Question 1

Most public companies use the direct method to prepare their statement of cash flows because the computations are simpler.

Accepted Answer

A) True 
 B)False

Question 2

The first section presented on the statement of cash flows is the operating activities section.

Accepted Answer

A) True 
 B)False

Question 3

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014.
$\begin{array}{llr}
  \text {- Net cash flows from operating activities:  } & \text { $ \$ 32,000 $ positive}\
 \text { - Net cash flows from operating activities: } & \text { $ \$ 38,000 $ negative}\
 \text {- Net cash flows from financing activities:  } & \text { $ \$ 9,000 $ positive} 
\end{array}$

-
How much was the net change in cash during the year?

Accepted Answer

A)  $3,000 negative 
B)  $79,000 positive 
C)  $3,000 positive 
D)  $61,000 negative 
A)  $3,000 negative 
B)  $79,000 positive 
C)  $3,000 positive 
D)  $61,000 negative

Question 4

Which of the following would appear on a statement of cash flows prepared using the direct method?

Accepted Answer

A)  Adjustments to net income 
B)  Cash payments for salaries 
C)  Adjustments for gains and losses on sale of property 
D)  Increase/decrease in current assets 
A)  Adjustments to net income 
B)  Cash payments for salaries 
C)  Adjustments for gains and losses on sale of property 
D)  Increase/decrease in current assets

Question 5

Avatar Company uses the indirect method to prepare its statement of cash flows. Using the worksheet shown below, please enter the adjustments needed to record the acquisition of plant assets for $52,000.

Accepted Answer

This question is no

Question 6

The cash flow from operating activities is calculated in the same way, whether the company uses the direct or the indirect method of preparing the statement of cash flow. The only difference is the way the financing activities section is prepared.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following describes the investing activities as shown in the statement of cash flows?

Accepted Answer

A)  Includes increases and decreases in long-term assets 
B)  Includes transactions affecting the capitalization of the business 
C)  Includes transactions that primarily impact current assets and current liabilities 
D)  Shows the beginning and ending balance of cash 
A)  Includes increases and decreases in long-term assets 
B)  Includes transactions affecting the capitalization of the business 
C)  Includes transactions that primarily impact current assets and current liabilities 
D)  Shows the beginning and ending balance of cash

Question 8

Avatar Company uses the indirect method to prepare its statement of cash flows. During 2014, plant assets with book value of $10,000 were sold for $14,000. Using the worksheet shown below, please enter the adjustments needed to record gain on sale of plant assets of $4,000.

Accepted Answer

This question is no

Question 9

Which of the following sections from the statement of cash flows would include the payment of a note payable by issuing common stock?

Accepted Answer

A)  The payment of a note payable by issuing common stock would be included in the investing section. 
B)  The payment of a note payable by issuing common stock would be included in the financing section. 
C)  The payment of a note payable by issuing common stock would be included in the operating section. 
D)  The payment of a note payable by issuing common stock would not be included in the noncash investing and financing section. 
A)  The payment of a note payable by issuing common stock would be included in the investing section. 
B)  The payment of a note payable by issuing common stock would be included in the financing section. 
C)  The payment of a note payable by issuing common stock would be included in the operating section. 
D)  The payment of a note payable by issuing common stock would not be included in the noncash investing and financing section.

Question 10

Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2013:
$$\begin{array}{l}
\text { From the income statement: }\
\begin{array} { l r } 
\text { Revenues: } & \$ 240,000 \
\text { Cost of goods sold: } & \$ 190,000 \
\text { Operating expenses: } & \$ 25,000 \
\text { Net income } & \$ 25,000
\end{array}\
\begin{array} { c c c } 
\text { From the balance sheet: } & \text { Beginning balance } & \text { Ending balance } \
\text { Accounts receivable: } & \$ 12,000 & \$ 15,000 \
\text { Inventory: } & \$ 22,000 & \$ 18,000 \
\text { Accounts payable: } & \$ 7,000 & \$ 12,000 \
\text { Accrued liabilities: } & \$ 3,000 & \$ 1,200
\end{array}
\end{array}$$
-  Assume that there were no sales of long-term assets, no interest revenue, and no expenses other than the expenses shown above. Please also assume that accounts payable are for purchases of inventory only.
On the statement of cash flows, what amount will be shown for cash flow from operating activities?

