Question 1

The indirect method of computing cash flows from operations begins with net income.

Accepted Answer

A) True 
 B)False

Question 2

In a statement of cash flows,cash transactions are classified into three major categories.Which of the following is not one of these three categories?

Accepted Answer

A) Managing activities. 
B) Operating activities. 
C) Financing activities. 
D) Investing activities. 
A) Managing activities. 
B) Operating activities. 
C) Financing activities. 
D) Investing activities.

Question 3

In 2015,Anderson Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000.In its statement of cash flows for 2015,Anderson should report the following with respect to the above transactions:

Accepted Answer

A) $363,000 net cash used by investing activities. 
B) $181,000 net cash used by investing activities; $27,000 net cash provided by operating activities. 
C) $181,000 net cash used by investing activities. 
D) $363,000 cash used by investing activities; $182,000 cash provided by financing activities. 
A) $363,000 net cash used by investing activities. 
B) $181,000 net cash used by investing activities; $27,000 net cash provided by operating activities. 
C) $181,000 net cash used by investing activities. 
D) $363,000 cash used by investing activities; $182,000 cash provided by financing activities.

Question 4

Computation of cash flows
An analysis of changes in selected balance sheet accounts of Gable Corporation shows the following for the current year:   The income statement for the current year included the following items relating to the transactions summarized above:   All payments and proceeds relating to these transactions were in cash.Using this information,compute the following cash flows for the current year:

Accepted Answer

(a)$250,000 (debit entries to

Question 5

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 6

In the long run,it is more important for a business to generate positive cash flows from investing activities than from operating activities.

Accepted Answer

A) True 
 B)False

Question 7

Computation of cash flows
An analysis of changes in selected balance sheet accounts of Taurus Corporation shows the following for the current year:   The income statement for the current year included the following items relating to the transactions summarized above:   All payments and proceeds relating to these transactions were in cash.Using this information,compute the following cash flows for the current year:

Accepted Answer

(a)$1,600,000 (debit entries t

Question 8

All of the following are advantages of an increasing cash flow from operations except:

Accepted Answer

A) A company is likely to pay its current bills with cash from operations not earnings. 
B) A company with cash is in a better position to fund growth. 
C) Large cash flows eliminate the need for borrowing. 
D) Earnings are viewed better if cash flows from operations closely match net income. 
A) A company is likely to pay its current bills with cash from operations not earnings. 
B) A company with cash is in a better position to fund growth. 
C) Large cash flows eliminate the need for borrowing. 
D) Earnings are viewed better if cash flows from operations closely match net income.

Question 9

Depreciation expense reduces net income but does not reduce the net cash flow from operating activities.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Computation of operating cash flows
The financial statements of Packard Corporation provide the following information for the current year:   Using this information,compute for the current year:

Accepted Answer

(a)Cash received from customers: $848,00

Question 12

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 system

Question 13

Classification of cash flows
Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year.Use the following code: O = operating activities,I = investing activities,and F = financing activities
Assume use of the direct method.If the event does not involve a cash flow that should be included in the statement of cash flows,use an X.
____ (a)Paid an account payable for inventory purchased in a prior accounting period.
____ (b)On December 28,made a large credit sale; terms,2/10,n/30.
____ (c)Received a dividend from an investment in IBM common stock.
____ (d)Paid a dividend to stockholders.
____ (e)Paid the interest on a note payable to First Bank.
____ (f)Paid the principal amount due on the note payable to First Bank.
____ (g)Transferred cash from a checking account into a money market fund.
____ (h)Made an adjusting entry to record accrued wages payable at the end of the period.
____ (i)Recorded depreciation expense for the current year.
____ (j)Purchased plant assets for cash.

Accepted Answer

O (a)Paid an account payable for invento

Question 14

If accounts receivable increased during the year,deducting the increase from net sales determines the amount of cash received.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) Purchase of marketable securities for cash. 
B) Collection of the principal amount of cash loans made to others. 
C) Investment of cash made in the business by the owners. 
D) Purchase of plant assets for cash. 
A) Purchase of marketable securities for cash. 
B) Collection of the principal amount of cash loans made to others. 
C) Investment of cash made in the business by the owners. 
D) Purchase of plant assets for cash.

Question 16

The "bottom line" in a statement of cash flows shows:

Accepted Answer

A) The cash (including cash equivalents)on the balance sheet at the end of the period. 
B) Net increase or decrease in cash during the period. 
C) Net income,computed by the cash basis of accounting. 
D) Net cash flow from operating activities. 
A) The cash (including cash equivalents)on the balance sheet at the end of the period. 
B) Net increase or decrease in cash during the period. 
C) Net income,computed by the cash basis of accounting. 
D) Net cash flow from operating activities.

Question 17

The FASB permits a company to use the direct method or the indirect method for the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 18

Empire Company uses the indirect method to prepare its statement of cash flows.The following information has been gathered for the current period:   Solely on the basis of the above information,Empire's net cash flow from operating activities is:

Accepted Answer

A) $338,000. 
B) $428,000. 
C) $343,000. 
D) $358,000. 
A) $338,000. 
B) $428,000. 
C) $343,000. 
D) $358,000.

Question 19

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 20

Computation of operating cash flows
The financial statements of Custom Corporation provide the following information for the current year:   Using this information,compute for the current year:

Accepted Answer

(a)Cash received from customers: $801,00

Exam 13: Statement of Cash Flows

The indirect method of computing cash flows from operations begins with net income.

In a statement of cash flows,cash transactions are classified into three major categories.Which of the following is not one of these three categories?

In 2015,Anderson Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000.In its statement of cash flows for 2015,Anderson should report the following with respect to the above transactions:

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:

In the long run,it is more important for a business to generate positive cash flows from investing activities than from operating activities.

All of the following are advantages of an increasing cash flow from operations except:

Depreciation expense reduces net income but does not reduce the net cash flow from operating activities.

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

Computation of operating cash flows The financial statements of Packard Corporation provide the following information for the current year: Using this information,compute for the current year:

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.

If accounts receivable increased during the year,deducting the increase from net sales determines the amount of cash received.

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

The "bottom line" in a statement of cash flows shows:

The FASB permits a company to use the direct method or the indirect method for the statement of cash flows.

Empire Company uses the indirect method to prepare its statement of cash flows.The following information has been gathered for the current period: Solely on the basis of the above information,Empire's net cash flow from operating activities is:

When equipment is purchased entirely through a loan:

Computation of operating cash flows The financial statements of Custom Corporation provide the following information for the current year: Using this information,compute for the current year:

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

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