Question 1

Operating activities include the cash effects of transactions that create revenues and expenses.

Accepted Answer

A) True 
 B)False

Question 2

During the decline phase, cash from investing activities may be negative while cash from financing activities may be positive as the company issues new stock or debt.

Accepted Answer

A) True 
 B)False

Question 3

A statement of cash flows indicates the sources and uses of cash during a period.

Accepted Answer

A) True 
 B)False

Question 4

The payment of interest on bonds payable is classified as a cash outflow from operating activities.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following would be added to net income using the indirect method?

Accepted Answer

A) An increase in accounts receivable. 
B) An increase in prepaid expenses. 
C) Depreciation expense. 
D) A decrease in accounts payable. 
A) An increase in accounts receivable. 
B) An increase in prepaid expenses. 
C) Depreciation expense. 
D) A decrease in accounts payable.

Question 6

Assume that the Brackney Inc.uses the indirect method to depict cash flows.Indicate where, if at all, land purchased for cash would be classified on the 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

In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is

Accepted Answer

A) added to net income. 
B) deducted from net income. 
C) ignored because it does not affect cash. 
D) not reported on a statement of cash flows. 
A) added to net income. 
B) deducted from net income. 
C) ignored because it does not affect cash. 
D) not reported on a statement of cash flows.

Question 8

The net income reported on the income statement of Hutchins Company for the current year was $1,360,000.Depreciation recorded on plant assets was $257,000.Accounts receivable and inventories increased by $72,000 and $48,000, respectively.Prepaid expenses and accounts payable decreased by $6,000 and $66,000, respectively.How much cash was provided by operating activities during the year?

Accepted Answer

A) $1,380,000. 
B) $1,500,000. 
C) $1,437,000. 
D) $1,797,000. 
A) $1,380,000. 
B) $1,500,000. 
C) $1,437,000. 
D) $1,797,000.

Question 9

Using the indirect method, which of the following adjustments to convert net income to net cash provided by operating activities is correct?

Accepted Answer

The answer of Using the indirect method, which of the...

Question 10

Using the indirect method, if equipment is sold at a gain, the

Accepted Answer

A) sale proceeds received are deducted in the operating activities section. 
B) sale proceeds received are added in the operating activities section. 
C) amount of the gain is added in the operating activities section. 
D) amount of the gain is deducted in the operating activities section. 
A) sale proceeds received are deducted in the operating activities section. 
B) sale proceeds received are added in the operating activities section. 
C) amount of the gain is added in the operating activities section. 
D) amount of the gain is deducted in the operating activities section.

Question 11

A transaction involving a gain on the sale of equipment affects cash provided (used) by

Accepted Answer

A) financing and investing activities. 
B) operating and financing activities. 
C) operating and investing activities. 
D) operating, financing, and investing activities. 
A) financing and investing activities. 
B) operating and financing activities. 
C) operating and investing activities. 
D) operating, financing, and investing activities.

Question 12

Free cash flow is cash from operating activities less dividends.

Accepted Answer

A) True 
 B)False

Question 13

The net income reported on the income statement for the current year was $240,000.Depreciation was $52,000.Accounts receivable and inventories decreased by $5,000 and $15,000, respectively.Prepaid expenses and accounts payable increased, respectively, by $500 and $14,000.Investments were sold at a loss of $20,000.How much cash was provided by operating activities?

Accepted Answer

A) $307,500. 
B) $317,500. 
C) $345,500. 
D) $258,500. 
A) $307,500. 
B) $317,500. 
C) $345,500. 
D) $258,500.

Question 14

Assume that the Quinn Corporation uses the indirect method to depict cash flows.Indicate where, if at all, interest paid on a note would be reported on the 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 15

All of the following statements are true regarding cash flow presentations except

Accepted Answer

A) the balance sheet provides only limited information about a company's cash flows. 
B) the balance sheet provides information about how property, plant, and equipment were financed. 
C) the income statement does not show how much cash was generated by operating activities. 
D) if cash from operations is compared to net income, information about the quality of reported net income is revealed. 
A) the balance sheet provides only limited information about a company's cash flows. 
B) the balance sheet provides information about how property, plant, and equipment were financed. 
C) the income statement does not show how much cash was generated by operating activities. 
D) if cash from operations is compared to net income, information about the quality of reported net income is revealed.

