Question 1

Dividends paid belong in the operating section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 2

How should purchases, sales, and depreciation of plant assets be classified in Johnson's statement of cash flows for the current year? (Assume the direct method is used by Johnson.)

Accepted Answer

A)  Purchases of plant assets are classified as investing activities; sales of plant assets are classified as financing activities; depreciation is classified as an operating activity. 
B)  Purchases of plant assets and depreciation are classified as investing activities; sales of plant assets are classified as financing activities. 
C)  Purchases and sales of plant assets are classified as investing activities; depreciation does not appear as an operating, financing, or investing activity. 
D)  Since plant assets are used to generate income from operations, purchases, sales, and depreciation of plant assets are all classified as operating activities. 
A)  Purchases of plant assets are classified as investing activities; sales of plant assets are classified as financing activities; depreciation is classified as an operating activity. 
B)  Purchases of plant assets and depreciation are classified as investing activities; sales of plant assets are classified as financing activities. 
C)  Purchases and sales of plant assets are classified as investing activities; depreciation does not appear as an operating, financing, or investing activity. 
D)  Since plant assets are used to generate income from operations, purchases, sales, and depreciation of plant assets are all classified as operating activities.

Question 3

Based solely on the above information, Kenny's net cash flow from investing activities for 2010 is:

Accepted Answer

A)  $215,000 net cash used by investing activities. 
B)  $165,000 net cash provided by investing activities. 
C)  $265,000 net cash used by investing activities. 
D)  $290,000 net cash provided by investing activities. 
A)  $215,000 net cash used by investing activities. 
B)  $165,000 net cash provided by investing activities. 
C)  $265,000 net cash used by investing activities. 
D)  $290,000 net cash provided by investing activities.

Question 4

If cash increased during the year and there was also a net loss for the year, there must be positive cash flows from financing and investing activities.

Accepted Answer

A) True 
 B)False

Question 5

In a statement of cash flows, the term cash includes:

Accepted Answer

A)  Only money on deposit in bank accounts. 
B)  Only bank accounts and cash on hand. 
C)  Bank accounts, cash on hand, and cash equivalents. 
D)  Bank accounts, cash on hand, cash equivalents, and marketable securities classified as current assets. 
A)  Only money on deposit in bank accounts. 
B)  Only bank accounts and cash on hand. 
C)  Bank accounts, cash on hand, and cash equivalents. 
D)  Bank accounts, cash on hand, cash equivalents, and marketable securities classified as current assets.

Question 6

Cash flows are grouped in the statement of cash flows into the following major categories:

Accepted Answer

A)  Operating activities, investing activities, and financing activities. 
B)  Cash receipts, cash disbursements, and noncash activities. 
C)  Direct cash flows and indirect cash flows. 
D)  Operating activities, investing activities, and collecting activities. 
A)  Operating activities, investing activities, and financing activities. 
B)  Cash receipts, cash disbursements, and noncash activities. 
C)  Direct cash flows and indirect cash flows. 
D)  Operating activities, investing activities, and collecting activities.

Question 7

Depreciation is a non-cash expense.

Accepted Answer

A) True 
 B)False

Question 8

The statement of cash flows is designed to assist users in assessing each of the following, except:

Accepted Answer

A)  The ability of a company to remain liquid. 
B)  The major sources of cash receipts during the period. 
C)  The company's profitability. 
D)  The reasons why net cash flow from operating activities differ from net income. 
A)  The ability of a company to remain liquid. 
B)  The major sources of cash receipts during the period. 
C)  The company's profitability. 
D)  The reasons why net cash flow from operating activities differ from net income.

Question 9

Compute the amount of New World's cash payments for operating expenses.

Accepted Answer

A)  $277,200. 
B)  $283,500. 
C)  $378,000. 
D)  $349,650. 
A)  $277,200. 
B)  $283,500. 
C)  $378,000. 
D)  $349,650.

Question 10

Seldin's net cash flow from operating activities for the current year is:

Accepted Answer

A)  $57,000. 
B)  $59,000. 
C)  $61,000. 
D)  $67,000. 
A)  $57,000. 
B)  $59,000. 
C)  $61,000. 
D)  $67,000.

Question 11

Monarch Company uses the indirect method to prepare its statement of cash flows. The following information has been gathered for the current period: On the basis of the above information only, Monarch Company's statement of cash flows shows net cash flow from operating activities to be:

Accepted Answer

A)  $187,000. 
B)  $333,000. 
C)  $225,000. 
D)  $361,000. 
A)  $187,000. 
B)  $333,000. 
C)  $225,000. 
D)  $361,000.

Question 12

Under the indirect method, when machinery is sold at a gain, the gain is added in the operating section of the statement of cash flows and the cost is added in the investing section.

Accepted Answer

A) True 
 B)False

Question 13

Cash flows and accounting records
In a business with an accrual-based accounting system, is a statement of cash flows based upon account balances shown in the adjusted trial balance? Explain.

Accepted Answer

No. In an accrual-based accounting syste

Question 14

The following balance sheets are provided for Socrates Foods:
  
a. Compute the following:
(1) Cash received from customers during the year $__________
(2) Cash payments for merchandise during the year $__________
(3) Wages paid to employees during the year $__________
(4) In Socrates Foods' statement of cash flows, what amount would be reported as the net change in cash and cash equivalents? $__________ (increase/decrease)
b. Socrates Foods recorded the sale of equipment as follows:
 
How would this transaction be reported in Socrates Foods' statement of cash flows? (Assume the direct method is being used.)

