Question 1

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

Accepted Answer

A) True 
 B)False  True

Question 2

Indicate where the issuance of common stock issued for cash would appear, if at all, on the indirect 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 C

Question 3

In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.

Accepted Answer

A) True 
 B)False  True

Question 4

Analysis of the changes in all of the noncash balance sheet accounts will explain the change in the cash account.

Accepted Answer

A) True 
 B)False

Question 5

Land acquired from the issuance of common stock is reported

Accepted Answer

A)  as a financing activity. 
B)  as an investing activity. 
C)  as an operating activity. 
D)  in a separate schedule at the bottom of the statement of cash flows. 
A)  as a financing activity. 
B)  as an investing activity. 
C)  as an operating activity. 
D)  in a separate schedule at the bottom of the statement of cash flows.

Question 6

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 7

Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

Accepted Answer

A) True 
 B)False

Question 8

The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.

Accepted Answer

A) True 
 B)False

Question 9

In addition to the three basic financial statements, which of the following is also a required financial statement?

Accepted Answer

A)  the "Cash Budget" 
B)  the Statement of Cash Flows 
C)  the Statement of Cash Inflows and Outflows 
D)  the "Cash Reconciliation" 
A)  the "Cash Budget" 
B)  the Statement of Cash Flows 
C)  the Statement of Cash Inflows and Outflows 
D)  the "Cash Reconciliation"

Question 10

Which of the following transactions would not be classified as a financing activity?

Accepted Answer

A)  Purchase of treasury stock 
B)  Payment of dividends 
C)  Issuance of bonds at a discount 
D)  Purchase of a long-term investment in bonds 
A)  Purchase of treasury stock 
B)  Payment of dividends 
C)  Issuance of bonds at a discount 
D)  Purchase of a long-term investment in bonds

Question 11

The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following would not be needed to determine net cash provided by operating activities?

Accepted Answer

A)  Depreciation expense 
B)  Change in accounts receivable 
C)  Payment of cash dividends 
D)  Change in prepaid expenses 
A)  Depreciation expense 
B)  Change in accounts receivable 
C)  Payment of cash dividends 
D)  Change in prepaid expenses

Question 13

In Lynne Company, there was an increase in the land account during the year of $43,000. Analysis reveals that the change resulted from a cash sale of land at cost $115,000, and a cash purchase of land for $158,000. In the statement of cash flows, the change in the land account should be reported in the investment section:

Accepted Answer

A)  as a net purchase of land, $43,000. 
B)  only as a purchase of land $158,000. 
C)  as a purchase of land $158,000 and a sale of land $115,000. 
D)  only as a sale of land $115,000. 
A)  as a net purchase of land, $43,000. 
B)  only as a purchase of land $158,000. 
C)  as a purchase of land $158,000 and a sale of land $115,000. 
D)  only as a sale of land $115,000.

Question 14

The third (final) step in preparing the statement of cash flows is to

Accepted Answer

A)  analyze changes in noncurrent asset and liability accounts. 
B)  compare the net change in cash with the change in the cash account reported on the balance sheet. 
C)  determine net cash provided by operating activities. 
D)  list the noncash activities. 
A)  analyze changes in noncurrent asset and liability accounts. 
B)  compare the net change in cash with the change in the cash account reported on the balance sheet. 
C)  determine net cash provided by operating activities. 
D)  list the noncash activities.

Question 15

In converting net income to net cash provided by operating activities, under the indirect method:

Accepted Answer

A)  decreases in accounts receivable and increases in prepaid expenses are added. 
B)  decreases in inventory and increases in accrued liabilities are added. 
C)  decreases in accounts payable and decreases in inventory are deducted. 
D)  increases in accounts receivable and increases in accrued liabilities are deducted. 
A)  decreases in accounts receivable and increases in prepaid expenses are added. 
B)  decreases in inventory and increases in accrued liabilities are added. 
C)  decreases in accounts payable and decreases in inventory are deducted. 
D)  increases in accounts receivable and increases in accrued liabilities are deducted.

Question 16

All major financing and investing activities affect cash.

Accepted Answer

A) True 
 B)False

Question 17

All of the following statements about free cash flow are false except:

Accepted Answer

A)  Significant free cash flow indicates less potential to finance new investments. 
B)  Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends. 
C)  Free cash flow is not reported on the statement of cash flows. 
D)  Significant free cash flow indicates less potential to pay additional dividends. 
A)  Significant free cash flow indicates less potential to finance new investments. 
B)  Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends. 
C)  Free cash flow is not reported on the statement of cash flows. 
D)  Significant free cash flow indicates less potential to pay additional dividends.

Question 18

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)

Accepted Answer

A)  subtraction from net income. 
B)  addition to net income. 
C)  addition to cash flow from investing activities. 
D)  subtraction from cash flow from investing activities. 
A)  subtraction from net income. 
B)  addition to net income. 
C)  addition to cash flow from investing activities. 
D)  subtraction from cash flow from investing activities.

Question 19

In preparing a statement of cash flows, an increase in the Common Stock and Treasury Stock accounts during a period would be an investing activity.

Accepted Answer

A) True 
 B)False

Question 20

In preparing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis.

Accepted Answer

A) True 
 B)False

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

Indicate where the issuance of common stock issued for cash would appear, if at all, on the indirect statement of cash flows.

In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.

Analysis of the changes in all of the noncash balance sheet accounts will explain the change in the cash account.

Land acquired from the issuance of common stock is reported

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

Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.

In addition to the three basic financial statements, which of the following is also a required financial statement?

Which of the following transactions would not be classified as a financing activity?

The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities.

Which of the following would not be needed to determine net cash provided by operating activities?

The third (final) step in preparing the statement of cash flows is to

In converting net income to net cash provided by operating activities, under the indirect method:

All major financing and investing activities affect cash.

All of the following statements about free cash flow are false except:

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)

In preparing a statement of cash flows, an increase in the Common Stock and Treasury Stock accounts during a period would be an investing activity.

In preparing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis.

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Financial Statement Analysis

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Exam 13: Statement of Cash Flows

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

Indicate where the issuance of common stock issued for cash would appear, if at all, on the indirect statement of cash flows.

In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.

Analysis of the changes in all of the noncash balance sheet accounts will explain the change in the cash account.

Land acquired from the issuance of common stock is reported

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

Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.

In addition to the three basic financial statements, which of the following is also a required financial statement?

Which of the following transactions would not be classified as a financing activity?

The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities.

Which of the following would not be needed to determine net cash provided by operating activities?

The third (final) step in preparing the statement of cash flows is to

In converting net income to net cash provided by operating activities, under the indirect method:

All major financing and investing activities affect cash.

All of the following statements about free cash flow are false except:

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)

In preparing a statement of cash flows, an increase in the Common Stock and Treasury Stock accounts during a period would be an investing activity.

In preparing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis.

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Financial Statement Analysis

Filters