Question 1

When using the indirect method,the amount of net cash flow from operating activities will be higher than it would be if the direct method were used.

Accepted Answer

A) True 
 B)False

Question 2

Under the indirect method,losses are added and gains are subtracted when computing net cash flow from operating activities.

Accepted Answer

A) True 
 B)False

Question 3

Diaz Company had the following comparative balance sheet information at the end of Year 2 and Year 1:
 $\begin{array}{c}
\text {Diaz Company}\
\text { Comparative Balance Sheets}\
\begin{array}{lll}
\
\text {Cash}\
\text {Accounts receivable}\
\text {Inventory}\
\text {Prepaid insurance}\
\text {Property, plant and equipment}\
\text {Accumulated depreciation}\
\text {Total}\
\text {Accounts payable}\
\text {Bonds payable}\
\text {Common stock}\
\text {Retained earnings}\
\text {Total}
\end{array}
\begin{array}{cc}
 \text { Year } 2 &  \text { Year } 1 \
 \$  30,000&  \$  28,000 \
  48,000 &  50,000 \
 158,000 &  156,000\
 10,000&  8,000 \
 70,000  & 60,000 \
 (14,000)  & (10,000) \
\$  302,000 & \$ 292,000 \
\$  14,000 & \$  18,000 \
 90,000 & 120,000 \
140,000 & 120,000 \
58,000 &  34,000 \
\$302,000 &\$292,000 \
\end{array}
\end{array}$
 Diaz reported net income for Year 2 of $40,000.There were no sales or disposals of property,plant,and equipment during the year.Diaz uses the indirect method to prepare the statement of cash flows.
Calculate Diaz's cash flow from financing activities for Year 2.

Accepted Answer

\[\begin{array} { l r } 
\text { Paid di

Question 4

Shaw Associates uses the indirect method for preparing the statement of cash flows.The following accounts and balances were drawn from the company's accounting records: $$\begin{array} { l c c } 
\text { Account Title } & \text { Beginning } & \text { Ending } \
\text { Accounts receivable } & \$ 30,000 & \$ 40,000 \
\text { Prepaid insurance } & \$ 24,600 & \$ 1,000 \
\text { Accounts payable } & \$ 24,000 & \$ 25,800 \
\text { Unearned revenue } & \$ 6,400 & \$ 3,800
\end{array}$$ Net income for the period was $42,000.The net cash flows from operating activities equal:

Accepted Answer

A)  $37,200. 
B)  $34,800. 
C)  $49,200. 
D)  $40,000. 
A)  $37,200. 
B)  $34,800. 
C)  $49,200. 
D)  $40,000.

Question 5

All of the following are deducted from net income when preparing the statement of cash flows under the indirect method except:

Accepted Answer

A)  an increase in accounts payable. 
B)  a decrease in accrued liabilities. 
C)  an increase in accounts receivable. 
D)  an increase in inventory. 
A)  an increase in accounts payable. 
B)  a decrease in accrued liabilities. 
C)  an increase in accounts receivable. 
D)  an increase in inventory.

Question 6

The difference between the direct and the indirect methods applies only to cash from what type of activity?

Accepted Answer

A)  Operating 
B)  Investing 
C)  Financing 
D)  All of these answers are correct. 
A)  Operating 
B)  Investing 
C)  Financing 
D)  All of these answers are correct.

Question 7

In preparing the statement of cash flows by the indirect method,a decrease in a long-term investment account would be added to net income.

Accepted Answer

A) True 
 B)False

Question 8

What types of accounts are reconciled to determine cash flows from operating activities?

Accepted Answer

Noncash current asset and curr

Question 9

Which of the following would not be reported as an investing activity on the statement of cash flows?

Accepted Answer

A)  Cash dividends received from an investment in marketable securities. 
B)  Cash loaned to another company. 
C)  Cash received from the sale of equipment. 
D)  Cash paid to purchase production equipment. 
A)  Cash dividends received from an investment in marketable securities. 
B)  Cash loaned to another company. 
C)  Cash received from the sale of equipment. 
D)  Cash paid to purchase production equipment.

