Question 1

The direct method of reporting operating cash flows:

Accepted Answer

A)  Is recommended but not required by the IASB. 
B)  Must be used by all companies. 
C)  Is used by most companies. 
D)  Is considered supplementary disclosure. 
E)  Is not recommended by the IASB, but is commonly used. 
A)  Is recommended but not required by the IASB. 
B)  Must be used by all companies. 
C)  Is used by most companies. 
D)  Is considered supplementary disclosure. 
E)  Is not recommended by the IASB, but is commonly used.

Question 2

An example of a transaction that must be disclosed as a noncash investing and financing activity includes:

Accepted Answer

A)  The retirement of debt by issuance of equity. 
B)  The purchase of long-term assets financed by a cash down payment and a note payable to the seller for the balance. 
C)  The leasing of assets by means of a finance lease. 
D)  The purchase of noncash assets in exchange for equity or debt securities. 
E)  All of these. 
A)  The retirement of debt by issuance of equity. 
B)  The purchase of long-term assets financed by a cash down payment and a note payable to the seller for the balance. 
C)  The leasing of assets by means of a finance lease. 
D)  The purchase of noncash assets in exchange for equity or debt securities. 
E)  All of these.

Question 3

Weston is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities. Management wishes to maximize cash flows from operating activities.

Accepted Answer

A)  $(168,000). 
B)  $200,000. 
C)  $168,000. 
D)  $(191,700). 
E)  $191,700. 
A)  $(168,000). 
B)  $200,000. 
C)  $168,000. 
D)  $(191,700). 
E)  $191,700.

Question 4

Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 5

___________________ activities generally include those transactions and events that affect long-term assets.

Accepted Answer

The answer of ___________________ activities generally include those transactions and...

Question 6

Information to prepare the statement of cash flows usually comes from three sources: (1) ________________________, (2) _____________________, and (3) __________________.

Accepted Answer

Comparative balance

Question 7

Financing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

Accepted Answer

A) True 
 B)False

Question 8

Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' shares.

Accepted Answer

A) True 
 B)False

Question 9

The IASB recommends that the operating section of the statement of cash flows be reported using the direct method.

Accepted Answer

A) True 
 B)False

Question 10

Explain the value of separating cash flows into operating activities, investing activities and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

Accepted Answer

By separating cash flows into three cate

Question 11

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 12

Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $140,000 was sold for a $5,000 gain 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)  $23,000. 
B)  $33,000. 
C)  $28,000. 
D)  $40,000. 
E)  $68,000. 
A)  $23,000. 
B)  $33,000. 
C)  $28,000. 
D)  $40,000. 
E)  $68,000.

Question 13

Explain how cash flows from investing and financing activities are determined.

Accepted Answer

Cash flows from investing activities are

Question 14

The statement of cash flows explains how transactions and events impact the end-of-period cash balance to produce the end-of-period net income.

Accepted Answer

A) True 
 B)False

Question 15

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: Income before taxes…………………………………………… $14,000
Depreciation expense..………………………………………… 12,000
Payment on mortgage payable………………………………… 15,000
Gain on sale of land…………………………………………… 7,500
Increase in merchandise inventory……………………………. 2,050
Increase in accounts payable………………………………….. 6,150
Proceeds from sale of land……………………………………. 8,000
Income taxes paid……………………………………………... 1,700

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 16

A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable. The entire transaction is disclosed to users on the statement of cash flows and/or in the notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 17

A company reported average total assets of $496,000 in Year 1 and $604,000 in Year 2. Its net operating cash flow in Year 1 was $41,150 and $55,500 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.

Accepted Answer

The answer of A company reported average total assets of...

Question 18

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the direct method.

Accepted Answer

The direct method for reporting cash flo

Question 19

When preparing a statement of cash flows on the indirect method, which of the following is correct?

Accepted Answer

A)  Proceeds from the sale of equipment should be added to income in the operating activities section. 
B)  A loss on the sale of land should be added to income in the operating activities section. 
C)  The declaration of a cash dividend should be a use of cash in the financing activities section. 
D)  The issuance of a bonus issue or share dividend should be a use of cash in the financing activities section. 
E)  The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section. 
A)  Proceeds from the sale of equipment should be added to income in the operating activities section. 
B)  A loss on the sale of land should be added to income in the operating activities section. 
C)  The declaration of a cash dividend should be a use of cash in the financing activities section. 
D)  The issuance of a bonus issue or share dividend should be a use of cash in the financing activities section. 
E)  The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section.

Question 20

The indirect method separately lists each major item of operating cash receipts and cash payments.

Accepted Answer

A) True 
 B)False

Exam 16: Statement of Cash Flows

The direct method of reporting operating cash flows:

An example of a transaction that must be disclosed as a noncash investing and financing activity includes:

Weston is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities. Management wishes to maximize cash flows from operating activities.

Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.

___________________ activities generally include those transactions and events that affect long-term assets.

Information to prepare the statement of cash flows usually comes from three sources: (1) ________________________, (2) _____________________, and (3) __________________.

Financing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' shares.

The IASB recommends that the operating section of the statement of cash flows be reported using the direct method.

Explain the value of separating cash flows into operating activities, investing activities and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

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

Explain how cash flows from investing and financing activities are determined.

The statement of cash flows explains how transactions and events impact the end-of-period cash balance to produce the end-of-period net income.

A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable. The entire transaction is disclosed to users on the statement of cash flows and/or in the notes to the financial statements.

A company reported average total assets of $496,000 in Year 1 and $604,000 in Year 2. Its net operating cash flow in Year 1 was $41,150 and $55,500 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the direct method.

When preparing a statement of cash flows on the indirect method, which of the following is correct?

The indirect method separately lists each major item of operating cash receipts and cash payments.

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

Information to prepare the statement of cash flows usually comes from three sources: (1) ______________, (2) _, and (3) ________.