Accepted Answer

A)  $26,800 
B)  $29,200 
C)  $23,000 
D)  $18,600 
A)  $26,800 
B)  $29,200 
C)  $23,000 
D)  $18,600

Question 11

Which of the following is NOT a cash outflow from an operating activity?

Accepted Answer

A)  Payment of interest on a loan 
B)  Payment for purchasing inventory 
C)  Payment of dividends 
D)  Payments to the government for taxes 
A)  Payment of interest on a loan 
B)  Payment for purchasing inventory 
C)  Payment of dividends 
D)  Payments to the government for taxes

Question 12

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014.
$\begin{array}{llr}
  \text {- Net cash flows from operating activities:  } & \text { $ \$ 32,000 $ positive}\
 \text { - Net cash flows from operating activities: } & \text { $ \$ 38,000 $ negative}\
 \text {- Net cash flows from financing activities:  } & \text { $ \$ 9,000 $ positive} 
\end{array}$

- 
If the beginning cash balance is $18,000, what would the ending cash balance be?

Accepted Answer

A)  $21,000 
B)  $18,000 
C)  $3,000 
D)  $15,000 
A)  $21,000 
B)  $18,000 
C)  $3,000 
D)  $15,000

Question 13

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following comparative balance sheet for Avatar Company and complete the third column for increases and decreases.
 \[\begin{array} { | l | r | r | r | } 
\hline & { \mathbf { 2 0 1 4 } } &  { \mathbf { 2 0 1 3 } } & \text { Increase/decrease } \
\hline \text { Cash } & \$ 33,000 & \$ 18,000 & \
\hline \text { Accounts receivable } & 22,000 & 35,000 & \
\hline \text { Inventory } & 170,000 & 115,000 & \
\hline \text { Total assets } & \$ 225,000 & \$ 168,000 & \
\hline & & & \
\hline \text { Accounts payable } & \$ 4,000 & \$ 6,000 & \
\hline \text { Accrued liabilities } & 2,000 & 1,000 & \
\hline \text { Long-term notes payable } & 84,000 & 90,000 & \
\hline \text { Total liabilities } & \$ 0,000 & \$ 97,000 & \
\hline & & & \
\hline \text { Common stock } & 30,000 & 2,000 & \
\hline \text { Retained earnings } & 113,000 & 74,000 & \
\hline \text { Treasury stock } & ( 8,000 & ( 5,000 & \
\hline \text { Total stockholders' equity } & \$ 135,000 & \$ 71,000 & \
\hline & & & \
\hline \begin{array} { l } 
\text { Total liabilities and } \
\text { stockholders' } \
\text { equity }
\end{array} &\$225,000 &\$168,000 & \
\hline
\end{array}\]

Accepted Answer

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

Question 14

The investing activities section of the statement of cash flows reflects the cash flows that increase or decrease long-term assets.

Accepted Answer

A) True 
 B)False

Question 15

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

-
How will the change in Accrued liabilities be shown on the statement of cash flows?

Accepted Answer

A)  Operating activities minus positive cash flow 
B)  Operating activities minus negative cash flow 
C)  Financing activities minus positive cash flow 
D)  Investing activities minus negative cash flow 
A)  Operating activities minus positive cash flow 
B)  Operating activities minus negative cash flow 
C)  Financing activities minus positive cash flow 
D)  Investing activities minus negative cash flow

Question 16

Qtopia Company uses the direct method to prepare its statement of cash flows. It has reported Cost of goods sold of $70,000 on its income statement for the year 2012. If the balance in the inventory account has gone up by $2,000 during the year, then $2,000 will have to be added to $70,000 as part of the process to calculate payments to suppliers for inventory purchases.

Accepted Answer

A) True 
 B)False

Question 17

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

- 
Additional information provided:
During 2014, the company repaid $40,000 of long-term notes payable.
During 2014, the company borrowed $34,000 on a new note payable.
Based on the above information only, what amount of net cash flow would be shown in the financing section of the statement of cash flows?