Question 10

During the year,the Equipment account increased by $25,000 and the Accumulated Depreciation account increased by $2,000.In addition,the company sold equipment that originally cost $12,000 and had $9,000 of accumulated depreciation for $4,500. What was the cash outflow to purchase equipment?

Accepted Answer

A)  $25,000 
B)  $37,000 
C)  $29,500 
D)  $13,000 
A)  $25,000 
B)  $37,000 
C)  $29,500 
D)  $13,000

Question 11

Street Corporation reported net income of $400,000 and a net cash flow from operating activities of $550,000 during the year.Which of the following could not have been a reason why Street's net cash flows from operating activities were greater than its net income?

Accepted Answer

A)  Increase in accrued liabilities from the beginning of the year to the end of the year 
B)  Increase in accounts payable from the beginning of the year to the end of the year 
C)  Loss on the sale of equipment 
D)  Increase in accounts receivable 
A)  Increase in accrued liabilities from the beginning of the year to the end of the year 
B)  Increase in accounts payable from the beginning of the year to the end of the year 
C)  Loss on the sale of equipment 
D)  Increase in accounts receivable

Question 12

Bates Company pays cash for all inventory purchases.Bates reports that it had a beginning inventory of $2,500 and an ending inventory of $900.Its cost of goods sold equaled $5,500.Based on this information,the amount of cash paid for inventory purchases was:

Accepted Answer

A)  $3,900 
B)  $7,100 
C)  $1,400 
D)  $9,100 
A)  $3,900 
B)  $7,100 
C)  $1,400 
D)  $9,100

Question 13

Under the indirect method,losses would be added to net income when determining the net cash flow from operating activities.

Accepted Answer

A) True 
 B)False

Question 14

The indirect method of preparing the statement of cash flows is recommended by the Financial Accounting Standards Board.

Accepted Answer

A) True 
 B)False

Question 15

Under the indirect method,the increase or decrease in stockholders' equity is handled in the investing section of a cash flow statement.

Accepted Answer

A) True 
 B)False

Question 16

The gain resulting from the sale of equipment shown when using the indirect method to prepare the statement of cash flows is reported in the:

Accepted Answer

A)  operating section as a deduction. 
B)  investing section as a deduction. 
C)  operating section as an addition. 
D)  investing section as an addition. 
A)  operating section as a deduction. 
B)  investing section as a deduction. 
C)  operating section as an addition. 
D)  investing section as an addition.

Question 17

What can cause cash flow from operating activities to be greater than net income from operating activities?

Accepted Answer

Such a result is possible due to noncash

Question 18

Use the reconciliation approach to determine cash received from customers for the Boyd Company for the year.Beginning and ending balances of accounts receivable were $6,500 and 5,900,respectively.Sales (all on account)amounted to $127,000.

Accepted Answer

\[\begin{array} { l r r } 
\text { Begin

Question 19

In preparing the statement of cash flows by the indirect method,which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?

Accepted Answer

A)  Increases in current assets are subtracted from net income. 
B)  Noncash revenue and gains are subtracted from net income. 
C)  Decreases in current assets are added to net income. 
D)  Increases in current liabilities are subtracted from net income. 
A)  Increases in current assets are subtracted from net income. 
B)  Noncash revenue and gains are subtracted from net income. 
C)  Decreases in current assets are added to net income. 
D)  Increases in current liabilities are subtracted from net income.

Question 20

Pierce Corporation reported a $3,600 balance in accounts receivable on January 1,Year 2.During the year,sales on account in the amount of $24,800 were made.If the ending balance of accounts receivable is $3,700,what is the amount of cash received from customers?

Accepted Answer

A)  $21,200 
B)  $21,500 
C)  $28,400 
D)  $24,700 
A)  $21,200 
B)  $21,500 
C)  $28,400 
D)  $24,700

When using the indirect method,the amount of net cash flow from operating activities will be higher than it would be if the direct method were used.

Under the indirect method,losses are added and gains are subtracted when computing net cash flow from operating activities.

All of the following are deducted from net income when preparing the statement of cash flows under the indirect method except:

The difference between the direct and the indirect methods applies only to cash from what type of activity?

In preparing the statement of cash flows by the indirect method,a decrease in a long-term investment account would be added to net income.

