Question 1

The statement of cash flows is an optional financial statement.

Accepted Answer

A) True 
 B)False  False

Question 2

Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity and dividends.

Accepted Answer

A) True 
 B)False  True

Question 3

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the amortization of bond discount for the period is deducted from the net income for the period.

Accepted Answer

A) True 
 B)False  False

Question 4

The statement of cash flows is not useful for:

Accepted Answer

A)  planning future investing and financing activities 
B)  determining a company's ability to pay its debts 
C)  determining a company's ability to pay dividends 
D)  calculating the net worth of a company 
A)  planning future investing and financing activities 
B)  determining a company's ability to pay its debts 
C)  determining a company's ability to pay dividends 
D)  calculating the net worth of a company

Question 5

The cost of merchandise sold during the year was $50,000. Merchandise inventories were $12,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $6,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

Accepted Answer

A)  $49,000 
B)  $47,000 
C)  $51,000 
D)  $53,000 
A)  $49,000 
B)  $47,000 
C)  $51,000 
D)  $53,000

Question 6

The direct method of preparing the operating activities section of the statement of cash flows reports major classes of gross cash receipts and gross cash payments.

Accepted Answer

A) True 
 B)False

Question 7

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be

Accepted Answer

A)  deducted from net income in converting the net income reported on the income statement to cash flows from operating activities 
B)  added to net income in converting the net income reported on the income statement to cash flows from operating activities 
C)  added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends 
D)  deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends 
A)  deducted from net income in converting the net income reported on the income statement to cash flows from operating activities 
B)  added to net income in converting the net income reported on the income statement to cash flows from operating activities 
C)  added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends 
D)  deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

Question 8

Cash flow per share is

Accepted Answer

A)  required to be reported on the balance sheet 
B)  required to be reported on the income statement 
C)  required to be reported on the statement of cash flows 
D)  not required to be reported on any statement 
A)  required to be reported on the balance sheet 
B)  required to be reported on the income statement 
C)  required to be reported on the statement of cash flows 
D)  not required to be reported on any statement

Question 9

Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents.

Accepted Answer

A) True 
 B)False

Question 10

Indicate whether each of the following would be added to or deducted from net income in determining net cash flow from operating activities by the indirect method:

Accepted Answer

The answer of Indicate whether each of the following would...

Question 11

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:   What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

Accepted Answer

A)  $198,000 
B)  $324,000 
C)  $352,000 
D)  $296,000 
A)  $198,000 
B)  $324,000 
C)  $352,000 
D)  $296,000

Question 12

Indicate the section (operating activities, investing activities, financing activities, or none) in which each of the following would be reported on the statement of cash flows prepared by the indirect method:

Accepted Answer

The answer of Indicate the section (operating activities, investing activities,...

Question 13

Using the indirect method, if land costing $85,000 was sold for $145,000, the amount reported in the financing activities section of the statement of cash flows would be $85,000.

Accepted Answer

A) True 
 B)False

Question 14

Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $37,000.

Accepted Answer

A) True 
 B)False

Question 15

If accounts payable have increased during a period

Accepted Answer

A)  revenues on an accrual basis are less than revenues on a cash basis. 
B)  expenses on an accrual basis are less than expenses on a cash basis. 
C)  expenses on an accrual basis are the same as expenses on a cash basis. 
D)  expenses on an accrual basis are greater than expenses on a cash basis. 
A)  revenues on an accrual basis are less than revenues on a cash basis. 
B)  expenses on an accrual basis are less than expenses on a cash basis. 
C)  expenses on an accrual basis are the same as expenses on a cash basis. 
D)  expenses on an accrual basis are greater than expenses on a cash basis.

Question 16

Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

Accepted Answer

A)  $50,000 
B)  $71,000 
C)  $121,000 
D)  $21,000 
A)  $50,000 
B)  $71,000 
C)  $121,000 
D)  $21,000

Question 17

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Accepted Answer

A) True 
 B)False

Question 18

Cost of merchandise sold reported on the income statement was $155,000. The accounts payable balance increased $5,000, and the inventory balance increased by $11,000 over the year. Determine the amount of cash paid for merchandise.

Accepted Answer

The answer of Cost of merchandise sold reported on the...

Question 19

The statement of cash flows reports a firm's major sources of cash receipts and major uses of cash payments for a period.

Accepted Answer

A) True 
 B)False

Question 20

A cash flow per share amount should be reported on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Exam 14: Statement of Cash Flows

The statement of cash flows is an optional financial statement.

Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity and dividends.

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the amortization of bond discount for the period is deducted from the net income for the period.

The statement of cash flows is not useful for:

The direct method of preparing the operating activities section of the statement of cash flows reports major classes of gross cash receipts and gross cash payments.

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be

Cash flow per share is

Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents.

Indicate whether each of the following would be added to or deducted from net income in determining net cash flow from operating activities by the indirect method:

Indicate the section (operating activities, investing activities, financing activities, or none) in which each of the following would be reported on the statement of cash flows prepared by the indirect method:

Using the indirect method, if land costing $85,000 was sold for $145,000, the amount reported in the financing activities section of the statement of cash flows would be $85,000.

Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $37,000.

If accounts payable have increased during a period

Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Cost of merchandise sold reported on the income statement was $155,000. The accounts payable balance increased $5,000, and the inventory balance increased by $11,000 over the year. Determine the amount of cash paid for merchandise.

The statement of cash flows reports a firm's major sources of cash receipts and major uses of cash payments for a period.

A cash flow per share amount should be reported on the statement of cash flows.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Cost Management for Just-In-Time Environments

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