Question 1

U.S.GAAP requires the classification of

Accepted Answer

A) the receipt of cash from interest and dividend revenues as an operating activity and cash related to the purchase and sale of long-term investments in securities as an investing activity. 
B) both receipt of cash from interest and dividend revenues and cash related to the purchase and sale of investments in securities as an investing activity. 
C) both receipt of cash from interest and dividend revenues and cash related to the purchase and sale of long-term investments in securities as an operating activity. 
D) both receipt of cash from interest and dividend revenues and cash related to the purchase and sale of investments in securities as a financing activity. 
E) both receipt of cash from interest and dividend revenues and cash related to the purchase and sale of long-term investments in securities as an exchange activity. 
A) the receipt of cash from interest and dividend revenues as an operating activity and cash related to the purchase and sale of long-term investments in securities as an investing activity. 
B) both receipt of cash from interest and dividend revenues and cash related to the purchase and sale of investments in securities as an investing activity. 
C) both receipt of cash from interest and dividend revenues and cash related to the purchase and sale of long-term investments in securities as an operating activity. 
D) both receipt of cash from interest and dividend revenues and cash related to the purchase and sale of investments in securities as a financing activity. 
E) both receipt of cash from interest and dividend revenues and cash related to the purchase and sale of long-term investments in securities as an exchange activity.

Question 2

The _____ method begins with net income for a period and then shows adjustments to net income to convert revenues to cash received from customers and to convert expenses to cash disbursed to various suppliers of goods and services.Most companies use this method.

Accepted Answer

A) direct 
B) indirect 
C) adjustment 
D) income 
E) free cash 
A) direct 
B) indirect 
C) adjustment 
D) income 
E) free cash

Question 3

Cash flows from operating activities include

Accepted Answer

A) selling goods and providing services. 
B) acquiring buildings and equipment. 
C) payment of dividends. 
D) retiring long-term debt. 
E) issuing stocks and bonds. 
A) selling goods and providing services. 
B) acquiring buildings and equipment. 
C) payment of dividends. 
D) retiring long-term debt. 
E) issuing stocks and bonds.

Question 4

U.S.GAAP classifies all of the following as investing activities on the statement of cash flows except for

Accepted Answer

A) cash inflows from selling manufacturing equipment. 
B) cash outflows from purchasing bonds (intended to be held to maturity) of other entities. 
C) cash outflows to lender for interest. 
D) cash inflows from selling a (long-term) portfolio of equity securities of other entities. 
E) cash outflows from buying manufacturing equipment. 
A) cash inflows from selling manufacturing equipment. 
B) cash outflows from purchasing bonds (intended to be held to maturity) of other entities. 
C) cash outflows to lender for interest. 
D) cash inflows from selling a (long-term) portfolio of equity securities of other entities. 
E) cash outflows from buying manufacturing equipment.

Question 5

In a statement of cash flows, interest payments to lenders should be classified as cash outflows for

Accepted Answer

A) operating activities. 
B) financing activities. 
C) investing activities. 
D) lending activities. 
E) exchange transactions. 
A) operating activities. 
B) financing activities. 
C) investing activities. 
D) lending activities. 
E) exchange transactions.

Question 6

Both U.S.GAAP and IFRS permit considerable flexibility with respect to the display of information in the statement of cash flows.If the firm uses the direct method of reporting cash flows from _____ activities rather than the indirect method, it must also provide a separate reconciliation of net income to cash flows from _____

Accepted Answer

A) operating; operating 
B) financing; financing 
C) investing; investing 
D) operating, investing; and financing; operating, investing; and financing; 
E) none of the above 
A) operating; operating 
B) financing; financing 
C) investing; investing 
D) operating, investing; and financing; operating, investing; and financing; 
E) none of the above

Question 7

U.S.GAAP requires the disclosure of the direct exchange (with no cash consideration) of a tract of land for manufacturing equipment to be used in the company's operations

Accepted Answer

A) as an operating activity. 
B) as an investing activity. 
C) as a financing activity. 
D) as an exchange activity. 
E) in a separate schedule or note, but does not appear in the statement of cash flows as an operating activity, investing activity, or a financing activity. 
A) as an operating activity. 
B) as an investing activity. 
C) as a financing activity. 
D) as an exchange activity. 
E) in a separate schedule or note, but does not appear in the statement of cash flows as an operating activity, investing activity, or a financing activity.

Question 8

A firm uses cash to _____ These amounts appear as cash flow from financing activities in the statement of cash flows.

Accepted Answer

A) pay dividends to shareholders 
B) repay borrowing 
C) reacquire outstanding common shares 
D) reacquire outstanding preferred shares 
E) all of the above 
A) pay dividends to shareholders 
B) repay borrowing 
C) reacquire outstanding common shares 
D) reacquire outstanding preferred shares 
E) all of the above

Question 9

U.S.GAAP requires that the statement of cash flows explain the changes in the firm's

Accepted Answer

A) cash and cash equivalents during the accounting period. 
B) resources and obligations during the accounting period. 
C) components of income from operations during the accounting period. 
D) accounts receivable and accounts payable during the accounting period. 
E) All of the above are required. 
A) cash and cash equivalents during the accounting period. 
B) resources and obligations during the accounting period. 
C) components of income from operations during the accounting period. 
D) accounts receivable and accounts payable during the accounting period. 
E) All of the above are required.

