Question 1

Which of the following is NOT a true statement about the statement of cash flows?

Accepted Answer

A)  It shows where cash came from and how it was spent. 
B)  It reports why cash increased or decreased. 
C)  It covers a specific span of time the same as the income statement. 
D)  It shows how the profits or losses of the company were generated. 
A)  It shows where cash came from and how it was spent. 
B)  It reports why cash increased or decreased. 
C)  It covers a specific span of time the same as the income statement. 
D)  It shows how the profits or losses of the company were generated.

Question 2

Harrison Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014:
• Retained earnings, beginning balance: $125,000
• Retained earnings, ending balance: $117,000
Company reported net loss of $8,000 for the year.
What was the amount of dividends paid during the year?

Accepted Answer

A)  $5,000 
B)  $2,000 
C)  Zero 
D)  $3,000 
A)  $5,000 
B)  $2,000 
C)  Zero 
D)  $3,000

Question 3

Partisan Services purchased 10 delivery vehicles by issuing a 10-year installment note payable for $320,000. This transaction would be shown in the investment section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 4

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet:
 $$\begin{array} { | l | r | r | r | } 
\hline &  { \mathbf { 2 0 1 4 } } & { \mathbf { 2 0 1 3 } } &  { \text { Increase/decrease } } \
\hline \text { Cash } & \$ 21,000 & \$ 18,000 & \$ 3,000 \
\hline \text { Accounts receivable } & 31,000 & 35,000 & ( 4,000) \
\hline \text { Inventory } & 53,000 & 25,000 & 28,000 \
\hline \text { PP\&E, net } & 120,000 & 90,000 & 30,000 \
\hline \text { Total assets } & \$ 225,000 & \$ 168,000 & \$ 57,000 \
\hline
\end{array}$$ 
Additional information provided:
• Equipment costing $52,000 was purchased for cash.
• Equipment with a net asset value of $10,000 was sold for $14,000.
• Depreciation expense of $12,000 was recorded during the year.
-
Please prepare the investing activities section of the statement of cash flows using the following format:
 $$\begin{array} { | l | l | l | } 
\hline \text { Investing activities: } &  \quad \quad& \quad \quad \
\hline \text { Proceeds from sale of assets } & & \
\hline \text { Acquisition of assets } & & \
\hline \text { Net cash from investing activities } & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

Question 5

Transnational Company just started in business and was looking for additional capital in order to purchase a property to build their headquarters. They found an investor who was willing to sell them land worth $500,000 in exchange for stock in the company. This transaction would be shown in the investing activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements accurately describes the statement of cash flows?

Accepted Answer

A)  It shows the relative proportion of debt and assets. 
B)  It shows the link between accrual based income and the cash reported on the balance sheet. 
C)  It indicates when long-term debt will mature. 
D)  It shows the link between book income and earnings per share. 
A)  It shows the relative proportion of debt and assets. 
B)  It shows the link between accrual based income and the cash reported on the balance sheet. 
C)  It indicates when long-term debt will mature. 
D)  It shows the link between book income and earnings per share.

Question 7

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet:
 $$\begin{array} { | l | r | r | r | } 
\hline&2014 & 2013 & \text { Increase/decrease }\
\hline \text { Accounts payable } & \$ 4,000 & \$ 6,000 & \$ ( 2,000 ) \
\hline \text { Accrued liabilities } & 2,000 & 1,000 & 1,000 \
\hline \text { Long-term notes payable } & 84,000 & 90,000 & ( 6,000 ) \
\hline \text { Total liabilities } & \$ 90,000 & \$ 97,000 & \$ ( 7,000 ) \
\hline
\end{array}$$ 
-
The change in accrued liabilities will be shown as a positive cash flow in the adjustments to Net income.

Accepted Answer

A) True 
 B)False

Question 8

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following income statement:
 $$\begin{array} { | l | r | r | } 
\hline \text { Sales revenue } & \$ 240,000 & \
\hline \text { Interest revenue } & 1,000 & \
\hline \text { Gain on sale of plant assets } & 4,000 & \
\hline \text { Total revenues and gains } & & \$ 245,000 \
\hline \text { Cost of goods sold } & 110,000 & \
\hline \text { Salary expense } & 45,000 & \
\hline \text { Depreciation expense } & 12,000 & \
\hline \text { Other operating expenses } & 23,000 & \
\hline \text { Interest expense } & 1,000 & \
\hline \text { Income tax expense } & 5,000 & \
\hline \text { Total expenses } & & \$ 196,000 \
\hline \text { Net income/(loss) } & & \$ 49,000 \
\hline
\end{array}$$ 
Other information provided:
• Current assets other than cash increase by $24,000.
• Current liabilities decrease by $1,000.
- 
Please prepare the operating activities section of the statement of cash flows using the following format:
 $$\begin{array} { | l | l | l | } 
\hline \text { Operating activities: } &\quad\quad &\quad\quad \
\hline \text { Net income } & & \
\hline \text { Adjustments } & & \
\hline & & \
\hline & & \
\hline & & \
\hline \text { Net cash from operating activities } & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

Question 9

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following financial statement information for the year 2014:   
- On Avatar's statement of cash flows, using the direct method, what amount will be shown for payments to employees?

