Question 1

Rufina Corp.sold for $20,000 plant assets that cost $40,000 and that had an accumulated depreciation of $8,000.The journal entry to record the transaction is:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 2

Lincoln Company engaged in this transaction: Retired long-term debt with cash.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

A) Operating activities section. 
B) Does not represent a cash flow. 
C) Investing activities section. 
D) Financing activities section. 
A) Operating activities section. 
B) Does not represent a cash flow. 
C) Investing activities section. 
D) Financing activities section.

Question 3

Noncash investing and financing transactions,such as the exchange of a long-term asset for a long-term liability,represent significant investing and financing activities and are reflected in a separate schedule as part of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 4

When preparing a statement of cash flows using the indirect method,depreciation expense is added to net income to arrive at net cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 5

The statement of cash flows shows the effects on net income of a company's operating,investing,and financing activities for an accounting period.

Accepted Answer

A) True 
 B)False

Question 6

Lincoln Company engaged in this transaction: Issued stock for land.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

A) Financing activities section. 
B) Operating activities section. 
C) Investing activities section. 
D) Schedule of noncash investing and financing transactions. 
A) Financing activities section. 
B) Operating activities section. 
C) Investing activities section. 
D) Schedule of noncash investing and financing transactions.

Question 7

Use this information to answer the following question. Northbrook Corporation is preparing a statement of cash flows.The following transactions occurred during the year:
1)Sold machinery for $9,000 cash.
2)Purchased a building for $80,000 cash.
3)Issued $70,000 worth of stock to acquire an airplane.
4)Converted long-term bonds by issuing $100,000 worth of stock.
5)Declared and paid a $10,000 cash dividend.
-Transaction 1 would be found on the statement of cash flows in the

Accepted Answer

A) cash flows from operating activities section. 
B) cash flows from financing activities section. 
C) noncash investing and financing transactions section. 
D) cash flows from investing activities section. 
A) cash flows from operating activities section. 
B) cash flows from financing activities section. 
C) noncash investing and financing transactions section. 
D) cash flows from investing activities section.

Question 8

For 20x5,Devers Enterprises had average total assets of $1,040,000,sales of $900,000,net income of $100,000,net cash flows from operating activities of $150,000,dividend payments of $50,000,purchases of plant assets of $120,000,and sales of plant assets of $110,000.Using this information,compute (a)cash flow yield, (b)cash flows to sales, (c)cash flows to assets,and (d)free cash flow.Round amounts to one decimal place.

Accepted Answer

a.1.5 times ($150,000 F1F1F1S1F1F1F10 $

Question 9

Lincoln Company engaged in this transaction: Purchased 60-day commercial paper.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

A) Does not represent a cash flow. 
B) Operating activities section. 
C) Financing activities section. 
D) Investing activities section. 
A) Does not represent a cash flow. 
B) Operating activities section. 
C) Financing activities section. 
D) Investing activities section.

Question 10

Cash flows to assets is computed as

Accepted Answer

A) Net cash flows from operating activities/Average total assets 
B) Average total assets/Net cash flows from operating activities 
C) Net cash flows from operating activities/Sales 
D) Net income/Net cash flows from operating activities 
A) Net cash flows from operating activities/Average total assets 
B) Average total assets/Net cash flows from operating activities 
C) Net cash flows from operating activities/Sales 
D) Net income/Net cash flows from operating activities

Question 11

Cash flows to assets is measured in "times."

Accepted Answer

A) True 
 B)False

Question 12

The indirect method of preparing a statement of cash flows

Accepted Answer

A) eliminates the need for a schedule of noncash investing and financing transactions. 
B) provides a different result than the direct method. 
C) adjusts net income for changes in current accounts. 
D) shows collections from customers rather than the change in Accounts Receivable. 
A) eliminates the need for a schedule of noncash investing and financing transactions. 
B) provides a different result than the direct method. 
C) adjusts net income for changes in current accounts. 
D) shows collections from customers rather than the change in Accounts Receivable.

Question 13

If the indirect method is used,which of the following would be added to net income to arrive at net cash flows from operating activities?