Question 16

The indirect and direct methods of preparing the statement of cash flows are identical except for the

Accepted Answer

A) significant noncash activity section. 
B) operating activities section. 
C) investing activities section. 
D) financing activities section. 
A) significant noncash activity section. 
B) operating activities section. 
C) investing activities section. 
D) financing activities section.

Question 17

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is not emphasized.

Accepted Answer

A) True 
 B)False

Question 18

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows.Indicate where, if at all, a stock dividend declared and issued would be classified on the 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 19

Assume that the Ecuyer Company uses the indirect method to depict cash flows.Indicate where, if at all, stock issued for equipment would be classified on the 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 20

On the statement of cash flows, the cash flows from operating activities section would be affected by

Accepted Answer

A) receipts from the issuance of capital stock. 
B) receipts from the sale of investments. 
C) payments for the acquisition of investments. 
D) cash receipts from sales activities. 
A) receipts from the issuance of capital stock. 
B) receipts from the sale of investments. 
C) payments for the acquisition of investments. 
D) cash receipts from sales activities.

Operating activities include the cash effects of transactions that create revenues and expenses.

During the decline phase, cash from investing activities may be negative while cash from financing activities may be positive as the company issues new stock or debt.

A statement of cash flows indicates the sources and uses of cash during a period.

The payment of interest on bonds payable is classified as a cash outflow from operating activities.

Which of the following would be added to net income using the indirect method?

Assume that the Brackney Inc.uses the indirect method to depict cash flows.Indicate where, if at all, land purchased for cash would be classified on the statement of cash flows.

In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is

Using the indirect method, which of the following adjustments to convert net income to net cash provided by operating activities is correct?

Using the indirect method, if equipment is sold at a gain, the

A transaction involving a gain on the sale of equipment affects cash provided (used) by

Free cash flow is cash from operating activities less dividends.

Assume that the Quinn Corporation uses the indirect method to depict cash flows.Indicate where, if at all, interest paid on a note would be reported on the statement of cash flows.

All of the following statements are true regarding cash flow presentations except

The indirect and direct methods of preparing the statement of cash flows are identical except for the

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is not emphasized.

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows.Indicate where, if at all, a stock dividend declared and issued would be classified on the statement of cash flows.

Assume that the Ecuyer Company uses the indirect method to depict cash flows.Indicate where, if at all, stock issued for equipment would be classified on the statement of cash flows.

On the statement of cash flows, the cash flows from operating activities section would be affected by

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

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Exam 12: Statement of Cash Flows

Operating activities include the cash effects of transactions that create revenues and expenses.

During the decline phase, cash from investing activities may be negative while cash from financing activities may be positive as the company issues new stock or debt.

A statement of cash flows indicates the sources and uses of cash during a period.

The payment of interest on bonds payable is classified as a cash outflow from operating activities.

Which of the following would be added to net income using the indirect method?

Assume that the Brackney Inc.uses the indirect method to depict cash flows.Indicate where, if at all, land purchased for cash would be classified on the statement of cash flows.

In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is

Using the indirect method, which of the following adjustments to convert net income to net cash provided by operating activities is correct?

Using the indirect method, if equipment is sold at a gain, the

A transaction involving a gain on the sale of equipment affects cash provided (used) by

Free cash flow is cash from operating activities less dividends.

Assume that the Quinn Corporation uses the indirect method to depict cash flows.Indicate where, if at all, interest paid on a note would be reported on the statement of cash flows.

All of the following statements are true regarding cash flow presentations except

The indirect and direct methods of preparing the statement of cash flows are identical except for the

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is not emphasized.

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows.Indicate where, if at all, a stock dividend declared and issued would be classified on the statement of cash flows.

Assume that the Ecuyer Company uses the indirect method to depict cash flows.Indicate where, if at all, stock issued for equipment would be classified on the statement of cash flows.

On the statement of cash flows, the cash flows from operating activities section would be affected by

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Financial Analysis: The Big Picture

Understanding Investments in Debt and Equity Securities

Filters