Question 1

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 2

Cigna Corporation's 2015 net income is smaller than net cash flow from operating activities.Which of the following would not be an explanation of why net income is smaller than net cash flow from operating activities?

Accepted Answer

A) Cigna paid dividends to shareholders during 2015. 
B) Cigna's accounts payable increased during 2015. 
C) Cigna recognized depreciation expense in 2015. 
D) Cigna sold equipment at a loss in 2015. 
A) Cigna paid dividends to shareholders during 2015. 
B) Cigna's accounts payable increased during 2015. 
C) Cigna recognized depreciation expense in 2015. 
D) Cigna sold equipment at a loss in 2015.

Question 3

Craig Corporation's reported net income for 2015 is less than its net cash flow from operating activities.One reason for this could be:

Accepted Answer

A) The sale of machinery at a loss in 2015. 
B) An increase in inventory levels during 2015. 
C) The sale of investments at a gain in 2015. 
D) An error in the preparation of the statement of cash flows; net income should be greater than or equal to net cash flow from operating activities. 
A) The sale of machinery at a loss in 2015. 
B) An increase in inventory levels during 2015. 
C) The sale of investments at a gain in 2015. 
D) An error in the preparation of the statement of cash flows; net income should be greater than or equal to net cash flow from operating activities.

Question 4

Alexander Company reported an increase of $185,000 in its accounts receivable during the year.The company's statement of cash flows reported $500,000 of cash received from customers.What amount of net sales must Alexander have recorded?

Accepted Answer

A) $315,000. 
B) $685,000. 
C) $500,000. 
D) $185,000. 
A) $315,000. 
B) $685,000. 
C) $500,000. 
D) $185,000.

Question 5

During the current year,Atkins,Inc.sold a parcel of land for $840,000 cash.The land had been purchased by Atkins several years ago for $410,000.Atkins,Inc.uses the indirect method to prepare its statement of cash flows.In order to reconcile net income to net cash flow from operating activities,net income must be:

Accepted Answer

A) Decreased by $410,000. 
B) Decreased by $430,000. 
C) Increased by $430,000. 
D) Not adjusted because the sale of land is classified as an investing activity. 
A) Decreased by $410,000. 
B) Decreased by $430,000. 
C) Increased by $430,000. 
D) Not adjusted because the sale of land is classified as an investing activity.

Question 6

Accounting terminology
Listed below are eight technical accounting terms introduced in this chapter:   Each of the following statements may (or may not)describe one of these technical terms.In the space provided beside each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms.
____ (a)Cash sales and collections of accounts receivable.
____ (b)The classification of cash flows which includes issuing capital stock and paying dividends.
____ (c)The financial statement which best describes the profitability of a business.
____ (d)The section of a statement of cash flows summarizing the cash effects of most transactions entering into the determination of net income.
____ (e)An expense that reduces net cash flow but does not reduce net income.
____ (f)The classification of cash flows that includes purchases and sales of plant assets.
____ (g)Transactions shown in a supplementary schedule accompanying a statement of cash flows.

Accepted Answer

(a)Cash received from customers,(b)Finan

Question 7

Chapin Company reported net income of $410,000 for 2015.Balances of selected current asset and current liability accounts are as shown on the indicated dates:   Depreciation expense for 2015 amounted to $65,000.Using only the above information,compute Chapin's net cash flow from operating activities (indirect method)for 2015:

Accepted Answer

A) $470,600. 
B) $467,400. 
C) $460,600. 
D) $448,600. 
A) $470,600. 
B) $467,400. 
C) $460,600. 
D) $448,600.

Question 8

Whether one uses the direct or the indirect method of presentation of the statement of cash flows,the totals from each of the three sections (activities)will be the same regardless of the method used.

Accepted Answer

A) True 
 B)False

Question 9

Hamilton Company reported an increase of $370,000 in its accounts receivable during the year 2015.The company's statement of cash flows for 2015 reported $1 million of cash received from customers.What amount of net sales must Hamilton have recorded in 2015?

Accepted Answer

A) $630,000. 
B) $1,370,000. 
C) $1,000,000. 
D) $370,000. 
A) $630,000. 
B) $1,370,000. 
C) $1,000,000. 
D) $370,000.

Question 10

Which of the following is an investing activity?

Accepted Answer

A) Purchase of equipment. 
B) Payment of interest. 
C) Issuing common stock. 
D) Issuing long-term debt. 
A) Purchase of equipment. 
B) Payment of interest. 
C) Issuing common stock. 
D) Issuing long-term debt.

Question 11

A cash dividend paid to shareholders is reported on the:

Accepted Answer

A) Financing activities section of the statement of cash flows. 
B) Balance sheet. 
C) Income statement. 
D) Operating activities section of the statement of cash flows. 
A) Financing activities section of the statement of cash flows. 
B) Balance sheet. 
C) Income statement. 
D) Operating activities section of the statement of cash flows.

Question 12

Peak pricing charges:

Accepted Answer

A) A higher price when demand is high and a lower price when demand is low. 
B) A lower price when demand is high and a higher price when demand is low. 
C) A low price when demand is high and a lower price when demand is low. 
D) A high price when demand is high and a higher price when demand is low. 
A) A higher price when demand is high and a lower price when demand is low. 
B) A lower price when demand is high and a higher price when demand is low. 
C) A low price when demand is high and a lower price when demand is low. 
D) A high price when demand is high and a higher price when demand is low.

