indirect method.

Question 13

Which of the following items is treated as a cash equivalent?

Accepted Answer

A) Commercial paper with a 6-month maturity when purchased and 4 months until maturity at the balance sheet date. 
B) Investment in corporate stocks which management intends to sell within 3 months after the balance sheet date. 
C) Money market funds which can be obtained overnight from a bank or brokerage firm. 
D) Investments in corporate bonds which have 5 years until maturity when they are purchased. 
A) Commercial paper with a 6-month maturity when purchased and 4 months until maturity at the balance sheet date. 
B) Investment in corporate stocks which management intends to sell within 3 months after the balance sheet date. 
C) Money market funds which can be obtained overnight from a bank or brokerage firm. 
D) Investments in corporate bonds which have 5 years until maturity when they are purchased.

Question 14

When using the indirect method, how is the issuing of stock for cash shown on the statement of cash flows?

Accepted Answer

A) Operating activity 
B) Investing activity 
C) Financing activity 
D) Non cash investing and financing activity 
A) Operating activity 
B) Investing activity 
C) Financing activity 
D) Non cash investing and financing activity

Question 15

Which of the following statements is true?

Accepted Answer

A) Investments in commercial paper or U.S.Treasury bills must be treated as cash equivalents. 
B) Investments in stock cannot be treated as cash equivalents because they are not convertible into a known amount of cash. 
C) Investments which are convertible into a known amount of cash and mature within three months after the balance sheet date are treated as cash equivalents. 
D) Investments in money market accounts cannot be treated as cash equivalents because they do not have a specific maturity date. 
A) Investments in commercial paper or U.S.Treasury bills must be treated as cash equivalents. 
B) Investments in stock cannot be treated as cash equivalents because they are not convertible into a known amount of cash. 
C) Investments which are convertible into a known amount of cash and mature within three months after the balance sheet date are treated as cash equivalents. 
D) Investments in money market accounts cannot be treated as cash equivalents because they do not have a specific maturity date.

Question 16

Where would you tell someone to find the information needed to compute the cash flow adequacy ratio?

Accepted Answer

A) the balance sheet only 
B) the statement of cash flows and the notes to the statements 
C) the statement of cash flows only 
D) the income statement only 
A) the balance sheet only 
B) the statement of cash flows and the notes to the statements 
C) the statement of cash flows only 
D) the income statement only

Question 17

All the information needed to compute the cash flow adequacy ratio is found on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

Under the direct method, depreciation expense is treated as an outflow in the Investing Activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 19

Each of the following transactions would be classified as either an investing or a financing activity except

Accepted Answer

A) investments in stock are purchased. 
B) a bank loan is obtained. 
C) stock is issued to acquire land. 
D) dividends are paid. 
A) investments in stock are purchased. 
B) a bank loan is obtained. 
C) stock is issued to acquire land. 
D) dividends are paid.

Question 20

activities involve long-term liabilities and stockholders' equity.

Accepted Answer

The answer of activities involve long-term liabilities and stockholders' equity....

Under certain conditions, an investment in common stock can be considered a cash equivalent.

In terms of the statement of cash flows, cash includes actual cash items plus certain cash equivalents such as commercial paper, money market funds, and Treasury bills.

The cash flow adequacy ratio can only be calculated if a company uses the direct method to report cash flows from operating activities.

Presented below is the operating activities section of the statement of cash flows for Golden Consulting for 2016: Which method of preparing the operating activities section has Golden Consulting used?

The financial statement that primarily reflects events related to the operating activities of a business, or the selling of products or providing services is the .

When using the indirect method, how would the declaration and payment of cash dividends be shown on the statement of cash flows?

Which of the following items is not a cash equivalent?

Which of the following statements is true?

Which of the following statements is true?

Which of the following items would be considered a cash equivalent if it was held at the balance sheet date?

When using the indirect method, the gain from selling a long-term investment is recognized in which of the following?

Which of the following items is treated as a cash equivalent?

When using the indirect method, how is the issuing of stock for cash shown on the statement of cash flows?

Which of the following statements is true?

Where would you tell someone to find the information needed to compute the cash flow adequacy ratio?

All the information needed to compute the cash flow adequacy ratio is found on the balance sheet.

Under the direct method, depreciation expense is treated as an outflow in the Investing Activities section of the statement of cash flows.

Each of the following transactions would be classified as either an investing or a financing activity except

activities involve long-term liabilities and stockholders' equity.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 12: The Statement of Cash Flows

Under certain conditions, an investment in common stock can be considered a cash equivalent.

In terms of the statement of cash flows, cash includes actual cash items plus certain cash equivalents such as commercial paper, money market funds, and Treasury bills.

The cash flow adequacy ratio can only be calculated if a company uses the direct method to report cash flows from operating activities.

Presented below is the operating activities section of the statement of cash flows for Golden Consulting for 2016: Which method of preparing the operating activities section has Golden Consulting used?

The financial statement that primarily reflects events related to the operating activities of a business, or the selling of products or providing services is the .

When using the indirect method, how would the declaration and payment of cash dividends be shown on the statement of cash flows?

Which of the following items is not a cash equivalent?

Which of the following statements is true?

Which of the following statements is true?

Which of the following items would be considered a cash equivalent if it was held at the balance sheet date?

When using the indirect method, the gain from selling a long-term investment is recognized in which of the following?

Which of the following items is treated as a cash equivalent?

When using the indirect method, how is the issuing of stock for cash shown on the statement of cash flows?

Which of the following statements is true?

Where would you tell someone to find the information needed to compute the cash flow adequacy ratio?

All the information needed to compute the cash flow adequacy ratio is found on the balance sheet.

Under the direct method, depreciation expense is treated as an outflow in the Investing Activities section of the statement of cash flows.

Each of the following transactions would be classified as either an investing or a financing activity except

activities involve long-term liabilities and stockholders' equity.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

Financial Statement Analysis

International Financial Reporting Standards

Filters