Question 1

While preparing the statement of cash flows using the indirect method, Depreciation Expense is subtracted from Net Income under operating activities.

Accepted Answer

A) True 
 B)False

Question 2

Karaoke Company uses the indirect method to prepare its statement of cash flows. Refer to the following sections of the comparative balance sheet:   Additional information:
No stock was retired.
No treasury stock was sold.
During 2014, the company repaid $60,000 of long-term notes payable.
During 2014, the company borrowed $51,000 on a new long-term note payable.
Net income for the year was $68,000.
Prepare the financing section of the statement of cash flows.

Accepted Answer

Cash Flows

Question 3

The statement of cash flows explains why net income as reported on the income statement does not equal the change in the cash balance.

Accepted Answer

A) True 
 B)False

Question 4

Avatar Company uses the indirect method to prepare the statement of cash flows. Refer to the following income statement:   Additional information provided by the company includes the following:
Current assets other than cash increase by $36,000.
Current liabilities decrease by $1,500.
Prepare the operating activities section of the statement of cash flows.

Accepted Answer

The answer of Avatar Company uses the indirect method to...

Question 5

Cash received from the issuance of Notes Payable is a(n)________ on the statement of cash flows.

Accepted Answer

A) non-cash activity 
B) financing activity 
C) operating activity 
D) investing activity 
A) non-cash activity 
B) financing activity 
C) operating activity 
D) investing activity

Question 6

Walker Corp. uses indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet:   How will the change in inventory be shown on the statement of cash flows?

Accepted Answer

A) positive cash flow under the operating activities section 
B) negative cash flow under the operating activities section 
C) positive cash flow under the financing activities section 
D) negative cash flow under the investing activities section 
A) positive cash flow under the operating activities section 
B) negative cash flow under the operating activities section 
C) positive cash flow under the financing activities section 
D) negative cash flow under the investing activities section

Question 7

Avatar Company uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet:   How will the change in Accrued Liabilities be shown on the statement of cash flows?

Accepted Answer

A) as an addition to Net Income 
B) as a deduction from Net Income 
C) as a deduction from operating cash flows 
D) as an addition to operating cash flows 
A) as an addition to Net Income 
B) as a deduction from Net Income 
C) as a deduction from operating cash flows 
D) as an addition to operating cash flows

Question 8

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 
B) activities that create revenue or expenses 
C) activities that increase or decrease long-term assets 
D) activities that pertain to construction of new facilities 
A) activities that obtain the cash needed to launch and sustain the business 
B) activities that create revenue or expenses 
C) activities that increase or decrease long-term assets 
D) activities that pertain to construction of new facilities

Question 9

If an investor wants to know how much cash a company can free up for new opportunities, such as expanding into a new sales region, they would most likely look at:

Accepted Answer

A) free cash flow. 
B) net cash flow from investing activities. 
C) acid ratio. 
D) earnings per share. 
A) free cash flow. 
B) net cash flow from investing activities. 
C) acid ratio. 
D) earnings per share.

Question 10

Martinez Company uses the direct method to prepare its statement of cash flows. It has reported Cost of Goods Sold of $95,000 on its income statement for the year 2015. If the balance in the Inventory account has gone down by $6,000 during the year, then $6,000 will have to be added to $95,000 as part of the process to calculate payments to suppliers for inventory purchases.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following items would be included as an operating activity on the statement of cash flows, using the direct method?

Accepted Answer

A) purchase of treasury stock 
B) payment of dividends 
C) issuance of stock 
D) payment of interest expense 
A) purchase of treasury stock 
B) payment of dividends 
C) issuance of stock 
D) payment of interest expense

Question 12

Which of the following statements is true of the direct and indirect methods of preparing the statement of cash flows?

Accepted Answer

A) The indirect method and the direct method will produce the same amount of net cash flow from operating activities. 
B) The direct method begins with Net Income and adjusts to calculate operating and investing 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 methods are the same. 
A) The indirect method and the direct method will produce the same amount of net cash flow from operating activities. 
B) The direct method begins with Net Income and adjusts to calculate operating and investing 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 methods are the same.

Question 13

Nelson Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet:   The change in Accrued Liabilities will be shown as a negative cash flow in the adjustments to Net Income.

Accepted Answer

A) True 
 B)False

Question 14

The operating activities section of the statement of cash flows reflects the cash flows that affect current assets and current liabilities.

Accepted Answer

A) True 
 B)False

Question 15

The financing activities section of the statement of cash flows includes paying dividends and paying off loans.

Accepted Answer

A) True 
 B)False

Question 16

Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2014: From the income statement:
Sales Revenues, $265,000
Cost of Goods Sold, $210,000
Operating expenses, $31,000
From the balance sheet:   On the statement of cash flows, what amount will be shown for payments to suppliers for operating expenses? (Assume that Accounts Payable are for purchases of inventory only and Accrued Liabilities relate to Operating Expenses.)

Accepted Answer

A) $33,500 
B) $28,500 
C) $29,500 
D) $35,000 
A) $33,500 
B) $28,500 
C) $29,500 
D) $35,000

Question 17

The investing activities section of the statement of cash flows includes activities that affect the long-term asset section of the balance sheet.

Accepted Answer

A) True 
 B)False

Question 18

Nelson Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet:   The change in Accounts Payable will be shown as a negative cash flow in the adjustments to Net Income.

Accepted Answer

A) True 
 B)False

Question 19

Davis Company uses the direct method to prepare its statement of cash flows. Refer to the following information reported for the year 2014: Operating expenses, $26,000
Accrued Liabilities, beginning balance, $3,000
Accrued Liabilities, ending balance, $5,000
What amount was paid to suppliers for operating expenses on a cash basis?

Accepted Answer

A) $29,000 
B) $28,000 
C) $24,000 
D) $31,000 
A) $29,000 
B) $28,000 
C) $24,000 
D) $31,000

Question 20

The purchase of equipment financed by a Long-Term Notes Payable is an example of:

Accepted Answer

A) investing activity. 
B) financing activity. 
C) operating activity. 
D) non-cash investing and financing activity. 
A) investing activity. 
B) financing activity. 
C) operating activity. 
D) non-cash investing and financing activity.

Exam 16: The Statement of Cash Flows

While preparing the statement of cash flows using the indirect method, Depreciation Expense is subtracted from Net Income under operating activities.

The statement of cash flows explains why net income as reported on the income statement does not equal the change in the cash balance.

Cash received from the issuance of Notes Payable is a(n)________ on the statement of cash flows.

Walker Corp. uses indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: How will the change in inventory be shown on the statement of cash flows?

Avatar Company uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: How will the change in Accrued Liabilities be shown on the statement of cash flows?

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

If an investor wants to know how much cash a company can free up for new opportunities, such as expanding into a new sales region, they would most likely look at:

Which of the following items would be included as an operating activity on the statement of cash flows, using the direct method?

Which of the following statements is true of the direct and indirect methods of preparing the statement of cash flows?

Nelson Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: The change in Accrued Liabilities will be shown as a negative cash flow in the adjustments to Net Income.

The operating activities section of the statement of cash flows reflects the cash flows that affect current assets and current liabilities.

The financing activities section of the statement of cash flows includes paying dividends and paying off loans.

The investing activities section of the statement of cash flows includes activities that affect the long-term asset section of the balance sheet.

Nelson Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: The change in Accounts Payable will be shown as a negative cash flow in the adjustments to Net Income.

The purchase of equipment financed by a Long-Term Notes Payable is an example of:

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Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

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