Question 1

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

Accepted Answer

A)  Operating activity. 
B)  Investing activity. 
C)  Financing activity. 
D)  Noncash investing and financing activity. 
E)  Operating or financing activity. 
A)  Operating activity. 
B)  Investing activity. 
C)  Financing activity. 
D)  Noncash investing and financing activity. 
E)  Operating or financing activity.

Question 2

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the direct method.

Accepted Answer

A) True 
 B)False

Question 3

The payment of cash dividends to shareholders can be classified as an operating or a financing activity.

Accepted Answer

A) True 
 B)False

Question 4

Use the following calendar-year information to prepare David Company's statement of cash flows using the direct method.

Accepted Answer

The answer of Use the following calendar-year information to prepare...

Question 5

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for ordinary shares is:

Accepted Answer

A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Schedule of noncash investing or financing activity. 
E)  Either investing or financing activities. 
A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Schedule of noncash investing or financing activity. 
E)  Either investing or financing activities.

Question 6

Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Use the following information about the calendar-year cash flows of MacArthur Company to prepare a statement of cash flows (direct method) and a schedule of noncash investing and financing activities.

Accepted Answer

The answer of Use the following information about the calendar-year...

Question 9

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 10

Conversion of preference shares to ordinary shares is reported in the financing section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 11

The usual first step in preparing the statement of cash flows is computing the net increase or net decrease in cash.

Accepted Answer

A) True 
 B)False

Question 12

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 received from the sale of its ordinary shares during Year 2.

Accepted Answer

A)  $185,000. 
B)  $106,000. 
C)  $95,000. 
D)  $50,000. 
E)  $145,000. 
A)  $185,000. 
B)  $106,000. 
C)  $95,000. 
D)  $50,000. 
E)  $145,000.

Question 13

Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.

Accepted Answer

The cash flow on total assets ratio is d

Question 14

To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

Accepted Answer

A) True 
 B)False

Question 15

The cash flow on total assets ratio:

Accepted Answer

A)  Is the same as return on assets. 
B)  Is the same as profit margin. 
C)  Can be an indicator of earnings quality. 
D)  Is highly affected by accounting principles of income recognition and measurement. 
E)  Is average net assets divided by cash flows from operations. 
A)  Is the same as return on assets. 
B)  Is the same as profit margin. 
C)  Can be an indicator of earnings quality. 
D)  Is highly affected by accounting principles of income recognition and measurement. 
E)  Is average net assets divided by cash flows from operations.

Question 16

Use the following company information to prepare a schedule of significant noncash investing and financing activities:
(a) Sold a building with a carrying amount of $125,000 for $195,000 cash and land with a carrying amount of $32,000 for $65,000 cash.
(b) Issued 10,000 $10 par value ordinary shares in exchange for equipment with a market value of $135,000.
(c) Retired a $100,000, 10% bond by issuing another $100,000, 12% bond issue.
(d) Acquired land by issuing a ten-year, 9%, $44,000 note payable.

Accepted Answer

The answer of Use the following company information to prepare...

Question 17

A company had average total assets of $2,316,000, total cash flows of $1,320,000, cash flows from operations of $455,000, and cash flows for property, plant and equipment of $850,000. The cash flow on total assets ratio equals:

Accepted Answer

A)  17.33%. 
B)  20.97%. 
C)  53.53%. 
D)  34.47%. 
E)  19.65%. 
A)  17.33%. 
B)  20.97%. 
C)  53.53%. 
D)  34.47%. 
E)  19.65%.

Question 18

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 19

Information to prepare the statement of cash flows usually comes from (a) comparative balance sheets, (b) current income statement, and (c) additional information.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following items can be reported on the statement of cash flows under financing activities?

Accepted Answer

A)  Declaration of a cash dividend. 
B)  Payment of a cash dividend. 
C)  Declaration of a share dividend. 
D)  Payment of a share dividend. 
E)  Share split. 
A)  Declaration of a cash dividend. 
B)  Payment of a cash dividend. 
C)  Declaration of a share dividend. 
D)  Payment of a share dividend. 
E)  Share split.

Exam 16: Statement of Cash Flows

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the direct method.

The payment of cash dividends to shareholders can be classified as an operating or a financing activity.

Use the following calendar-year information to prepare David Company's statement of cash flows using the direct method.

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for ordinary shares is:

Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

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.

Use the following information about the calendar-year cash flows of MacArthur Company to prepare a statement of cash flows (direct method) and a schedule of noncash investing and financing activities.

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Conversion of preference shares to ordinary shares is reported in the financing section of the statement of cash flows.

The usual first step in preparing the statement of cash flows is computing the net increase or net decrease in cash.

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 received from the sale of its ordinary shares during Year 2.

Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.

To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

The cash flow on total assets ratio:

A company had average total assets of $2,316,000, total cash flows of $1,320,000, cash flows from operations of $455,000, and cash flows for property, plant and equipment of $850,000. The cash flow on total assets ratio equals:

Information to prepare the statement of cash flows usually comes from (a) comparative balance sheets, (b) current income statement, and (c) additional information.

Which of the following items can be reported on the statement of cash flows under financing activities?

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

Long-Term Assets

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

Filters