What types of accounts are reconciled to determine cash flows from operating activities?

Which of the following would not be reported as an investing activity on the statement of cash flows?

During the year,the Equipment account increased by $25,000 and the Accumulated Depreciation account increased by $2,000.In addition,the company sold equipment that originally cost $12,000 and had $9,000 of accumulated depreciation for $4,500. What was the cash outflow to purchase equipment?

Street Corporation reported net income of $400,000 and a net cash flow from operating activities of $550,000 during the year.Which of the following could not have been a reason why Street's net cash flows from operating activities were greater than its net income?

Bates Company pays cash for all inventory purchases.Bates reports that it had a beginning inventory of $2,500 and an ending inventory of $900.Its cost of goods sold equaled $5,500.Based on this information,the amount of cash paid for inventory purchases was:

Under the indirect method,losses would be added to net income when determining the net cash flow from operating activities.

The indirect method of preparing the statement of cash flows is recommended by the Financial Accounting Standards Board.

Under the indirect method,the increase or decrease in stockholders' equity is handled in the investing section of a cash flow statement.

The gain resulting from the sale of equipment shown when using the indirect method to prepare the statement of cash flows is reported in the:

What can cause cash flow from operating activities to be greater than net income from operating activities?

Use the reconciliation approach to determine cash received from customers for the Boyd Company for the year.Beginning and ending balances of accounts receivable were $6,500 and 5,900,respectively.Sales (all on account)amounted to $127,000.

In preparing the statement of cash flows by the indirect method,which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?

Pierce Corporation reported a $3,600 balance in accounts receivable on January 1,Year 2.During the year,sales on account in the amount of $24,800 were made.If the ending balance of accounts receivable is $3,700,what is the amount of cash received from customers?

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, process, and Hybrid Costing Systems

Financial Statement Analysis

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Exam 14: Statement of Cash Flows

When using the indirect method,the amount of net cash flow from operating activities will be higher than it would be if the direct method were used.

Under the indirect method,losses are added and gains are subtracted when computing net cash flow from operating activities.

All of the following are deducted from net income when preparing the statement of cash flows under the indirect method except:

The difference between the direct and the indirect methods applies only to cash from what type of activity?

In preparing the statement of cash flows by the indirect method,a decrease in a long-term investment account would be added to net income.

What types of accounts are reconciled to determine cash flows from operating activities?

Which of the following would not be reported as an investing activity on the statement of cash flows?

During the year,the Equipment account increased by $25,000 and the Accumulated Depreciation account increased by $2,000.In addition,the company sold equipment that originally cost $12,000 and had $9,000 of accumulated depreciation for $4,500. What was the cash outflow to purchase equipment?

Street Corporation reported net income of $400,000 and a net cash flow from operating activities of $550,000 during the year.Which of the following could not have been a reason why Street's net cash flows from operating activities were greater than its net income?

Bates Company pays cash for all inventory purchases.Bates reports that it had a beginning inventory of $2,500 and an ending inventory of $900.Its cost of goods sold equaled $5,500.Based on this information,the amount of cash paid for inventory purchases was:

Under the indirect method,losses would be added to net income when determining the net cash flow from operating activities.

The indirect method of preparing the statement of cash flows is recommended by the Financial Accounting Standards Board.

Under the indirect method,the increase or decrease in stockholders' equity is handled in the investing section of a cash flow statement.

The gain resulting from the sale of equipment shown when using the indirect method to prepare the statement of cash flows is reported in the:

What can cause cash flow from operating activities to be greater than net income from operating activities?

Use the reconciliation approach to determine cash received from customers for the Boyd Company for the year.Beginning and ending balances of accounts receivable were $6,500 and 5,900,respectively.Sales (all on account)amounted to $127,000.

In preparing the statement of cash flows by the indirect method,which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?

Pierce Corporation reported a $3,600 balance in accounts receivable on January 1,Year 2.During the year,sales on account in the amount of $24,800 were made.If the ending balance of accounts receivable is $3,700,what is the amount of cash received from customers?

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, process, and Hybrid Costing Systems

Financial Statement Analysis

Filters