Accepted Answer

A) Increase in Inventory. 
B) Decrease in Prepaid Expenses. 
C) Decrease in Accounts Payable. 
D) Increase in Accounts Receivable. 
A) Increase in Inventory. 
B) Decrease in Prepaid Expenses. 
C) Decrease in Accounts Payable. 
D) Increase in Accounts Receivable.

Question 14

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Gain on Sale of Investment-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Accepted Answer

A) Add to net income to arrive at net cash flows from operating activities. 
B) Subtract from net income to arrive at net cash flows from operating activities. 
C) Not used to adjust net income to calculate net cash flows from operating activities. 
A) Add to net income to arrive at net cash flows from operating activities. 
B) Subtract from net income to arrive at net cash flows from operating activities. 
C) Not used to adjust net income to calculate net cash flows from operating activities.

Question 15

Net cash flows from operating activities would be needed to calculate cash flow yield,cash flows to assets,and cash flows to sales.

Accepted Answer

A) True 
 B)False

Question 16

Determining cash flows from investing activities is the ________ step in preparing the statement of cash flows.

Accepted Answer

A) First 
B) Second 
C) Third 
D) Fourth 
A) First 
B) Second 
C) Third 
D) Fourth

Question 17

What does it mean when a company has positive free cash flow? What does it mean when a company has negative free cash flow?

Accepted Answer

Positive free cash flow means that the c

Question 18

During the year,Ollie's Outdoor Outfitters issued 20,000 shares of common stock in exchange for a prime piece of land.Two employees of the accounting department,Audrey and Neil,disagree as to the appearance of this particular transaction on the statement of cash flows.Audrey believes it to be a significant noncash transaction,and it therefore should be presented as such at the bottom of the statement.Neil contends that because this transaction did not cause any cash to flow in or out of the company,it has no place on the statement of cash flows.Who is correct and why?

Accepted Answer

Audrey is correct in her contention that

Question 19

Lincoln Company engaged in this transaction: As required by the landlord,prepaid one year's rent on its leased warehouse.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

A) Financing activities section. 
B) Does not represent a cash flow. 
C) Investing activities section. 
D) Operating activities section. 
A) Financing activities section. 
B) Does not represent a cash flow. 
C) Investing activities section. 
D) Operating activities section.

Question 20

The income statement indicates a business's success or failure in earning an income from its operating activities,but it does not reflect the inflow and outflow of cash from operating activities.

Accepted Answer

A) True 
 B)False

Exam 15: The Statement of Cash Flows

Rufina Corp.sold for $20,000 plant assets that cost $40,000 and that had an accumulated depreciation of $8,000.The journal entry to record the transaction is:

Lincoln Company engaged in this transaction: Retired long-term debt with cash. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Noncash investing and financing transactions,such as the exchange of a long-term asset for a long-term liability,represent significant investing and financing activities and are reflected in a separate schedule as part of the statement of cash flows.

When preparing a statement of cash flows using the indirect method,depreciation expense is added to net income to arrive at net cash flows from operating activities.

The statement of cash flows shows the effects on net income of a company's operating,investing,and financing activities for an accounting period.

Lincoln Company engaged in this transaction: Issued stock for land. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Purchased 60-day commercial paper. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Cash flows to assets is computed as

Cash flows to assets is measured in "times."

The indirect method of preparing a statement of cash flows

If the indirect method is used,which of the following would be added to net income to arrive at net cash flows from operating activities?

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Gain on Sale of Investment-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Net cash flows from operating activities would be needed to calculate cash flow yield,cash flows to assets,and cash flows to sales.

Determining cash flows from investing activities is the ________ step in preparing the statement of cash flows.

What does it mean when a company has positive free cash flow? What does it mean when a company has negative free cash flow?

Lincoln Company engaged in this transaction: As required by the landlord,prepaid one year's rent on its leased warehouse. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

The income statement indicates a business's success or failure in earning an income from its operating activities,but it does not reflect the inflow and outflow of cash from operating activities.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis and Capital Budgeting

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