Question 1

Cash flows from interest received on loans are reported in the statement of cash flows as part of:

Accepted Answer

A)  Operating activities. 
B)  Financing activities. 
C)  This is not reported in the statement of cash flows. 
D)  Noncash activities. 
E)  Investing activities. 
A)  Operating activities. 
B)  Financing activities. 
C)  This is not reported in the statement of cash flows. 
D)  Noncash activities. 
E)  Investing activities.

Question 2

A cash-based measure to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.

Accepted Answer

A) True 
 B)False

Question 3

Investing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

Accepted Answer

A) True 
 B)False

Question 4

Noncash financing and investing activities are disclosed in a ________ or in a separate ________.

Accepted Answer

note; schedule inclu

Question 5

Common uses of the statement of cash flows include all but which of the following?

Accepted Answer

A)  Investor assessment of cash flows before buying and selling stock. 
B)  Management prediction of future cash flows for decision making. 
C)  Management determination of the specific sources and uses of cash. 
D)  Creditor evaluation of a company's ability to generate cash to cover debt. 
E)  Government assessment of whether company is able to pay taxes as they become due. 
A)  Investor assessment of cash flows before buying and selling stock. 
B)  Management prediction of future cash flows for decision making. 
C)  Management determination of the specific sources and uses of cash. 
D)  Creditor evaluation of a company's ability to generate cash to cover debt. 
E)  Government assessment of whether company is able to pay taxes as they become due.

Question 6

Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year $233,000 Cash dividends declared for the year 50,000
Proceeds from the sale of equipment 85,000 Gain on the sale of equipment 4,500
Cash dividends payable at the beginning of the year 22,000 Cash dividends payable at the end of the year 30,000 Net income for the year 110,000

Accepted Answer

A)  $343,000. 
B)  $301,000. 
C)  $213,000. 
D)  $293,000. 
E)  $297,500. 
A)  $343,000. 
B)  $301,000. 
C)  $213,000. 
D)  $293,000. 
E)  $297,500.

Question 7

The cash flow on total assets ratio is computed by dividing ________ by ________.

Accepted Answer

cash flows from oper

Question 8

Preparation of the statement of cash flows does not involve:

Accepted Answer

A)  Computing the net increase or decrease in cash. 
B)  Computing the profit compared to the net increase or decrease in cash. 
C)  Computing and reporting net cash provided or used by operations. 
D)  Computing and reporting net cash provided or used by investing activities. 
E)  Computing and reporting net cash provided or used by financing activities. 
A)  Computing the net increase or decrease in cash. 
B)  Computing the profit compared to the net increase or decrease in cash. 
C)  Computing and reporting net cash provided or used by operations. 
D)  Computing and reporting net cash provided or used by investing activities. 
E)  Computing and reporting net cash provided or used by financing activities.

Question 9

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: $$\begin{array} { l | r } 
\text { Net income for the year was } & \$ 52,000 \
\hline \text { Accounts payable decreased by } & 18,000 \
\hline \text { Accounts receivable increased by } & 25,000 \
\hline \text { Inventories increased by } & 5,000 \
\hline \text { Depreciation expense was } & 30,000
\end{array}$$ Net cash provided by operating activities was:

Accepted Answer

A)  $60,000. 
B)  $34,000. 
C)  $80,000. 
D)  $52,000. 
E)  $70,000. 
A)  $60,000. 
B)  $34,000. 
C)  $80,000. 
D)  $52,000. 
E)  $70,000.

Question 10

When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

Accepted Answer

A)  A decrease in accounts payable. 
B)  Proceeds from the disposal of a long-term asset with no gain or loss. 
C)  An increase in accounts receivable. 
D)  A decrease in accrued expenses payable. 
E)  An increase in prepaid expenses. 
A)  A decrease in accounts payable. 
B)  Proceeds from the disposal of a long-term asset with no gain or loss. 
C)  An increase in accounts receivable. 
D)  A decrease in accrued expenses payable. 
E)  An increase in prepaid expenses.

Question 11

The purchase of stock in another company is classified as a financing activity.

Accepted Answer

A) True 
 B)False

Question 12

A machine with a cost of $130,000, current year depreciation expense of $17,000 and accumulated depreciation of $85,000 is sold for $40,000 cash. The total amount that should be reported in the operating section of the statement of cash flow as per indirect method is:

Accepted Answer

A)  $17,000. 
B)  $22,000. 
C)  $57,000. 
D)  $4,000. 
E)  $21,000. 
A)  $17,000. 
B)  $22,000. 
C)  $57,000. 
D)  $4,000. 
E)  $21,000.

