Question 1

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

Question 2

The reconciling entry for depreciation expense in a worksheet is a credit to Accumulated Depreciation and a debit to Operating-Depreciation Expense.

Accepted Answer

A) True 
 B)False

Question 3

Daimler Enterprises reported cash flow from operations of $312,000. The company made capital expenditures of $112,000 and paid dividends of $34,000.
Instructions
Compute free cash flow.

Accepted Answer

Free cash flow = $31

Question 4

In computing cash payments for income taxes, a decrease in income taxes payable is ______________ to (from) income tax expense.

Accepted Answer

The answer of In computing cash payments for income taxes,...

Question 5

During 2010, Baxter Company sold a building with a book value of $145,000 for proceeds of $162,000. The company also sold long-term investments for proceeds of $45,000. The company purchased land and a new building for $320,000 by signing a long-term note payable. No other transactions impacted long-term asset accounts during 2010.
Instructions
Compute net cash flows from investing activities.

Accepted Answer

Net cash flows from

Question 6

Indicate where the event purchased land 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

Question 7

Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method?

Accepted Answer

A)  Cash receipts from customers 
B)  Cash paid for income taxes 
C)  Gain on sale of equipment 
D)  Cash paid to employees 
A)  Cash receipts from customers 
B)  Cash paid for income taxes 
C)  Gain on sale of equipment 
D)  Cash paid to employees

Question 8

Which of the following items does not appear in the statement of cash flows under the direct method?

Accepted Answer

A)  Cash payments to suppliers 
B)  Cash collections from customers 
C)  Depreciation Expense 
D)  Cash from the sale of equipment 
A)  Cash payments to suppliers 
B)  Cash collections from customers 
C)  Depreciation Expense 
D)  Cash from the sale of equipment

Question 9

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 10

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of

Accepted Answer

A)  the adjusted trial balance. 
B)  the current period's balance sheet. 
C)  a comparative balance sheet. 
D)  a comparative income statement. 
A)  the adjusted trial balance. 
B)  the current period's balance sheet. 
C)  a comparative balance sheet. 
D)  a comparative income statement.

Question 11

The use of cash to purchase highly liquid short-term investments (cash equivalents) would be reported on the statement of cash flows as an investing activity.

Accepted Answer

A) True 
 B)False

Question 12

When equipment is sold for cash, the amount received is reflected as a cash

Accepted Answer

A)  inflow in the operating section. 
B)  inflow in the financing section. 
C)  inflow in the investing section. 
D)  outflow in the operating section. 
A)  inflow in the operating section. 
B)  inflow in the financing section. 
C)  inflow in the investing section. 
D)  outflow in the operating section.

Question 13

A loss on sale of equipment is added to net income in determining cash provided by operations under the indirect method.

Accepted Answer

A) True 
 B)False

Question 14

In computing cash payments for operating expenses, a decrease in prepaid expenses is ______________ and an increase in accrued expenses payable is ______________ to (from) operating expenses, exclusive of depreciation.

Accepted Answer

The answer of In computing cash payments for operating expenses,...

Question 15

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 16

Neal Company reported net income of $140,000. For 2010, depreciation was $30,000, and the company reported a gain on sale of investments of $10,000. Accounts receivable increased $25,000 and accounts payable decreased $20,000.
Instructions
Compute net cash provided by operating activities using the indirect method.

Accepted Answer

The answer of Neal Company reported net income of $140,000....

Question 17

Bainbridge Company uses the direct method in determining net cash provided by operating activities. The income statement shows income tax expense $70,000. Income taxes payable were $25,000 at the beginning of the year and $18,000 at the end of the year. Cash payments for income taxes are

Accepted Answer

A)  $63,000. 
B)  $70,000. 
C)  $77,000. 
D)  $88,000. 
A)  $63,000. 
B)  $70,000. 
C)  $77,000. 
D)  $88,000.

Question 18

Trent Company prepared the tabulation below at December 31, 2010.   
Show how each item should be reported in the statement of cash flows. Use parentheses for deductions.

Accepted Answer

The answer of Trent Company prepared the tabulation below at...

Question 19

If accounts receivable increase during a period, revenues on an accrual basis are ______________ than revenues on a cash basis.

Accepted Answer

The answer of If accounts receivable increase during a period,...

Question 20

A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is

Accepted Answer

A)  adjusted cash from operations. 
B)  cash provided by operations. 
C)  free cash flow. 
D)  net cash provided by operating activities. 
A)  adjusted cash from operations. 
B)  cash provided by operations. 
C)  free cash flow. 
D)  net cash provided by operating activities.

Exam 17: Statement of Cash Flows

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.

The reconciling entry for depreciation expense in a worksheet is a credit to Accumulated Depreciation and a debit to Operating-Depreciation Expense.

Daimler Enterprises reported cash flow from operations of $312,000. The company made capital expenditures of $112,000 and paid dividends of $34,000. Instructions Compute free cash flow.

In computing cash payments for income taxes, a decrease in income taxes payable is ______________ to (from) income tax expense.

Indicate where the event purchased land for cash would appear, if at all, on the indirect statement of cash flows.

Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method?

Which of the following items does not appear in the statement of cash flows under the direct method?

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

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of

The use of cash to purchase highly liquid short-term investments (cash equivalents) would be reported on the statement of cash flows as an investing activity.

When equipment is sold for cash, the amount received is reflected as a cash

A loss on sale of equipment is added to net income in determining cash provided by operations under the indirect method.

In computing cash payments for operating expenses, a decrease in prepaid expenses is ______________ and an increase in accrued expenses payable is ______________ to (from) operating expenses, exclusive of depreciation.

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

Bainbridge Company uses the direct method in determining net cash provided by operating activities. The income statement shows income tax expense $70,000. Income taxes payable were $25,000 at the beginning of the year and $18,000 at the end of the year. Cash payments for income taxes are

Trent Company prepared the tabulation below at December 31, 2010. Show how each item should be reported in the statement of cash flows. Use parentheses for deductions.

If accounts receivable increase during a period, revenues on an accrual basis are ______________ than revenues on a cash basis.

A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

In computing cash payments for operating expenses, a decrease in prepaid expenses is and an increase in accrued expenses payable is to (from) operating expenses, exclusive of depreciation.