Accepted Answer

a. (1) $1,650,000(sales) - $15,000 (incr

Question 15

When equipment is purchased entirely through a loan:

Accepted Answer

A)  The equipment is shown as an increase in the investing activities section. 
B)  The equipment is shown as a decrease in the investing activities section. 
C)  The loan is shown as an increase in the financing section. 
D)  Neither the loan nor the purchase of equipment is shown in the investing or the financing sections. 
A)  The equipment is shown as an increase in the investing activities section. 
B)  The equipment is shown as a decrease in the investing activities section. 
C)  The loan is shown as an increase in the financing section. 
D)  Neither the loan nor the purchase of equipment is shown in the investing or the financing sections.

Question 16

Which of the following indicates a cash receipt?

Accepted Answer

A)  A decrease in accrued expenses, such as wages payable. 
B)  A decrease in accounts receivable. 
C)  An increase in inventory. 
D)  A decrease in accounts payable. 
A)  A decrease in accrued expenses, such as wages payable. 
B)  A decrease in accounts receivable. 
C)  An increase in inventory. 
D)  A decrease in accounts payable.

Question 17

The 2010 statement of cash flows of Dickens Corporation shows $500,000 cash paid for dividends. If dividends in Dickens' statement of retained earnings are reported at $550,000 then:

Accepted Answer

A)  Dickens' dividends payable account must amount to $50,000 at the end of 2010. 
B)  Dickens' Cash account must have increased by $50,000 in 2010. 
C)  Dickens' dividends payable account must have increased by $50,000 in 2010. 
D)  Dickens' dividends payable account must have decreased by $50,000 in 2010. 
A)  Dickens' dividends payable account must amount to $50,000 at the end of 2010. 
B)  Dickens' Cash account must have increased by $50,000 in 2010. 
C)  Dickens' dividends payable account must have increased by $50,000 in 2010. 
D)  Dickens' dividends payable account must have decreased by $50,000 in 2010.

Question 18

Which of the following is not true regarding the direct and indirect methods of computing net cash flow from operating activities?

Accepted Answer

A)  Both methods result in the same dollar amount of cash flow from operating activities. 
B)  Both methods involve adjusting entries to the company's books so that the accounting records reflect the figures shown in the statement of cash flows. 
C)  Both methods are acceptable to the FASB for reporting purposes. 
D)  Both methods convert accrual-based income statement amounts to cash flow results. 
A)  Both methods result in the same dollar amount of cash flow from operating activities. 
B)  Both methods involve adjusting entries to the company's books so that the accounting records reflect the figures shown in the statement of cash flows. 
C)  Both methods are acceptable to the FASB for reporting purposes. 
D)  Both methods convert accrual-based income statement amounts to cash flow results.

Question 19

If a company's accounts payable has increased over a year, it is an indication that the company is buying more goods.

Accepted Answer

A) True 
 B)False

Question 20

Cash flows from operating activities include all of the following except:

Accepted Answer

A)  Collections from customers for sales of goods. 
B)  Interest and dividends received. 
C)  Payments of interest. 
D)  Payments of dividends. 
A)  Collections from customers for sales of goods. 
B)  Interest and dividends received. 
C)  Payments of interest. 
D)  Payments of dividends.

Exam 13: Statement of Cash Flows

Dividends paid belong in the operating section of the statement of cash flows.

How should purchases, sales, and depreciation of plant assets be classified in Johnson's statement of cash flows for the current year? (Assume the direct method is used by Johnson.)

Based solely on the above information, Kenny's net cash flow from investing activities for 2010 is:

If cash increased during the year and there was also a net loss for the year, there must be positive cash flows from financing and investing activities.

In a statement of cash flows, the term cash includes:

Cash flows are grouped in the statement of cash flows into the following major categories:

Depreciation is a non-cash expense.

The statement of cash flows is designed to assist users in assessing each of the following, except:

Compute the amount of New World's cash payments for operating expenses.

Seldin's net cash flow from operating activities for the current year is:

Monarch Company uses the indirect method to prepare its statement of cash flows. The following information has been gathered for the current period: On the basis of the above information only, Monarch Company's statement of cash flows shows net cash flow from operating activities to be:

Under the indirect method, when machinery is sold at a gain, the gain is added in the operating section of the statement of cash flows and the cost is added in the investing section.

Cash flows and accounting records In a business with an accrual-based accounting system, is a statement of cash flows based upon account balances shown in the adjusted trial balance? Explain.

When equipment is purchased entirely through a loan:

Which of the following indicates a cash receipt?

The 2010 statement of cash flows of Dickens Corporation shows $500,000 cash paid for dividends. If dividends in Dickens' statement of retained earnings are reported at $550,000 then:

Which of the following is not true regarding the direct and indirect methods of computing net cash flow from operating activities?

If a company's accounts payable has increased over a year, it is an indication that the company is buying more goods.

Cash flows from operating activities include all of the following except:

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Financial Statement Analysis

Global Business and Accounting

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

The Time Value of Money: Future Amounts and Present Values Answer Key

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