Question 1

Which of the following is a deduction from net income in reconciling net income to cash flow from operating activities?

Accepted Answer

A) Amortization of bond premium 
B) Cash dividend declared and paid 
C) Collection of an account receivable 
D) Write-off of an uncollectible account receivable 
A) Amortization of bond premium 
B) Cash dividend declared and paid 
C) Collection of an account receivable 
D) Write-off of an uncollectible account receivable

Question 2

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

Accepted Answer

A) inflow and outflow of cash. 
B) outflow of cash. 
C) addition to net income in the adjustments to reconcile net income to cash from operating activities. 
D) deduction from net income in the adjustments to reconcile net income to cash from operating activities. 
A) inflow and outflow of cash. 
B) outflow of cash. 
C) addition to net income in the adjustments to reconcile net income to cash from operating activities. 
D) deduction from net income in the adjustments to reconcile net income to cash from operating activities.

Question 3

If a company issues both a balance sheet and an income statement with comparative figures from last year,a statement of cash flows:

Accepted Answer

A) is no longer necessary; but may be used at the company's option. 
B) should not be issued. 
C) should be issued for the current year only. 
D) should be issued for each period for which an income statement is presented. 
A) is no longer necessary; but may be used at the company's option. 
B) should not be issued. 
C) should be issued for the current year only. 
D) should be issued for each period for which an income statement is presented.

Question 4

Assume cash paid to suppliers for the current year is $350,000,merchandise inventory increased by $5,000 during the year,and accounts payable decreased by $10,000 during the year.What was the cost of goods sold for the current year?

Accepted Answer

A) $335,000 
B) $345,000 
C) $355,000 
D) $365,000 
A) $335,000 
B) $345,000 
C) $355,000 
D) $365,000

Question 5

Which of the following investments should be classified as cash equivalents for Lastima Company in preparing the statement of cash flows?
1
Shares of stock in Lastima Company.
2
A one-month Treasury note purchased by Lastima Company when only
3 months remained in the note's term.
3
Share in a money market fund purchased by Lastima Company; the fund
Purchases only investment grade corporate debt instruments with
Maturities of 2 months or less.
4
A one-year treasury note purchased by Lastima Company when the
Treasury note was issued,which now has only 2 months
Remaining in its term.

Accepted Answer

A) 2, 3 
B) 2, 4 
C) 2, 3, 4 
D) 1, 2, 3, 4 
A) 2, 3 
B) 2, 4 
C) 2, 3, 4 
D) 1, 2, 3, 4

Question 6

A company's income statement disclosed $45,000 of investment revenue on equity method investments.The company did not purchase or dispose of any such investments during the year,yet the equity method investments account increased $30,000 during the year.What is the complete disclosure of these events in the statement of cash flows prepared under the indirect method?

Accepted Answer

A) Operating cash inflow, $45,000; $30,000 subtraction in reconciliation of earnings and net operating cash flow 
B) $30,000 subtraction in reconciliation of earnings and net operating cash flow 
C) Operating cash inflow, $15,000; $30,000 subtraction in reconciliation of earnings and net operating cash flow 
D) Operating cash inflow, $15,000 
A) Operating cash inflow, $45,000; $30,000 subtraction in reconciliation of earnings and net operating cash flow 
B) $30,000 subtraction in reconciliation of earnings and net operating cash flow 
C) Operating cash inflow, $15,000; $30,000 subtraction in reconciliation of earnings and net operating cash flow 
D) Operating cash inflow, $15,000

Question 7

On a reconciliation of net income to cash from operations,depreciation is added back to net income as depreciation

Accepted Answer

A) is a direct outflow of cash. 
B) reduces net income but does not involve an outflow of cash. 
C) reduces net income and involves an outflow of cash. 
D) is an outflow of cash to a fund established for the replacement of assets. 
A) is a direct outflow of cash. 
B) reduces net income but does not involve an outflow of cash. 
C) reduces net income and involves an outflow of cash. 
D) is an outflow of cash to a fund established for the replacement of assets.

Question 8

The following is Grafton Corporation's comparative balance sheets for 2014 and 2013:
   
Additional information:
1.On December 31,2013,Grafton acquired 25 percent of Elkins Corporation's common stock for $137,500.On that date,the carrying value of Elkins' net assets and liabilities (which approximated fair value)was $550,000.Elkins reported income of $60,000 for the year ended December 31,2014.No dividend was paid on Elkins' common stock during the year.
2.During 2014,Grafton loaned $150,000 to Beckley Company,an unrelated entity.Beckley made the first semi-annual principal payment of $15,000,plus interest at 10 percent,on October 1,2014.
3.On January 2,2014,Grafton sold equipment costing $30,000,with a carrying value of $17,500,for $20,000 cash.
4.On January 2,2014,Grafton entered into a capital lease for an office building.The present value of the annual rental payments is $200,000,which equals the fair value of the building.Grafton made the first lease payment of $30,000 when due on January 2,2015.
5.Grafton's net income for 2014 was $180,000.
6.Grafton declared and paid cash dividends for 2014 and 2013 as follows:
   
Required:
Prepare a statement of cash flows for Grafton Company for 2014 using the indirect method.Include relevant supplemental schedules.