Accepted Answer

A)  $62,000 
B)  $42,000 
C)  $24,000 
D)  $45,000 
A)  $62,000 
B)  $42,000 
C)  $24,000 
D)  $45,000

Question 10

For anything to be considered a cash equivalent, the asset must be:

Accepted Answer

A)  convertible to cash within 5 years. 
B)  convertible to cash within 3 months or less. 
C)  convertible to cash within 6 months or less. 
D)  convertible to cash within 1 year. 
A)  convertible to cash within 5 years. 
B)  convertible to cash within 3 months or less. 
C)  convertible to cash within 6 months or less. 
D)  convertible to cash within 1 year.

Question 11

Which of the following sections from the statement of cash flows would include the purchase of a building totally financed by a mortgage?

Accepted Answer

A)  The investing section 
B)  The operating section 
C)  The financing section 
D)  The noncash investing and financing section 
A)  The investing section 
B)  The operating section 
C)  The financing section 
D)  The noncash investing and financing section

Question 12

Which of the following sections from the statement of cash flows would include the acquisition of a building by issuing common stock?

Accepted Answer

A)  The investing section 
B)  The financing section 
C)  The operating section 
D)  The noncash investing and financing section 
A)  The investing section 
B)  The financing section 
C)  The operating section 
D)  The noncash investing and financing section

Question 13

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following income statement:
 $$\begin{array} { | l | r | r | } 
\hline \text { Sales revenue } & \$ 240,000 & \
\hline \text { Interest revenue } & 1,000 & \
\hline \text { Gain on sale of plant assets } & 4,000 & \
\hline \text { Total revenues and gains } & & \$ 245,000 \
\hline \text { Cost of goods sold } & 110,000 & \
\hline \text { Salary expense } & 45,000 & \
\hline \text { Depreciation expense } & 12,000 & \
\hline \text { Other operating expenses } & 23,000 & \
\hline \text { Interest expense } & 1,000 & \
\hline \text { Income tax expense } & 5,000 & \
\hline \text { Total expenses } & & \$ 196,000 \
\hline \text { Net income/(loss) } & & \$ 49,000 \
\hline
\end{array}$$ 
Other information provided:
• Current assets other than cash increase by $24,000.
• Current liabilities decrease by $1,000.
-
Please prepare the operating activities section of the statement of cash flows using the following format:
 $$\begin{array} { | l | l | l | } 
\hline \text { Operating activities: } & \quad\quad&\quad\quad \
\hline \text { Net income } & & \
\hline \text { Adjustments } & & \
\hline \text { Depreciation expense } & & \
\hline \text { Gain or loss on sale } & & \
\hline \text { Increase/decrease in current assets } & & \
\hline \text { Increase/decrease in current liabilities } & & \
\hline \text { Net cash from operating activities } & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

Question 14

In creating a statement of cash flows using the indirect method, a gain on the sale of plant assets must be shown as an addition to Net income in the operating activities section.

Accepted Answer

A) True 
 B)False

Question 15

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following information reported for the year 2014:
$$\begin{array}{l}
\begin{array} { l r } 
\text { - Sales revenue: } & \$ 240,000 \
\text { - Interest revenue: } & \$ 1,000 \
\text { - Accounts receivable beginning balance: } & \$ 35,000 \
\text { Accounts receivable ending balance: } & \$ 31,000
\end{array}\
\text { There were no amounts reported for Interest receivable }
\end{array}$$
In the operating activity section of the statement of cash flows, what amount would be shown for total cash receipts?

Accepted Answer

A)  $244,000 
B)  $237,000 
C)  $245,000 
D)  $235,000 
A)  $244,000 
B)  $237,000 
C)  $245,000 
D)  $235,000

Question 16

A company's Inventory account increased $26,800 and its Accounts payable account decreased $18,240 during the year. The accounts payable relates only to the acquisition of inventory. Sales were $789,500 and Cost of goods sold was $532,700. What was the amount of payments to the supplier of inventory?

