Question 1

In the statement of cash flows,the purchase of supplies is classified as:

Accepted Answer

A) Operating activities. 
B) Financing activities. 
C) Investing activities. 
D) This would not appear on a statement of cash flows. 
A) Operating activities. 
B) Financing activities. 
C) Investing activities. 
D) This would not appear on a statement of cash flows.

Question 2

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 3

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

Accepted Answer

A) Long-term borrowing. 
B) Payment of dividends to stockholders. 
C) Payment of interest to creditors. 
D) Short-term borrowing. 
A) Long-term borrowing. 
B) Payment of dividends to stockholders. 
C) Payment of interest to creditors. 
D) Short-term borrowing.

Question 4

Which method will yield the higher cash flows from financing activities?

Accepted Answer

A) The indirect method. 
B) The direct method. 
C) Both direct and indirect methods will yield the same amount. 
D) Depends upon the situation. 
A) The indirect method. 
B) The direct method. 
C) Both direct and indirect methods will yield the same amount. 
D) Depends upon the situation.

Question 5

The SEC requires public companies to use the indirect method for the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Which of the following would be presented in the cash from operating activities section of the statement of cash flows when the indirect method is used?

Accepted Answer

A) Gain on the sale of investments. 
B) Depreciation expense. 
C) Neither a gain on the sale of investments nor depreciation expense would be shown. 
D) Both a gain on the sale of investments and depreciation expense would be shown. 
A) Gain on the sale of investments. 
B) Depreciation expense. 
C) Neither a gain on the sale of investments nor depreciation expense would be shown. 
D) Both a gain on the sale of investments and depreciation expense would be shown.

Question 8

A statement of cash flows is not intended to assist investors in evaluating:

Accepted Answer

A) Reasons for differences between the amount of net income and net cash flow from operations. 
B) The company's ability to meet its obligations and to pay dividends. 
C) Non-cash aspects of investing and financing activities. 
D) The profitability of business operations. 
A) Reasons for differences between the amount of net income and net cash flow from operations. 
B) The company's ability to meet its obligations and to pay dividends. 
C) Non-cash aspects of investing and financing activities. 
D) The profitability of business operations.

Question 9

The operating activities section of the cash flow statement includes the cash effects of those transactions reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 10

Rent expense in Marrin Company's 2015 income statement is $420,000.If Prepaid Rent was $70,000 at December 31,2014,and is $95,000 at December 31,2015,the cash paid for rent during 2015 is:

Accepted Answer

A) $420,000. 
B) $445,000. 
C) $395,000. 
D) $480,000. 
A) $420,000. 
B) $445,000. 
C) $395,000. 
D) $480,000.

Question 11

For a company to survive in the long-run it must have positive cash flows from investing activities.

Accepted Answer

A) True 
 B)False

Question 12

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 13

If accounts receivable decrease during the period,cash received from customers probably exceeds net sales.

Accepted Answer

A) True 
 B)False

Question 14

The purchase of equipment for the manufacturing of inventory belongs in the operating activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 15

An example of a non-cash investing or financing activity that is disclosed in a supplementary schedule accompanying the statement of cash flows is:

Accepted Answer

A) Recording depreciation expense for the current year. 
B) Declaring,but not paying,dividends on common stock. 
C) Selling land in exchange for a note receivable. 
D) Transferring cash from a checking account into a money market fund. 
A) Recording depreciation expense for the current year. 
B) Declaring,but not paying,dividends on common stock. 
C) Selling land in exchange for a note receivable. 
D) Transferring cash from a checking account into a money market fund.

Question 16

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 17

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 18

Depreciation is a non-cash expense.

Accepted Answer

A) True 
 B)False

Question 19

Cash flows from operating activities-indirect method
In the computation of net cash flows from operating activities for 2015 by the indirect method,determine whether each of the following items would be added to net income,deducted from net income,or omitted from the computation.Indicate your answer by using the following symbols: + (added to net income),- (deducted from net income),or 0 (omitted from computation).
____ (a)A decrease in accounts payable to suppliers of merchandise during 2015.
____ (b)A loss recognized on the sale of office equipment during 2015.
____ (c)Depreciation expense for 2015.
____ (d)Dividends,declared at the end of last year,paid to shareholders during the current year.
____ (e)An increase in inventory levels during 2015.
____ (f)A decrease in accounts receivable from customers during 2015.

Accepted Answer

(a)- (b)+

Question 20

Cash flows from operating activities-indirect method
The data below are taken from the financial statements of the Spectrum Corporation:   Complete the partial statement of cash flows for the year ended December 31,2015,showing the computation of net cash flows from operating activities by the indirect method:

Accepted Answer

The answer of Cash flows from operating activities-indirect method
The data...

Exam 13: Statement of Cash Flows

In the statement of cash flows,the purchase of supplies is classified as:

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

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

Which method will yield the higher cash flows from financing activities?

The SEC requires public companies to use the indirect method for the statement of cash flows.

Which of the following indicates a cash receipt?

Which of the following would be presented in the cash from operating activities section of the statement of cash flows when the indirect method is used?

A statement of cash flows is not intended to assist investors in evaluating:

The operating activities section of the cash flow statement includes the cash effects of those transactions reported on the income statement.

Rent expense in Marrin Company's 2015 income statement is $420,000.If Prepaid Rent was $70,000 at December 31,2014,and is $95,000 at December 31,2015,the cash paid for rent during 2015 is:

For a company to survive in the long-run it must have positive cash flows from investing activities.

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.

If accounts receivable decrease during the period,cash received from customers probably exceeds net sales.

The purchase of equipment for the manufacturing of inventory belongs in the operating activities section of the statement of cash flows.

An example of a non-cash investing or financing activity that is disclosed in a supplementary schedule accompanying the statement of cash flows is:

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

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.

Depreciation is a non-cash expense.

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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