Question 1

When a company uses peak pricing, it is charging the highest or "peak" prices the public will be willing to pay during periods of low demand.

Accepted Answer

A) True 
 B)False

Question 2

How should the transactions involving marketable securities be classified in Korman's statement of cash flows for 2009?

Accepted Answer

A)  The purchase of marketable securities, sales of marketable securities, and receipt of dividends are all classified as investing activities. 
B)  The purchase and the sale of marketable securities are classified as investing activities; the receipt of dividends is classified as an operating activity. 
C)  The purchase of marketable securities is classified as an investing activity; the sale of marketable securities is classified as a financing activity; the receipt of dividends is classified as an operating activity. 
D)  The purchase and the sale of marketable securities are classified as investing activities; the receipt of dividends is classified as a financing activity. 
A)  The purchase of marketable securities, sales of marketable securities, and receipt of dividends are all classified as investing activities. 
B)  The purchase and the sale of marketable securities are classified as investing activities; the receipt of dividends is classified as an operating activity. 
C)  The purchase of marketable securities is classified as an investing activity; the sale of marketable securities is classified as a financing activity; the receipt of dividends is classified as an operating activity. 
D)  The purchase and the sale of marketable securities are classified as investing activities; the receipt of dividends is classified as a financing activity.

Question 3

Which of the following is not included in the statement of cash flows, or in a supplement?ary schedule accompanying the statement of cash flows?

Accepted Answer

A)  Disclosure of investing or financing activities that did not involve cash. 
B)  A reconciliation of net income to net cash flows from operating activities. 
C)  Disclosure of the amount of cash invested in money market funds during the accounting period. 
D)  The amount of cash and cash equivalents owned by the business at the end of the accounting period. 
A)  Disclosure of investing or financing activities that did not involve cash. 
B)  A reconciliation of net income to net cash flows from operating activities. 
C)  Disclosure of the amount of cash invested in money market funds during the accounting period. 
D)  The amount of cash and cash equivalents owned by the business at the end of the accounting period.

Question 4

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

Accepted Answer

A)  Cash proceeds from selling investments. 
B)  Cash proceeds from collections on loans. 
C)  Cash advanced to borrowers. 
D)  Cash proceeds from borrowing. 
A)  Cash proceeds from selling investments. 
B)  Cash proceeds from collections on loans. 
C)  Cash advanced to borrowers. 
D)  Cash proceeds from borrowing.

Question 5

All of the following are financing activities except:

Accepted Answer

A)  Borrowing money. 
B)  Lending money. 
C)  Selling capital stock. 
D)  Paying dividends. 
A)  Borrowing money. 
B)  Lending money. 
C)  Selling capital stock. 
D)  Paying dividends.

Question 6

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

Accepted Answer

A)  $1,191,750. 
B)  $1,192,800. 
C)  $1,113,000. 
D)  $1,160,250. 
A)  $1,191,750. 
B)  $1,192,800. 
C)  $1,113,000. 
D)  $1,160,250.

Question 7

From the viewpoint of stockholders or potential investors, which of the following cash flow measurements would be of least importance?

Accepted Answer

A)  The dollar amount of net cash flow from operating activities for the current year. 
B)  The trend in net cash flow from operating activities from year to year. 
C)  The corporation's free cash flow for the current year. 
D)  The dollar amount of overall increase or decrease in cash for the current year. 
A)  The dollar amount of net cash flow from operating activities for the current year. 
B)  The trend in net cash flow from operating activities from year to year. 
C)  The corporation's free cash flow for the current year. 
D)  The dollar amount of overall increase or decrease in cash for the current year.

Question 8

Gannon Corporation uses the indirect method to prepare its statement of cash flows. Following this approach, a gain on sale of equipment was deducted from net income in computing net cash flow from operating activities. The most likely reason for this adjustment is that:

Accepted Answer

A)  The sale of equipment did not result in the receipt of any cash by Gannon Corporation. 
B)  The sale resulted in a cash receipt in an accounting period different from the period in which the gain was recognized. 
C)  The amount of the gain recognized was not equal to the cash received. 
D)  This type of transaction is not classified as an operating activity. 
A)  The sale of equipment did not result in the receipt of any cash by Gannon Corporation. 
B)  The sale resulted in a cash receipt in an accounting period different from the period in which the gain was recognized. 
C)  The amount of the gain recognized was not equal to the cash received. 
D)  This type of transaction is not classified as an operating activity.

Question 9

Compute the cash payments for purchases of merchandise during the current year.

Accepted Answer

A)  $260,000. 
B)  $250,000. 
C)  $266,000. 
D)  $254,000. 
A)  $260,000. 
B)  $250,000. 
C)  $266,000. 
D)  $254,000.

Question 10

Which of the following sets of data is sufficient to compute the amount of cash paid for merchandise?