Accepted Answer

The answer of The following is Grafton Corporation's comparative balance...

Question 9

Financial information for Inverness Company at December 31,2014,and for the year then ended,are presented below:
   
Additional information:
1.Purchased operational assets for cash,$9,000.
2.Sold an operational asset for $6,000 cash (cost,$21,000,two-thirds depreciated).
3.Sold unissued common stock for $5,000 cash.
4.Purchased operational assets; exchanged unissued bonds of $30,000 (face value equaled market value)in payment.
5.Sold the long-term investments classified as available-for-sale for $9,000 cash; the market value of these investments had not changed since 2013.
6.Purchased treasury stock for cash,$11,500.
7.Retired bonds payable at maturity date by issuing common stock,$10,000.
Required:
Prepare the statement of cash flows using the direct method.

Accepted Answer

Inverness Company
St

Question 10

Which of the following transactions would not be reported on the statement of cash flows?

Accepted Answer

A) Purchase of treasury stock 
B) Declaration of a cash dividend which has not yet been paid 
C) Patent amortization 
D) Purchase of an operational asset by issuing common stock 
A) Purchase of treasury stock 
B) Declaration of a cash dividend which has not yet been paid 
C) Patent amortization 
D) Purchase of an operational asset by issuing common stock

Question 11

A firm purchased $35,000 worth of investments classified as securities available for sale.At the end of the year,the investments were worth $23,000.What is the correct presentation of these events in the statement of cash flows prepared under the direct method?

Accepted Answer

A) Investing cash outflow, $35,000 
B) Add $23,000 in reconciliation of earnings and net operating cash flow 
C) Investing cash outflow, $35,000; subtract $12,000 in reconciliation of earnings and net operating cash flow 
D) No disclosure is needed. 
A) Investing cash outflow, $35,000 
B) Add $23,000 in reconciliation of earnings and net operating cash flow 
C) Investing cash outflow, $35,000; subtract $12,000 in reconciliation of earnings and net operating cash flow 
D) No disclosure is needed.

Question 12

Melville Company reported sales of $700,000,bad debt expense of $60,000,and an increase in net accounts receivable of $150,000 during the current year.What is the amount of cash collected from customers for the current year if the company did not record any write-offs during the current year?

Accepted Answer

A) $550,000 
B) $590,000 
C) $610,000 
D) $640,000 
A) $550,000 
B) $590,000 
C) $610,000 
D) $640,000

Question 13

Which of the following items is included on a statement of cash flows as a noncash exchange?

Accepted Answer

A) Depreciation 
B) Issuance (sale) of common stock 
C) Purchase of treasury stock 
D) Retirement of long-term debt by issuance of preferred stock 
A) Depreciation 
B) Issuance (sale) of common stock 
C) Purchase of treasury stock 
D) Retirement of long-term debt by issuance of preferred stock

Question 14

A gain on the sale of a plant assets should be included in which of the following sections of a statement of cash flows prepared using the indirect method?

Accepted Answer

A) Investing activities 
B) Operating activities 
C) Financing activities 
D) Non-cash investing and financing activities 
A) Investing activities 
B) Operating activities 
C) Financing activities 
D) Non-cash investing and financing activities

Question 15

A company with substantial operating profits prepares its statement of cash flows using the indirect method.The gain on the sale of a long-term investment should be disclosed separately as a(n)

Accepted Answer

A) inflow from operating activities. 
B) adjustment to net income in the reconciliation of net income to cash from operating activities. 
C) inflow from investing activities. 
D) outflow from investing activities. 
A) inflow from operating activities. 
B) adjustment to net income in the reconciliation of net income to cash from operating activities. 
C) inflow from investing activities. 
D) outflow from investing activities.

Question 16

Which of the following would be a cash outflow from operating activities for Poe Company?

Accepted Answer

A) Cash paid for dividends on Poe Co. common stock 
B) Cash paid for treasury stock 
C) Cash paid for the purchase of an investment in securities of Raven Company classified as trading securities 
D) Cash paid for dividends on Poe Co. preferred stock 
A) Cash paid for dividends on Poe Co. common stock 
B) Cash paid for treasury stock 
C) Cash paid for the purchase of an investment in securities of Raven Company classified as trading securities 
D) Cash paid for dividends on Poe Co. preferred stock

Question 17

Under the direct method,which one of the following would represent cash paid?