Question 13

Hines Cannery issued capital stock in 2015 for $700,000.During 2015 the company paid dividends of $250,000.What is the effect of these events in Hines' statement of cash flows for 2015?

Accepted Answer

A) $700,000 cash provided by investing activities,and $250,000 cash disbursed for financing activities. 
B) $700,000 cash provided by financing activities,and $250,000 cash disbursed for investing activities. 
C) $700,000 cash provided by financing activities,and $250,000 cash disbursed for operating activities. 
D) $450,000 net cash provided by financing activities. 
A) $700,000 cash provided by investing activities,and $250,000 cash disbursed for financing activities. 
B) $700,000 cash provided by financing activities,and $250,000 cash disbursed for investing activities. 
C) $700,000 cash provided by financing activities,and $250,000 cash disbursed for operating activities. 
D) $450,000 net cash provided by financing activities.

Question 14

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 15

Place an X in the column signifying whether the activity is an operating,investing,or a financing activity,and if it is a source or a use of funds or if it is a non-cash activity.

Accepted Answer

The answer of Place an X in the column signifying...

Question 16

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.

Question 17

The comparative balance sheets of Apollo Rocket,Inc.show a net increase in inventory of $79,000 and a net decrease in accounts payable of $42,000 during 2015.In computing net cash flow from operating activities under the indirect method,net income for 2015 should be:

Accepted Answer

A) Increased by $37,000. 
B) Reduced by $37,000. 
C) Increased by $121,000. 
D) Reduced by $121,000. 
A) Increased by $37,000. 
B) Reduced by $37,000. 
C) Increased by $121,000. 
D) Reduced by $121,000.

Question 18

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 this company uses 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)Declared a dividend to be paid early next year.
____ (b)Recorded depreciation expense for the current year.
____ (c)At year-end,paid rent in advance for the next six months.
____ (d)Issued capital stock for cash; management plans to use this cash to invest in marketable securities.
____ (e)Sold a parcel of unused land at a loss.
____ (f)Collected principal amount due on a note receivable.
____ (g)Used the cash received in d,above,to purchase marketable securities.
____ (h)Collected interest due on note receivable described in f,above.
____ (i)Made an adjusting entry to accrue interest payable at year-end.
____ (j)Collected account receivable from a customer who made a large credit purchase in a prior period.

Accepted Answer

X (a)Declared a dividend to be paid earl

Question 19

The statement of cash flows of Bosley Corporation shows the amount of cash received from customers as $720,000.If net sales in Bosley Corporation's income statement are reported at $670,000 then:

Accepted Answer

A) Bosley's accounts receivable increased $50,000. 
B) Bosley's Cash account decreased $50,000. 
C) Bosley's accounts receivable decreased $50,000. 
D) Bosley's accounts receivable are $50,000 at the end of the year. 
A) Bosley's accounts receivable increased $50,000. 
B) Bosley's Cash account decreased $50,000. 
C) Bosley's accounts receivable decreased $50,000. 
D) Bosley's accounts receivable are $50,000 at the end of the year.

Question 20

Significance of cash flows
In the long run,is it more important for a business to have a positive cash flow from its operating activities,investing activities,or financing activities? Why?

Accepted Answer

In the long run,it is most important for

Exam 13: Statement of Cash Flows

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

Cigna Corporation's 2015 net income is smaller than net cash flow from operating activities.Which of the following would not be an explanation of why net income is smaller than net cash flow from operating activities?

Craig Corporation's reported net income for 2015 is less than its net cash flow from operating activities.One reason for this could be:

Alexander Company reported an increase of $185,000 in its accounts receivable during the year.The company's statement of cash flows reported $500,000 of cash received from customers.What amount of net sales must Alexander have recorded?

Whether one uses the direct or the indirect method of presentation of the statement of cash flows,the totals from each of the three sections (activities)will be the same regardless of the method used.

Hamilton Company reported an increase of $370,000 in its accounts receivable during the year 2015.The company's statement of cash flows for 2015 reported $1 million of cash received from customers.What amount of net sales must Hamilton have recorded in 2015?

Which of the following is an investing activity?

A cash dividend paid to shareholders is reported on the:

Peak pricing charges:

Hines Cannery issued capital stock in 2015 for $700,000.During 2015 the company paid dividends of $250,000.What is the effect of these events in Hines' statement of cash flows for 2015?

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

Place an X in the column signifying whether the activity is an operating,investing,or a financing activity,and if it is a source or a use of funds or if it is a non-cash activity.

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

The comparative balance sheets of Apollo Rocket,Inc.show a net increase in inventory of $79,000 and a net decrease in accounts payable of $42,000 during 2015.In computing net cash flow from operating activities under the indirect method,net income for 2015 should be:

The statement of cash flows of Bosley Corporation shows the amount of cash received from customers as $720,000.If net sales in Bosley Corporation's income statement are reported at $670,000 then:

Significance of cash flows In the long run,is it more important for a business to have a positive cash flow from its operating activities,investing activities,or financing activities? Why?

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

Filters