Question 1

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

Accepted Answer

A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Schedule of noncash financing and investing activities. 
E)  Reconciliation of cash balance. 
A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Schedule of noncash financing and investing activities. 
E)  Reconciliation of cash balance.

Question 2

___________________ activities include those transactions that affect long-term liabilities and equity.

Accepted Answer

The answer of ___________________ activities include those transactions that affect...

Question 3

Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 4

When preparing a statement of cash flows on the indirect method, each of the following should be classified as an operating activity cash flow except:

Accepted Answer

A)  An increase in accounts receivable. 
B)  A decrease in accounts payable. 
C)  A gain from disposal of a long-term asset 
D)  An increase in prepaid expenses. 
E)  A decrease in accrued expenses payable. 
A)  An increase in accounts receivable. 
B)  A decrease in accounts payable. 
C)  A gain from disposal of a long-term asset 
D)  An increase in prepaid expenses. 
E)  A decrease in accrued expenses payable.

Question 5

The cash flow on total assets ratio can be used as an indicator of earnings quality.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following is representative of typical cash flows from operating activities?

Accepted Answer

A)  Proceeds from collecting the principal amounts of loans. 
B)  Repayment of principals on loans. 
C)  Proceeds from the issuance of bonds and notes payable. 
D)  Payments by a merchandiser to acquire equity securities of other companies. 
E)  Receipts of cash sales. 
A)  Proceeds from collecting the principal amounts of loans. 
B)  Repayment of principals on loans. 
C)  Proceeds from the issuance of bonds and notes payable. 
D)  Payments by a merchandiser to acquire equity securities of other companies. 
E)  Receipts of cash sales.

Question 7

The statement of cash flows helps address questions such as

Accepted Answer

A)  How is the increase in investments financed? 
B)  What is the source of cash for new plant assets? 
C)  How much cash is generated from or used in operations? 
D)  Why is cash flow from operations different from income? 
E)  All of these. 
A)  How is the increase in investments financed? 
B)  What is the source of cash for new plant assets? 
C)  How much cash is generated from or used in operations? 
D)  Why is cash flow from operations different from income? 
E)  All of these.

Question 8

A company's income statement showed the following: net income, $124,000; depreciation expense, $30,000; and gain on sale of plant assets, $14,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses decreased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

Accepted Answer

A)  $139,000. 
B)  $141,000. 
C)  $145,800. 
D)  $155,000. 
E)  $167,000. 
A)  $139,000. 
B)  $141,000. 
C)  $145,800. 
D)  $155,000. 
E)  $167,000.

Question 9

Analysis reveals that a company had a net decrease in cash of $4,000 for the current year. Net cash provided by operating activities was $18,000; net cash used in investing activities was $10,000 and net cash used in financing activities was $12,000. If the year-end cash balance is $21,000, the beginning cash balance was:

Accepted Answer

A)  $3,000. 
B)  $7,000. 
C)  $17,000. 
D)  $25,000. 
E)  $39,000. 
A)  $3,000. 
B)  $7,000. 
C)  $17,000. 
D)  $25,000. 
E)  $39,000.

Question 10

Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $140,000 was sold for a $10,000 loss in Year 2. The following selected information is available for Sebring Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

Accepted Answer

A)  $62,000. 
B)  $38,000. 
C)  $28,000. 
D)  $18,000. 
E)  $58,000. 
A)  $62,000. 
B)  $38,000. 
C)  $28,000. 
D)  $18,000. 
E)  $58,000.

Question 11

Investing activities include: (a) the purchase and sale of long-term assets, (b) lending and collecting on notes receivable, and (c) the purchase and sale of short-term investments in the securities of other entities, other than cash equivalents and trading securities.

Accepted Answer

A) True 
 B)False

Question 12

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

Accepted Answer

A)  Cash. 
B)  Cash received from customers. 
C)  Increase (decrease) in accounts receivable. 
D)  Net income. 
E)  Adjustments to net income. 
A)  Cash. 
B)  Cash received from customers. 
C)  Increase (decrease) in accounts receivable. 
D)  Net income. 
E)  Adjustments to net income.

Question 13

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

Accepted Answer

A)  Historical cost principle. 
B)  Materiality principle. 
C)  Full disclosure principle. 
D)  Going concern principle. 
E)  Business entity principle. 
A)  Historical cost principle. 
B)  Materiality principle. 
C)  Full disclosure principle. 
D)  Going concern principle. 
E)  Business entity principle.

Question 14

The purchase of stock in another company is classified as a financing activity.

Accepted Answer

A) True 
 B)False

Question 15

The direct method for preparing and reporting the statement of cash flows reports net income and then adjusts it for items necessary to calculate net cash provided or used by operating activities.

Accepted Answer

A) True 
 B)False

Question 16

Describe the format of the statement of cash flows, including the reporting of significant noncash investing and financing activities.

Accepted Answer

The statement of cash flows involves rep

Question 17

Noncash investing and financing activities may be disclosed in:

Accepted Answer

A)  A note in the financial statements or a schedule attached to the statement of cash flows. 
B)  The operating activities section of the statement of cash flows. 
C)  The investing activities section of the statement of cash flows. 
D)  The financing activities section of the statement of cash flows. 
E)  The reconciliation of cash balance section. 
A)  A note in the financial statements or a schedule attached to the statement of cash flows. 
B)  The operating activities section of the statement of cash flows. 
C)  The investing activities section of the statement of cash flows. 
D)  The financing activities section of the statement of cash flows. 
E)  The reconciliation of cash balance section.

Question 18

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

Accepted Answer

A)  $12,700. 
B)  $13,900. 
C)  $20,900. 
D)  $28,400. 
E)  $35,900. 
A)  $12,700. 
B)  $13,900. 
C)  $20,900. 
D)  $28,400. 
E)  $35,900.

Question 19

Beewell's net income for the year ended December 31, Year 2 was $185,000. Information from Beewell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2.

Accepted Answer

A)  $79,000. 
B)  $106,000. 
C)  $95,000. 
D)  $50,000. 
E)  $145,000. 
A)  $79,000. 
B)  $106,000. 
C)  $95,000. 
D)  $50,000. 
E)  $145,000.

Question 20

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

Accepted Answer

A)  Credit sales. 
B)  Cash collections from customers. 
C)  Depreciation expense. 
D)  Cash received from the sale of a building. 
E)  Cash received from the sale of treasury stock. 
A)  Credit sales. 
B)  Cash collections from customers. 
C)  Depreciation expense. 
D)  Cash received from the sale of a building. 
E)  Cash received from the sale of treasury stock.

Exam 16: Reporting the Statement of Cash Flows

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

___________________ activities include those transactions that affect long-term liabilities and equity.

Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.

When preparing a statement of cash flows on the indirect method, each of the following should be classified as an operating activity cash flow except:

The cash flow on total assets ratio can be used as an indicator of earnings quality.

Which one of the following is representative of typical cash flows from operating activities?

The statement of cash flows helps address questions such as

Investing activities include: (a) the purchase and sale of long-term assets, (b) lending and collecting on notes receivable, and (c) the purchase and sale of short-term investments in the securities of other entities, other than cash equivalents and trading securities.

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

The purchase of stock in another company is classified as a financing activity.

The direct method for preparing and reporting the statement of cash flows reports net income and then adjusts it for items necessary to calculate net cash provided or used by operating activities.

Describe the format of the statement of cash flows, including the reporting of significant noncash investing and financing activities.

Noncash investing and financing activities may be disclosed in:

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

Beewell's net income for the year ended December 31, Year 2 was $185,000. Information from Beewell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2.

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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