Question 13

Financing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

Accepted Answer

A) True 
 B)False

Question 14

The direct method for the preparation of the operating activities section of the statement of cash flows:

Accepted Answer

A)  Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement. 
B)  Is required by the FASB. 
C)  Reports a different amount of cash flows from operations than if the indirect method is used. 
D)  Separately lists each major item of operating cash receipts and cash payments. 
E)  Is required if the company is a merchandiser. 
A)  Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement. 
B)  Is required by the FASB. 
C)  Reports a different amount of cash flows from operations than if the indirect method is used. 
D)  Separately lists each major item of operating cash receipts and cash payments. 
E)  Is required if the company is a merchandiser.

Question 15

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

Accepted Answer

A)  This is not reported on the statement of cash flows. 
B)  Operating activities. 
C)  Schedule of noncash investing or financing activity. 
D)  Financing activities. 
E)  Investing activities. 
A)  This is not reported on the statement of cash flows. 
B)  Operating activities. 
C)  Schedule of noncash investing or financing activity. 
D)  Financing activities. 
E)  Investing activities.

Question 16

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are added to net income.

Accepted Answer

A) True 
 B)False

Question 17

Match each of the following items with the appropriate definitions.
(A) Financing activities
(B) Investing activities
(C) Statement of cash flows
(D) Indirect method
(E) Direct method
(F) Operating activities
________ (1) A method of computing and reporting that involves adjusting the net income amount by adding and subtracting items that are necessary to yield net cash provided (used) by operating activities.
________ (2) A financial statement that reports the cash inflows and cash outflows for an accounting period, and classifies those cash flows as operating, investing, or financing activities.
________ (3) A method of computing and reporting the net cash provided (used) by operating activities that lists the major items of operating cash receipts, and then subtracts the major items of operating cash payments.
________ (4) Transactions that include making and collecting notes receivable or purchasing and selling plant assets, or investments in other than cash equivalents and trading securities.
________ (5) Transactions with a company's owners and creditors that include obtaining cash from issuing debt and repaying the amounts borrowed, and obtaining cash from or distributing cash to owners.
________ (6) Activities that involve the production or purchase of merchandise and the sale of goods or services to customers, including expenditures related to administering the business.

Accepted Answer

1. D; 2. C

Question 18

Cash flow amounts and their timing should be considered when planning and analyzing operating activities.

Accepted Answer

A) True 
 B)False

Question 19

The cash flow on total assets ratio reflects actual cash flows and is therefore affected by income recognition and measurement.

Accepted Answer

A) True 
 B)False

Question 20

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available:
 1.
$\begin{array}{ll}
\text { Net income for the year was } & \$ 52,000 \
\hline \text { Accounts payable decreased by } & \$ 18,000 \
\hline \text { Accounts receivable increased by } & \$ 25,000 \
\hline \text { Inventories increased by } & \$ 5,000 \
\hline \text { Cash dividends paid were } & \$ 14,000 \
\hline \text { Depreciation expense was } & \$ 20,000
\end{array}$

Net cash provided by operating activites was:
A) $\$ 120,000$.
B) $\$ 70,000$.
C) $\$ 110,000$
D) $\$ 24,000$.
E) $\$ 71,000$

Accepted Answer

The answer of In preparing a company's statement of cash...

Exam 16: Reporting the Statement of Cash Flows

Cash flows from interest received on loans are reported in the statement of cash flows as part of:

A cash-based measure to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.

Investing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

Noncash financing and investing activities are disclosed in a ________ or in a separate ________.

Common uses of the statement of cash flows include all but which of the following?

The cash flow on total assets ratio is computed by dividing ________ by ________.

Preparation of the statement of cash flows does not involve:

When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

The purchase of stock in another company is classified as a financing activity.

A machine with a cost of $130,000, current year depreciation expense of $17,000 and accumulated depreciation of $85,000 is sold for $40,000 cash. The total amount that should be reported in the operating section of the statement of cash flow as per indirect method is:

Financing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

The direct method for the preparation of the operating activities section of the statement of cash flows:

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are added to net income.

Cash flow amounts and their timing should be considered when planning and analyzing operating activities.

The cash flow on total assets ratio reflects actual cash flows and is therefore affected by income recognition and measurement.

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

Filters

Noncash financing and investing activities are disclosed in a or in a separate .

The cash flow on total assets ratio is computed by dividing by .