Accepted Answer

A)  Cost of goods sold, increase or decrease in inventory, increase or decrease in accounts payable. 
B)  Increase or decrease in cash, increase or decrease in inventory, increase or decrease in accounts payable. 
C)  Cost of goods sold, increase or decrease in accounts payable. 
D)  Cost of goods sold. 
A)  Cost of goods sold, increase or decrease in inventory, increase or decrease in accounts payable. 
B)  Increase or decrease in cash, increase or decrease in inventory, increase or decrease in accounts payable. 
C)  Cost of goods sold, increase or decrease in accounts payable. 
D)  Cost of goods sold.

Question 11

Interest paid belongs in the operating section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 12

Net cash flows from operating activities will have the same total no matter which method is used, direct or indirect.

Accepted Answer

A) True 
 B)False

Question 13

Under the indirect method, depreciation, increase in inventories, and "non-operating" losses are added to net income to arrive at net cash flow from operating activities.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not classified among the operating activities in a statement of cash flows?

Accepted Answer

A)  Payment of interest on a bank loan. 
B)  Payment of the principal amount owed on a bank loan. 
C)  Payment of an account payable to a merchandise supplier. 
D)  Payment of income taxes. 
A)  Payment of interest on a bank loan. 
B)  Payment of the principal amount owed on a bank loan. 
C)  Payment of an account payable to a merchandise supplier. 
D)  Payment of income taxes.

Question 15

Compute the amount of cash payments for operating expenses.

Accepted Answer

A)  $138,600. 
B)  $141,750. 
C)  $189,000. 
D)  $174,825. 
A)  $138,600. 
B)  $141,750. 
C)  $189,000. 
D)  $174,825.

Question 16

Bert's Bungy Jumping, Inc. paid $650,000 cash for casualty insurance during the year 2009. If the income statement for the year reports insurance expense of $620,000:

Accepted Answer

A)  Bert's prepaid insurance decreased $30,000. 
B)  Bert's cash account balance decreased $30,000. 
C)  Bert's prepaid insurance increased $30,000. 
D)  Bert's prepaid insurance was $30,000 at year-end. 
A)  Bert's prepaid insurance decreased $30,000. 
B)  Bert's cash account balance decreased $30,000. 
C)  Bert's prepaid insurance increased $30,000. 
D)  Bert's prepaid insurance was $30,000 at year-end.

Question 17

In a statement of cash flows, collections of accounts receivable are classified as:

Accepted Answer

A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Revenues and Gains. 
A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Revenues and Gains.

Question 18

Differences between net income and operating cash flow
Identify three factors that may cause net income to differ from the net cash flow from operating activities.

Accepted Answer

Net income may differ from the net cash

Question 19

The cost (book value) of the marketable securities sold during 2009 was:

Accepted Answer

A)  $207,000. 
B)  $113,000. 
C)  $160,000. 
D)  Some other amount. 
A)  $207,000. 
B)  $113,000. 
C)  $160,000. 
D)  Some other amount.

Question 20

The "worksheet approach" to preparing a statement of cash flows involves analyzing changes in non-cash balance sheet accounts.

Accepted Answer

A) True 
 B)False

Exam 13: Statement of Cash Flows

When a company uses peak pricing, it is charging the highest or "peak" prices the public will be willing to pay during periods of low demand.

How should the transactions involving marketable securities be classified in Korman's statement of cash flows for 2009?

Which of the following is not included in the statement of cash flows, or in a supplement?ary schedule accompanying the statement of cash flows?

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

All of the following are financing activities except:

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

From the viewpoint of stockholders or potential investors, which of the following cash flow measurements would be of least importance?

Gannon Corporation uses the indirect method to prepare its statement of cash flows. Following this approach, a gain on sale of equipment was deducted from net income in computing net cash flow from operating activities. The most likely reason for this adjustment is that:

Compute the cash payments for purchases of merchandise during the current year.

Which of the following sets of data is sufficient to compute the amount of cash paid for merchandise?

Interest paid belongs in the operating section of the statement of cash flows.

Net cash flows from operating activities will have the same total no matter which method is used, direct or indirect.

Under the indirect method, depreciation, increase in inventories, and "non-operating" losses are added to net income to arrive at net cash flow from operating activities.

Which of the following is not classified among the operating activities in a statement of cash flows?

Compute the amount of cash payments for operating expenses.

Bert's Bungy Jumping, Inc. paid $650,000 cash for casualty insurance during the year 2009. If the income statement for the year reports insurance expense of $620,000:

In a statement of cash flows, collections of accounts receivable are classified as:

Differences between net income and operating cash flow Identify three factors that may cause net income to differ from the net cash flow from operating activities.

The cost (book value) of the marketable securities sold during 2009 was:

The "worksheet approach" to preparing a statement of cash flows involves analyzing changes in non-cash balance sheet accounts.

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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