Accepted Answer

A)  $541,260 
B)  $559,500 
C)  $577,740 
D)  $532,700 
A)  $541,260 
B)  $559,500 
C)  $577,740 
D)  $532,700

Question 17

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following financial statement information for the year 2014:   
- On Avatar's statement of cash flows, using the direct method, what amount will be shown for total net cash flow from operating activities?

Accepted Answer

A)  $213,000 negative 
B)  $32,000 positive 
C)  $32,000 negative 
D)  $245,000 positive 
A)  $213,000 negative 
B)  $32,000 positive 
C)  $32,000 negative 
D)  $245,000 positive

Question 18

Which of the following are the activities that are included in the operating activities section of the statement of cash flows?

Accepted Answer

A)  Activities that obtain the cash needed to launch and sustain the business are included in the operating activities section. 
B)  Activities that create revenue or expenses in the entity's major line of business are included in the operating activities section. 
C)  Activities that increase or decrease long-term assets are included in the operating activities section. 
D)  Activities that pertain to construction of new facilities are included in the operating activities section. 
A)  Activities that obtain the cash needed to launch and sustain the business are included in the operating activities section. 
B)  Activities that create revenue or expenses in the entity's major line of business are included in the operating activities section. 
C)  Activities that increase or decrease long-term assets are included in the operating activities section. 
D)  Activities that pertain to construction of new facilities are included in the operating activities section.

Question 19

An outflow of cash from an investing activity would be:

Accepted Answer

A)  purchasing treasury stock. 
B)  issuing notes payable. 
C)  paying cash dividends to stockholders. 
D)  making loans to third parties. 
A)  purchasing treasury stock. 
B)  issuing notes payable. 
C)  paying cash dividends to stockholders. 
D)  making loans to third parties.

Question 20

Which of the following statements about the statement of cash flows is TRUE?

Accepted Answer

A)  The indirect method and the direct method will both show the same end results. 
B)  The direct method begins with net income and adjusts to calculate operating cash flows. 
C)  The indirect method shows three types of cash flows, but the direct method does not. 
D)  The operating activities section of both the direct and the indirect method are the same. 
A)  The indirect method and the direct method will both show the same end results. 
B)  The direct method begins with net income and adjusts to calculate operating cash flows. 
C)  The indirect method shows three types of cash flows, but the direct method does not. 
D)  The operating activities section of both the direct and the indirect method are the same.

Which of the following is NOT a true statement about the statement of cash flows?

Partisan Services purchased 10 delivery vehicles by issuing a 10-year installment note payable for $320,000. This transaction would be shown in the investment section of the statement of cash flows.

Which of the following statements accurately describes the statement of cash flows?

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following financial statement information for the year 2014: - On Avatar's statement of cash flows, using the direct method, what amount will be shown for payments to employees?

For anything to be considered a cash equivalent, the asset must be:

Which of the following sections from the statement of cash flows would include the purchase of a building totally financed by a mortgage?

Which of the following sections from the statement of cash flows would include the acquisition of a building by issuing common stock?

In creating a statement of cash flows using the indirect method, a gain on the sale of plant assets must be shown as an addition to Net income in the operating activities section.

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following financial statement information for the year 2014: - On Avatar's statement of cash flows, using the direct method, what amount will be shown for total net cash flow from operating activities?

Which of the following are the activities that are included in the operating activities section of the statement of cash flows?

An outflow of cash from an investing activity would be:

Which of the following statements about the statement of cash flows is TRUE?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

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Exam 14: The Statement of Cash Flows

Which of the following is NOT a true statement about the statement of cash flows?

Partisan Services purchased 10 delivery vehicles by issuing a 10-year installment note payable for $320,000. This transaction would be shown in the investment section of the statement of cash flows.

Which of the following statements accurately describes the statement of cash flows?

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following financial statement information for the year 2014: - On Avatar's statement of cash flows, using the direct method, what amount will be shown for payments to employees?

For anything to be considered a cash equivalent, the asset must be:

Which of the following sections from the statement of cash flows would include the purchase of a building totally financed by a mortgage?

Which of the following sections from the statement of cash flows would include the acquisition of a building by issuing common stock?

In creating a statement of cash flows using the indirect method, a gain on the sale of plant assets must be shown as an addition to Net income in the operating activities section.

Avatar Company uses the direct method to prepare its statement of cash flows. Please refer to the following financial statement information for the year 2014: - On Avatar's statement of cash flows, using the direct method, what amount will be shown for total net cash flow from operating activities?

Which of the following are the activities that are included in the operating activities section of the statement of cash flows?

An outflow of cash from an investing activity would be:

Which of the following statements about the statement of cash flows is TRUE?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters