Question 1

Under the indirect method,net income is considered the primary source of cash from operating activities.

Accepted Answer

A) True 
 B)False

Question 2

If $200,000 of a company's own stock is sold,it is shown in the financing activities section.

Accepted Answer

A) True 
 B)False

Question 3

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { Col 1 } \
\text { Operating } \
\text { Direct }
\end{array} & \begin{array} { c } 
\text { Col 2 } \
\text { Operating } \
\text { Indirect }
\end{array} & \begin{array} { c } 
\text { Col 3 } \
\text { Investing }
\end{array} & \begin{array} { c } 
\text { Col 4 } \
\text { Financing }
\end{array} \
\hline \text { Cash paid for rent } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 4

There was a utility bill received but not paid.How would this nonpayment affect the statement of cash flows operations section-indirect method?

Accepted Answer

A) It is already included in the net income. 
B) It would affect the operations section positively. 
C) It would affect the operations section negatively. 
D) Does not affect the cash flow from operations. 
A) It is already included in the net income. 
B) It would affect the operations section positively. 
C) It would affect the operations section negatively. 
D) Does not affect the cash flow from operations.

Question 5

Land costing $60,000 was sold for $50,000.What was the effect on the investing activities?

Accepted Answer

A) Increase $50,000 
B) Decrease $10,000 
C) Decrease $70,000 
D) Increase $10,000 
A) Increase $50,000 
B) Decrease $10,000 
C) Decrease $70,000 
D) Increase $10,000

Question 6

The records of Ashley Boutique showed Net Loss,$30,000; Depreciation Expense,$25,000; and increase in Supplies on Hand,$5,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Accepted Answer

A) $15,000. 
B) $20,000. 
C) ($10,000). 
D) ($15,000). 
A) $15,000. 
B) $20,000. 
C) ($10,000). 
D) ($15,000).

Question 7

Activities that increase and decrease as a result of selling a company's stock are:

Accepted Answer

A) marketing activities. 
B) operating activities. 
C) investing activities. 
D) financing activities. 
A) marketing activities. 
B) operating activities. 
C) investing activities. 
D) financing activities.

Question 8

A statement of cash flows would not disclose the effect of which of the following transactions?

Accepted Answer

A) Stock dividends declared 
B) Bonds payable issued 
C) Purchase of treasury stock 
D) Capital stock issued to acquire fixed assets 
A) Stock dividends declared 
B) Bonds payable issued 
C) Purchase of treasury stock 
D) Capital stock issued to acquire fixed assets

Question 9

The purpose of a cash flow statement is to show the inflows and outflows of cash.

Accepted Answer

A) True 
 B)False

Question 10

Accounts Receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year.Income reported on the income statement for the year was $300,000.The cash flow from operating activities on the cash flow statement using the indirect method is:

Accepted Answer

A) $300,000. 
B) $330,000. 
C) $270,000. 
D) None of these answers are correct. 
A) $300,000. 
B) $330,000. 
C) $270,000. 
D) None of these answers are correct.

Question 11

Management has authorized the purchase of a large quantity of inventory for early December.The purchase will have credit terms of 2/10,n/30,they will authorize payment by the discount date.How will this decision affect the period's cash flows from operations-indirect method?

Accepted Answer

A) It will increase this period's cash flows from operations. 
B) It will decrease this period's cash flows from operations. 
C) It will not affect this period's cash flows from operations. 
D) This does not affect cash flows from operations. 
A) It will increase this period's cash flows from operations. 
B) It will decrease this period's cash flows from operations. 
C) It will not affect this period's cash flows from operations. 
D) This does not affect cash flows from operations.

Question 12

One section of a statement of cash flows is purchasing activities.

Accepted Answer

A) True 
 B)False

Question 13

The direct method must be used to report cash flows from operating activities in the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 14

Under the direct method,each line of the income statement is converted to cash paid or received.

Accepted Answer

A) True 
 B)False

Question 15

The board of directors is considering approving a declaration and payment of dividends for the second quarter of the year.How will this decision affect the period's cash flows from operations-indirect method?

Accepted Answer

A) It will increase this period's cash flows from operations. 
B) It will decrease this period's cash flows from operations. 
C) It will not affect this period's cash flows from operations. 
D) This does not affect cash flows from operations. 
A) It will increase this period's cash flows from operations. 
B) It will decrease this period's cash flows from operations. 
C) It will not affect this period's cash flows from operations. 
D) This does not affect cash flows from operations.

Question 16

A transaction of issuance of stock in exchange for equipment would be recorded as a(n):

Accepted Answer

A) operating activity. 
B) investing activity. 
C) financing activity. 
D) noncash investing and financing activity. 
A) operating activity. 
B) investing activity. 
C) financing activity. 
D) noncash investing and financing activity.

Question 17

An example of operating activities is the payment of dividends.

Accepted Answer

A) True 
 B)False

Question 18

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { Col 1 } \
\text { Operating } \
\text { Direct }
\end{array} & \begin{array} { c } 
\text { Col 2 } \
\text { Operating } \
\text { Indirect }
\end{array} & \begin{array} { c } 
\text { Col 3 } \
\text { Investing }
\end{array} & \begin{array} { c } 
\text { Col 4 } \
\text { Financing }
\end{array} \
\hline \text { Sale of land } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 19

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.
-$\begin{array} { | l | c | c | c | c | } 
\hline & \begin{array} { c } 
\text { Col 1 } \
\text { Operating } \
\text { Direct }
\end{array} & \begin{array} { c } 
\text { Col 2 } \
\text { Operating } \
\text { Indirect }
\end{array} & \begin{array} { c } 
\text { Col 3 } \
\text { Investing }
\end{array} & \begin{array} { c } 
\text { Col 4 } \
\text { Financing }
\end{array} \
\hline \text { Decrease in prepaid expenses } & & & & \
\hline
\end{array}$

Accepted Answer

The answer of For each of the following items, indicate...

Question 20

Of the following items,which is not classified as an investing activity on the statement of cash flows?

Accepted Answer

A) Sale of a plant asset for cash 
B) Purchasing land 
C) Collecting loans 
D) Selling goods and services 
A) Sale of a plant asset for cash 
B) Purchasing land 
C) Collecting loans 
D) Selling goods and services

Exam 21: Statement of Cash Flows

Under the indirect method,net income is considered the primary source of cash from operating activities.

If $200,000 of a company's own stock is sold,it is shown in the financing activities section.

There was a utility bill received but not paid.How would this nonpayment affect the statement of cash flows operations section-indirect method?

Land costing $60,000 was sold for $50,000.What was the effect on the investing activities?

The records of Ashley Boutique showed Net Loss,$30,000; Depreciation Expense,$25,000; and increase in Supplies on Hand,$5,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Activities that increase and decrease as a result of selling a company's stock are:

A statement of cash flows would not disclose the effect of which of the following transactions?

The purpose of a cash flow statement is to show the inflows and outflows of cash.

Accounts Receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year.Income reported on the income statement for the year was $300,000.The cash flow from operating activities on the cash flow statement using the indirect method is:

Management has authorized the purchase of a large quantity of inventory for early December.The purchase will have credit terms of 2/10,n/30,they will authorize payment by the discount date.How will this decision affect the period's cash flows from operations-indirect method?

One section of a statement of cash flows is purchasing activities.

The direct method must be used to report cash flows from operating activities in the statement of cash flows.

Under the direct method,each line of the income statement is converted to cash paid or received.

The board of directors is considering approving a declaration and payment of dividends for the second quarter of the year.How will this decision affect the period's cash flows from operations-indirect method?

A transaction of issuance of stock in exchange for equipment would be recorded as a(n):

An example of operating activities is the payment of dividends.

Of the following items,which is not classified as an investing activity on the statement of cash flows?

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: The Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes: The Conclusion of the Payroll Process

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property, plant, equipment, and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values, dividends, treasury Stocks, and Retained Earnings

Corporations and Bonds Payable

Analyzing Financial Statements

The Voucher System

Departmental Accounting

Manufacturing Accounting

Filters