Question 10

The Farley Company had retained earnings at the beginning of the year totaling $100,000.At the end of the year retained earnings totaled $200,000.Depreciation was $50,000 for the year and the company paid dividends of $150,000.What is the amount recorded as Net Income in the operating activities section of the statement of cash flows prepared using the indirect method?

Accepted Answer

A) a net loss of $150,000 
B) a net income of $150,000 
C) a net income of $0 
D) a net income of $250,000 
E) a net loss of $50,000 
A) a net loss of $150,000 
B) a net income of $150,000 
C) a net income of $0 
D) a net income of $250,000 
E) a net loss of $50,000

Question 11

IFRS permits firms to classify cash from interest and dividend revenue as operating, investing, or financing activities, provided the classification is consistently applied across periods.

Accepted Answer

A) True 
 B)False

Question 12

The statement of cash flows reports the amount of cash flow from a firm's

Accepted Answer

A) divestiture, and acquisition activities. 
B) operating, divestiture, and acquisition activities. 
C) funding and disbursement activities. 
D) operating, investing, and financing activities. 
E) operating, funding and disbursement activities. 
A) divestiture, and acquisition activities. 
B) operating, divestiture, and acquisition activities. 
C) funding and disbursement activities. 
D) operating, investing, and financing activities. 
E) operating, funding and disbursement activities.

Question 13

To prepare the statement of cash flows requires analyzing changes in balance sheet accounts during the accounting period, as represented by the Cash Change Equation.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following methods, allowed by U.S.GAAP, report(s) the net income for a period adjusted by revenues converted to cash received from customers and expenses converted to cash disbursed to various suppliers of goods and services?

Accepted Answer

A) the direct method 
B) the indirect method 
C) both the direct method and the indirect method 
D) the schedule of cash receipts and cash disbursements 
E) the funds flow statement 
A) the direct method 
B) the indirect method 
C) both the direct method and the indirect method 
D) the schedule of cash receipts and cash disbursements 
E) the funds flow statement

Question 15

Under U.S.GAAP, the classification of interest expense as an operating activity and dividends paid on common or preferred shares as a financing activity appears inconsistent to some observers as both are payments to suppliers of funds.Authoritative guidance requires the different treatments because

Accepted Answer

A) interest is an expense in computing net income. 
B) dividends represent a distribution of assets generated by net income not an expense reducing net income. 
C) interest represent a distribution of assets generated by net income not an expense reducing net income. 
D) dividends is an expense in computing net income. 
E) both choices a and b are correct. 
A) interest is an expense in computing net income. 
B) dividends represent a distribution of assets generated by net income not an expense reducing net income. 
C) interest represent a distribution of assets generated by net income not an expense reducing net income. 
D) dividends is an expense in computing net income. 
E) both choices a and b are correct.

Question 16

Although the guidance in U.S.GAAP and IFRS states a preference that companies present cash flows from operations using the indirect method, most companies present cash flows from operations as a reconciliation of net income to operating cash flow (the direct method).

Accepted Answer

A) True 
 B)False

Question 17

The following information is available from JB Corporation's accounting records for the year ended December 31, Year 4: $\begin{array}{ll}
\text { Cash received from customers } & \$ 600,000 \
\text { Dividends received from marketable securities } & 80,000 \
\text { Cash paid for purchase of supplies } & 300,000 \
\text { Income taxes paid } & 50,000 \
\text { Cash dividends paid to shareholders } & 30,000
\end{array}$Net cash flow from operating activities for Year 4 totaled

Accepted Answer

A) $200,000 
B) $250,000 
C) $300,000 
D) $330,000 
E) $220,000 
A) $200,000 
B) $250,000 
C) $300,000 
D) $330,000 
E) $220,000

Question 18

IFRS permits firms to classify cash from interest and dividend revenue as _____ activities, provided the classification is consistently applied across periods.

Accepted Answer

A) operating 
B) investing 
C) financing 
D) operating, investing, or financing 
E) None of the above are correct. 
A) operating 
B) investing 
C) financing 
D) operating, investing, or financing 
E) None of the above are correct.