Accepted Answer

A)  $6,000 negative 
B)  $6,000 positive 
C)  $5,000 positive 
D)  $7,000 negative 
A)  $6,000 negative 
B)  $6,000 positive 
C)  $5,000 positive 
D)  $7,000 negative

Question 18

Arturo Sales purchased some equipment for $12,000 by issuing a 6-month note payable. How would this transaction be shown on the statement of cash flows?

Accepted Answer

A)  In the noncash financing and investing activities section 
B)  In the investing activities section 
C)  In the operating activities section 
D)  In the financing activities section 
A)  In the noncash financing and investing activities section 
B)  In the investing activities section 
C)  In the operating activities section 
D)  In the financing activities section

Question 19

Which one of the following is a principal function of the statement of cash flows?

Accepted Answer

A)  To predict future profit growth 
B)  To calculate the turnover of inventory 
C)  To evaluate the level of debt and leverage of a company 
D)  To predict the ability to pay debts and dividends 
A)  To predict future profit growth 
B)  To calculate the turnover of inventory 
C)  To evaluate the level of debt and leverage of a company 
D)  To predict the ability to pay debts and dividends

Question 20

The direct method of preparing the statement of cash flows provides a clearer way of analyzing cash flow information than the indirect method.

Accepted Answer

A) True 
 B)False

Most public companies use the direct method to prepare their statement of cash flows because the computations are simpler.

The first section presented on the statement of cash flows is the operating activities section.

Which of the following would appear on a statement of cash flows prepared using the direct method?

Avatar Company uses the indirect method to prepare its statement of cash flows. Using the worksheet shown below, please enter the adjustments needed to record the acquisition of plant assets for $52,000.

The cash flow from operating activities is calculated in the same way, whether the company uses the direct or the indirect method of preparing the statement of cash flow. The only difference is the way the financing activities section is prepared.

Which of the following describes the investing activities as shown in the statement of cash flows?

Avatar Company uses the indirect method to prepare its statement of cash flows. During 2014, plant assets with book value of $10,000 were sold for $14,000. Using the worksheet shown below, please enter the adjustments needed to record gain on sale of plant assets of $4,000.

Which of the following sections from the statement of cash flows would include the payment of a note payable by issuing common stock?

Which of the following is NOT a cash outflow from an operating activity?

The investing activities section of the statement of cash flows reflects the cash flows that increase or decrease long-term assets.

Arturo Sales purchased some equipment for $12,000 by issuing a 6-month note payable. How would this transaction be shown on the statement of cash flows?

Which one of the following is a principal function of the statement of cash flows?

The direct method of preparing the statement of cash flows provides a clearer way of analyzing cash flow information than the indirect method.

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

Exam 14: The Statement of Cash Flows

Most public companies use the direct method to prepare their statement of cash flows because the computations are simpler.

The first section presented on the statement of cash flows is the operating activities section.

Which of the following would appear on a statement of cash flows prepared using the direct method?

Avatar Company uses the indirect method to prepare its statement of cash flows. Using the worksheet shown below, please enter the adjustments needed to record the acquisition of plant assets for $52,000.

The cash flow from operating activities is calculated in the same way, whether the company uses the direct or the indirect method of preparing the statement of cash flow. The only difference is the way the financing activities section is prepared.

Which of the following describes the investing activities as shown in the statement of cash flows?

Avatar Company uses the indirect method to prepare its statement of cash flows. During 2014, plant assets with book value of $10,000 were sold for $14,000. Using the worksheet shown below, please enter the adjustments needed to record gain on sale of plant assets of $4,000.

Which of the following sections from the statement of cash flows would include the payment of a note payable by issuing common stock?

Which of the following is NOT a cash outflow from an operating activity?

The investing activities section of the statement of cash flows reflects the cash flows that increase or decrease long-term assets.

Arturo Sales purchased some equipment for $12,000 by issuing a 6-month note payable. How would this transaction be shown on the statement of cash flows?

Which one of the following is a principal function of the statement of cash flows?

The direct method of preparing the statement of cash flows provides a clearer way of analyzing cash flow information than the indirect method.

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