Question 1

Which of the following is true of the statement of cash flows?

Accepted Answer

A) It indicates when long-term debt will mature. 
B) It reports on the qualitative behavior of the company's performance. 
C) It covers a span of time and is dated the same as the income statement. 
D) It shows how the profits or losses of the company were generated. 
A) It indicates when long-term debt will mature. 
B) It reports on the qualitative behavior of the company's performance. 
C) It covers a span of time and is dated the same as the income statement. 
D) It shows how the profits or losses of the company were generated.

Question 2

Davis Metals Company uses the direct method to prepare its statement of cash flows.Use the following information reported for the year 2017 to compute the cash paid to suppliers for operating expenses.
Operating expenses,$32,000
Accrued Liabilities,beginning balance,$3,700
Accrued Liabilities,ending balance,$5,200

Accepted Answer

A) $35,700 
B) $33,500 
C) $30,500 
D) $37,200 
A) $35,700 
B) $33,500 
C) $30,500 
D) $37,200

Question 3

The direct method starts with net income and adjusts it to net cash provided by operating activities.

Accepted Answer

A) True 
 B)False

Question 4

Neutral Paints Company uses the direct method for preparing its statement of cash flow.Neutral reports the following information regarding 2017:
From the income statement:
Sales Revenues,$268,000
Cost of Goods Sold,$213,000
Operating Expenses,$34,000
From the balance sheet:
 
What amount will be shown for payments to suppliers for operating expenses? (Accounts Payable are for purchases of merchandise inventory only,and Accrued Liabilities relate to operating expenses. )

Accepted Answer

A) $37,000 
B) $34,000 
C) $32,500 
D) $38,500 
A) $37,000 
B) $34,000 
C) $32,500 
D) $38,500

Question 5

Although the direct method is easier to use,the Financial Accounting Standards Board (FASB)prefers the indirect method of reporting cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 6

A business's cash receipts and cash payments for a specific period are reported on a(n)________.

Accepted Answer

A) income statement 
B) balance sheet 
C) statement of cash flows 
D) cash reconciliation statement 
A) income statement 
B) balance sheet 
C) statement of cash flows 
D) cash reconciliation statement

Question 7

The spreadsheet starts with the beginning statement of cash flows and concludes with the ending statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 8

The activities that are included in the operating activities section of the statement of cash flows are ________.

Accepted Answer

A) activities that involve stockholders' equity 
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 involve stockholders' equity 
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

Ocean Auto Parts Company uses the direct method to prepare its statement of cash flows.Refer to the following information reported for 2017:
1.Sales Revenue,$516,000
2.Accounts Receivable,beginning balance,$97,000
3.Accounts Receivable,ending balance,$63,000
Compute the collections from customers.

Accepted Answer

A) $550,000 
B) $453,000 
C) $160,000 
D) $356,000 
A) $550,000 
B) $453,000 
C) $160,000 
D) $356,000

Question 10

The financing activities section of the statement of cash flows includes paying dividends and making payments on long-term liabilities.

Accepted Answer

A) True 
 B)False

Question 11

When 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 12

The direct method of reporting cash flows from operating activities provides clearer information about the sources and uses of cash than does the indirect method.

Accepted Answer

A) True 
 B)False

Question 13

To complete the statement of cash flows,the net change in cash and cash balances must be shown.

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

Many companies use free cash flow to estimate the amount of cash that would be available for unexpected opportunities.

Accepted Answer

A) True 
 B)False

Question 16

Sonesta Farm Equipment Company sold equipment for cash.The income statement shows a loss on the sale of $9,000.The net book value of the asset was $30,900.Which of the following statements describes the cash effect of the transaction?

Accepted Answer

A) positive cash flow of $39,900 from financing activities 
B) negative cash flow of $21,900 for operating activities 
C) negative cash flow of $21,900 for financing activities 
D) positive cash flow of $21,900 from investing activities 
A) positive cash flow of $39,900 from financing activities 
B) negative cash flow of $21,900 for operating activities 
C) negative cash flow of $21,900 for financing activities 
D) positive cash flow of $21,900 from investing activities

Question 17

Tritan Company is preparing its statement of cash flows using the indirect method.Refer to the following portion of the comparative balance sheet:
 
Additional information provided by the company includes the following:
1.During 2016,the company repaid $35,000 of long-term notes payable.
2.During 2016,the company borrowed $23,000 on a new note payable.
Based on the above information only,what amount of net cash flow would be shown in the financing section of the statement of cash flows?

Accepted Answer

A) $(12,000) 
B) $12,000 
C) $58,000 
D) $(58,000) 
A) $(12,000) 
B) $12,000 
C) $58,000 
D) $(58,000)

Question 18

Wellington,Inc.uses the direct method to prepare its statement of cash flows.Refer to the following financial statement information for the year ended December 31,2017:

Use the direct method to compute the total cash receipts from operating activities.

Accepted Answer

A) $286,900 
B) $296,700 
C) $259,400 
D) $293,900 
A) $286,900 
B) $296,700 
C) $259,400 
D) $293,900

Question 19

Which of the following sections of the statement of cash flows includes activities that create revenue and expenses of the business?

Accepted Answer

A) the investing activities section 
B) the financing activities section 
C) the operating activities section 
D) the non-cash investing and financing section 
A) the investing activities section 
B) the financing activities section 
C) the operating activities section 
D) the non-cash investing and financing section

Question 20

For the year ended December 31,2016,the Statement of Cash Flows for Johnson Family Auto Supply shows the following information: Net Cash Used by Operating Activities,$71,000;Net Cash Provided by Investing Activities,$49,000;and Net Cash Provided by Financing Activities,$41,000.Cash has increased by $161,000.

Accepted Answer

A) True 
 B)False

Exam 16: The Statement of Cash Flows

Which of the following is true of the statement of cash flows?

The direct method starts with net income and adjusts it to net cash provided by operating activities.

Although the direct method is easier to use,the Financial Accounting Standards Board (FASB)prefers the indirect method of reporting cash flows from operating activities.

A business's cash receipts and cash payments for a specific period are reported on a(n)________.

The spreadsheet starts with the beginning statement of cash flows and concludes with the ending statement of cash flows.

The activities that are included in the operating activities section of the statement of cash flows are ________.

Ocean Auto Parts Company uses the direct method to prepare its statement of cash flows.Refer to the following information reported for 2017: 1.Sales Revenue,$516,000 2.Accounts Receivable,beginning balance,$97,000 3.Accounts Receivable,ending balance,$63,000 Compute the collections from customers.

The financing activities section of the statement of cash flows includes paying dividends and making payments on long-term liabilities.

When preparing the statement of cash flows using the indirect method,depreciation expense is subtracted from net income under operating activities.

The direct method of reporting cash flows from operating activities provides clearer information about the sources and uses of cash than does the indirect method.

To complete the statement of cash flows,the net change in cash and cash balances must be shown.

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

Many companies use free cash flow to estimate the amount of cash that would be available for unexpected opportunities.

Sonesta Farm Equipment Company sold equipment for cash.The income statement shows a loss on the sale of $9,000.The net book value of the asset was $30,900.Which of the following statements describes the cash effect of the transaction?

Wellington,Inc.uses the direct method to prepare its statement of cash flows.Refer to the following financial statement information for the year ended December 31,2017: Use the direct method to compute the total cash receipts from operating activities.

Which of the following sections of the statement of cash flows includes activities that create revenue and expenses of the business?

Accounting and the Business Environment

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

Capital Investment Decisions

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