Question 19

Alsup Company had the following transactions during the fiscal year ended December 31, Year 4.
·Accounts receivable decreased from $115,000 on December 31, Year 3, to $100,000
On December 31, Year 4.
·Alsup's Board of Directors declared dividends on December 31, Year 4, of $.05
Per share on the 2.8 million shares outstanding, payable to shareholders of record
On January 31, Year 5.The company did not declare or pay dividends for fiscal year,
Year 3.
·Sold a truck with a net book value of $7,000 for $5,000 cash, reporting a loss of $2,000.
·Paid interest to bondholders of $780,000.
·Cash increased from $106,000 on December 31, Year 3, to $284,000 on December 31, Year 4.
(CMA Dec 95 #4) Refer to the Alsup Company example.The total of cash provided (used) by operating activities plus cash provided (used) by investing activities plus cash provided (used) by financing activities is

Accepted Answer

A) cash provided of $284,000. 
B) cash provided of $178,000. 
C) cash used of $178,000. 
D) cash used of $582,000. 
E) cash used of $284,000. 
A) cash provided of $284,000. 
B) cash provided of $178,000. 
C) cash used of $178,000. 
D) cash used of $582,000. 
E) cash used of $284,000.

Question 20

Given the following changes in the balance sheet for Year 2 of the Cotton Company, prepare a statement of cash flows using the indirect method.
 $\begin{array}{ll}\text { Change In }&D R(C R)\
\text { Cash } & 90,000 \
\text { Accounts receivable } & 10,000 \
\text { Inventory } & (20,000) \
\text { Accounts payable } & 10,000 \
\text { Notes payable } & (50,000) \
\text { Equipment } & 40,000 \
\text { Accumulated depreciation } & (20,000) \
\text { Retained eamings } & (50,000) \
\text { Common stock } & (10,000)
\end{array}$ No dividends were paid during the year and no equipment was sold during the year.

Accepted Answer

None

U.S.GAAP requires the classification of

The _____ method begins with net income for a period and then shows adjustments to net income to convert revenues to cash received from customers and to convert expenses to cash disbursed to various suppliers of goods and services.Most companies use this method.

Cash flows from operating activities include

U.S.GAAP classifies all of the following as investing activities on the statement of cash flows except for

In a statement of cash flows, interest payments to lenders should be classified as cash outflows for

U.S.GAAP requires the disclosure of the direct exchange (with no cash consideration) of a tract of land for manufacturing equipment to be used in the company's operations

A firm uses cash to _____ These amounts appear as cash flow from financing activities in the statement of cash flows.

U.S.GAAP requires that the statement of cash flows explain the changes in the firm's

IFRS permits firms to classify cash from interest and dividend revenue as operating, investing, or financing activities, provided the classification is consistently applied across periods.

The statement of cash flows reports the amount of cash flow from a firm's

To prepare the statement of cash flows requires analyzing changes in balance sheet accounts during the accounting period, as represented by the Cash Change Equation.

Which of the following methods, allowed by U.S.GAAP, report(s) the net income for a period adjusted by revenues converted to cash received from customers and expenses converted to cash disbursed to various suppliers of goods and services?

Under U.S.GAAP, the classification of interest expense as an operating activity and dividends paid on common or preferred shares as a financing activity appears inconsistent to some observers as both are payments to suppliers of funds.Authoritative guidance requires the different treatments because

Although the guidance in U.S.GAAP and IFRS states a preference that companies present cash flows from operations using the indirect method, most companies present cash flows from operations as a reconciliation of net income to operating cash flow (the direct method).

IFRS permits firms to classify cash from interest and dividend revenue as _____ activities, provided the classification is consistently applied across periods.

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Exam 6: Statement of Cash Flows

U.S.GAAP requires the classification of

The _____ method begins with net income for a period and then shows adjustments to net income to convert revenues to cash received from customers and to convert expenses to cash disbursed to various suppliers of goods and services.Most companies use this method.

Cash flows from operating activities include

U.S.GAAP classifies all of the following as investing activities on the statement of cash flows except for

In a statement of cash flows, interest payments to lenders should be classified as cash outflows for

U.S.GAAP requires the disclosure of the direct exchange (with no cash consideration) of a tract of land for manufacturing equipment to be used in the company's operations

A firm uses cash to _____ These amounts appear as cash flow from financing activities in the statement of cash flows.

U.S.GAAP requires that the statement of cash flows explain the changes in the firm's

IFRS permits firms to classify cash from interest and dividend revenue as operating, investing, or financing activities, provided the classification is consistently applied across periods.

The statement of cash flows reports the amount of cash flow from a firm's

To prepare the statement of cash flows requires analyzing changes in balance sheet accounts during the accounting period, as represented by the Cash Change Equation.

Which of the following methods, allowed by U.S.GAAP, report(s) the net income for a period adjusted by revenues converted to cash received from customers and expenses converted to cash disbursed to various suppliers of goods and services?

Under U.S.GAAP, the classification of interest expense as an operating activity and dividends paid on common or preferred shares as a financing activity appears inconsistent to some observers as both are payments to suppliers of funds.Authoritative guidance requires the different treatments because

Although the guidance in U.S.GAAP and IFRS states a preference that companies present cash flows from operations using the indirect method, most companies present cash flows from operations as a reconciliation of net income to operating cash flow (the direct method).

IFRS permits firms to classify cash from interest and dividend revenue as _____ activities, provided the classification is consistently applied across periods.

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters