Question 1

The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

Accepted Answer

A) True 
 B)False

Question 2

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used (which can be reported in the notes).

Accepted Answer

A) True 
 B)False

Question 3

The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $$\begin{array} { l | r } 
\text { Retained earnings balance at the begining of the year } & \$ 126,000 \
\hline \text { Cash dividends declared for the year } & 46,000 \
\hline \text { Proceeds from the sale of equipment } & 81,000 \
\hline \text { Gain on the sale of equipment } & 7,000 \
\hline \text { Cash dividends payable at the beginning of the year } & 18,000 \
\hline \text { Cash dividends payable at the end of the year } & 20,000 \
\hline \text { Net income for the year } & 92,000
\end{array}$$ 
-The amount of cash dividends paid during the year would be:

Accepted Answer

A)  $44,000. 
B)  $64,000. 
C)  $48,000. 
D)  $46,000. 
E)  $8,000. 
A)  $44,000. 
B)  $64,000. 
C)  $48,000. 
D)  $46,000. 
E)  $8,000.

Question 4

A corporation reported average total assets in Year 1 of $397,350 and $440,800 in Year 2. Its net operating cash flow for Year 1 was $35,667 and $35,790 for Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

Accepted Answer

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

Question 5

A spreadsheet can help organize the information needed to prepare a statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

A company's income statement showed the following: net income, $134,000; depreciation expense, $30,000; and gain on sale of plant assets, $4,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

Accepted Answer

A)  $96,600. 
B)  $141,000. 
C)  $88,600. 
D)  $156,600. 
E)  $148,600. 
A)  $96,600. 
B)  $141,000. 
C)  $88,600. 
D)  $156,600. 
E)  $148,600.

Question 7

A statement of cash flows explains the differences between the beginning and ending balances of:

Accepted Answer

A)  Cash, cash equivalents, and short-term investments. 
B)  Cash and cash equivalents. 
C)  Net income. 
D)  Working capital. 
E)  Equity. 
A)  Cash, cash equivalents, and short-term investments. 
B)  Cash and cash equivalents. 
C)  Net income. 
D)  Working capital. 
E)  Equity.

Question 8

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

Accepted Answer

A)  Depreciation expense. 
B)  Cash collections from customers. 
C)  Cash received from the sale of treasury stock. 
D)  Cash received from the sale of a building. 
E)  Credit sales. 
A)  Depreciation expense. 
B)  Cash collections from customers. 
C)  Cash received from the sale of treasury stock. 
D)  Cash received from the sale of a building. 
E)  Credit sales.

Question 9

Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.

Accepted Answer

A) True 
 B)False

Question 10

_____________activities include the cash effects of transactions and events that determine net income.

Accepted Answer

The answer of _____________activities include the cash effects of transactions...

Question 11

The cash flow on total assets ratio:

Accepted Answer

A)  Is the same as profit margin. 
B)  Can be an indicator of earnings quality. 
C)  Is highly affected by accounting principles of income recognition and measurement. 
D)  Is the same as return on assets. 
E)  Is average net assets divided by cash flows from operations. 
A)  Is the same as profit margin. 
B)  Can be an indicator of earnings quality. 
C)  Is highly affected by accounting principles of income recognition and measurement. 
D)  Is the same as return on assets. 
E)  Is average net assets divided by cash flows from operations.

Question 12

A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable. The entire transaction is disclosed to users in the financing section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 13

Keita Co. reported net income of $213.4 million, net cash provided by operating activities of
$151.3 million, total cash flows of $187.7 million, and average total assets of 2,314.8 million at the end of the year. Calculate the cash flow on total assets ratio for Keita.

Accepted Answer

Cash Flow on Total Assets = Op

Question 14

Investing activities include: (a) the purchase and sale of long-term assets, (b) lending and collecting on notes receivable, and (c) the purchase and sale of short-term investments in the securities of other entities, other than cash equivalents and trading securities.

Accepted Answer

A) True 
 B)False

Question 15

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 16

When preparing the operating activities section of the statement of cash flows using the direct method, non-operating gains are added to net income.

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following is representative of typical cash flows from operating activities?

Accepted Answer

A)  Repayment of principals on loans. 
B)  Payments by a merchandiser to acquire equity securities of other companies. 
C)  Proceeds from the issuance of bonds and notes payable. 
D)  Receipts of cash sales. 
E)  Proceeds from collecting the principal amounts of loans. 
A)  Repayment of principals on loans. 
B)  Payments by a merchandiser to acquire equity securities of other companies. 
C)  Proceeds from the issuance of bonds and notes payable. 
D)  Receipts of cash sales. 
E)  Proceeds from collecting the principal amounts of loans.

Question 18

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are added to net income.

Accepted Answer

A) True 
 B)False

Question 19

When preparing the operating section of the statement of cash flows using the indirect method, noncash expenses are ________ net income.

Accepted Answer

The answer of When preparing the operating section of the...

Question 20

Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Exam 16: Reporting the Statement of Cash Flows

The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used (which can be reported in the notes).

A corporation reported average total assets in Year 1 of $397,350 and $440,800 in Year 2. Its net operating cash flow for Year 1 was $35,667 and $35,790 for Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

A spreadsheet can help organize the information needed to prepare a statement of cash flows.

A statement of cash flows explains the differences between the beginning and ending balances of:

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.

_____________activities include the cash effects of transactions and events that determine net income.

The cash flow on total assets ratio:

A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable. The entire transaction is disclosed to users in the financing section of the statement of cash flows.

Keita Co. reported net income of $213.4 million, net cash provided by operating activities of $151.3 million, total cash flows of $187.7 million, and average total assets of 2,314.8 million at the end of the year. Calculate the cash flow on total assets ratio for Keita.

Investing activities include: (a) the purchase and sale of long-term assets, (b) lending and collecting on notes receivable, and (c) the purchase and sale of short-term investments in the securities of other entities, other than cash equivalents and trading securities.

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

When preparing the operating activities section of the statement of cash flows using the direct method, non-operating gains are added to net income.

Which one of the following is representative of typical cash flows from operating activities?

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are added to net income.

When preparing the operating section of the statement of cash flows using the indirect method, noncash expenses are ________ net income.

Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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