Accepted Answer

A) Losses on sales of plant assets 
B) Gains on sales of plant assets 
C) Interest expense, adjusted for changes in interest payable and amortization of bond premium or discount 
D) Depreciation expense, adjusted for changes in depreciation methods 
A) Losses on sales of plant assets 
B) Gains on sales of plant assets 
C) Interest expense, adjusted for changes in interest payable and amortization of bond premium or discount 
D) Depreciation expense, adjusted for changes in depreciation methods

Question 18

A firm purchased $20,000 worth of investments classified as trading securities.At the end of the year,the investments are worth $23,000.What is the correct disclosure of these events in the statement of cash flows prepared under the direct method?

Accepted Answer

A) Operating cash inflow, $3,000 
B) Addition of $17,000 in reconciliation of earnings and net operating cash flow 
C) Operating cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow 
D) No disclosure is needed. 
A) Operating cash inflow, $3,000 
B) Addition of $17,000 in reconciliation of earnings and net operating cash flow 
C) Operating cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow 
D) No disclosure is needed.

Question 19

Which of the following independent transactions would cause net income to be more than cash from operating activities?

Accepted Answer

A) A decrease in the accounts receivable account 
B) An increase in the merchandise inventory account 
C) An increase in the accounts payable account 
D) An increase in the accrued wages payable account 
A) A decrease in the accounts receivable account 
B) An increase in the merchandise inventory account 
C) An increase in the accounts payable account 
D) An increase in the accrued wages payable account

Question 20

Which of the following is NOT classified as an operating activity?

Accepted Answer

A) Interest received 
B) Interest paid 
C) Dividends received 
D) Dividends paid 
A) Interest received 
B) Interest paid 
C) Dividends received 
D) Dividends paid

Which of the following is a deduction from net income in reconciling net income to cash flow from operating activities?

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

If a company issues both a balance sheet and an income statement with comparative figures from last year,a statement of cash flows:

Assume cash paid to suppliers for the current year is $350,000,merchandise inventory increased by $5,000 during the year,and accounts payable decreased by $10,000 during the year.What was the cost of goods sold for the current year?

On a reconciliation of net income to cash from operations,depreciation is added back to net income as depreciation

Which of the following transactions would not be reported on the statement of cash flows?

A firm purchased $35,000 worth of investments classified as securities available for sale.At the end of the year,the investments were worth $23,000.What is the correct presentation of these events in the statement of cash flows prepared under the direct method?

Melville Company reported sales of $700,000,bad debt expense of $60,000,and an increase in net accounts receivable of $150,000 during the current year.What is the amount of cash collected from customers for the current year if the company did not record any write-offs during the current year?

Which of the following items is included on a statement of cash flows as a noncash exchange?

A gain on the sale of a plant assets should be included in which of the following sections of a statement of cash flows prepared using the indirect method?

A company with substantial operating profits prepares its statement of cash flows using the indirect method.The gain on the sale of a long-term investment should be disclosed separately as a(n)

Which of the following would be a cash outflow from operating activities for Poe Company?

Under the direct method,which one of the following would represent cash paid?

A firm purchased $20,000 worth of investments classified as trading securities.At the end of the year,the investments are worth $23,000.What is the correct disclosure of these events in the statement of cash flows prepared under the direct method?

Which of the following independent transactions would cause net income to be more than cash from operating activities?

Which of the following is NOT classified as an operating activity?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Accounting in a Global Market

Analysis of Financial Statements

Filters

Exam 21: Statement of Cash Flows Revisited

Which of the following is a deduction from net income in reconciling net income to cash flow from operating activities?

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

If a company issues both a balance sheet and an income statement with comparative figures from last year,a statement of cash flows:

Assume cash paid to suppliers for the current year is $350,000,merchandise inventory increased by $5,000 during the year,and accounts payable decreased by $10,000 during the year.What was the cost of goods sold for the current year?

On a reconciliation of net income to cash from operations,depreciation is added back to net income as depreciation

Which of the following transactions would not be reported on the statement of cash flows?

A firm purchased $35,000 worth of investments classified as securities available for sale.At the end of the year,the investments were worth $23,000.What is the correct presentation of these events in the statement of cash flows prepared under the direct method?

Melville Company reported sales of $700,000,bad debt expense of $60,000,and an increase in net accounts receivable of $150,000 during the current year.What is the amount of cash collected from customers for the current year if the company did not record any write-offs during the current year?

Which of the following items is included on a statement of cash flows as a noncash exchange?

A gain on the sale of a plant assets should be included in which of the following sections of a statement of cash flows prepared using the indirect method?

A company with substantial operating profits prepares its statement of cash flows using the indirect method.The gain on the sale of a long-term investment should be disclosed separately as a(n)

Which of the following would be a cash outflow from operating activities for Poe Company?

Under the direct method,which one of the following would represent cash paid?

A firm purchased $20,000 worth of investments classified as trading securities.At the end of the year,the investments are worth $23,000.What is the correct disclosure of these events in the statement of cash flows prepared under the direct method?

Which of the following independent transactions would cause net income to be more than cash from operating activities?

Which of the following is NOT classified as an operating activity?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Accounting in a Global Market

Analysis of Financial Statements

Filters