Question 1

When net cash flow from operating activities is presented by the direct method,the statement of cash flows is accompanied by a supplementary schedule reconciling:

Accepted Answer

A) Net cash flow from operating activities with net sales. 
B) Net income with the net increase or decrease in cash and cash equivalents. 
C) Net income with net cash flow from operating activities. 
D) Net cash flow from operating activities shown in the statement with that which would result from use of the indirect method. 
A) Net cash flow from operating activities with net sales. 
B) Net income with the net increase or decrease in cash and cash equivalents. 
C) Net income with net cash flow from operating activities. 
D) Net cash flow from operating activities shown in the statement with that which would result from use of the indirect method. C

Question 2

[The following information applies to the questions displayed below.]
An analysis of changes in selected balance sheet accounts of Johnson Corporation shows the following for the current year:
   Johnson's income statement for the current year includes a $14,000 loss on disposal of plant assets.All payments and proceeds relating to purchase or sale of plant assets were in cash.
-How should purchases,sales,and depreciation of plant assets be classified in Johnson's statement of cash flows for the current year? (Assume the direct method is used by Johnson. )

Accepted Answer

A) Purchases of plant assets are classified as investing activities;sales of plant assets are classified as financing activities;depreciation is classified as an operating activity. 
B) Purchases of plant assets and depreciation are classified as investing activities;sales of plant assets are classified as financing activities. 
C) Purchases and sales of plant assets are classified as investing activities;depreciation does not appear as an operating,financing,or investing activity. 
D) Since plant assets are used to generate income from operations,purchases,sales,and depreciation of plant assets are all classified as operating activities. 
A) Purchases of plant assets are classified as investing activities;sales of plant assets are classified as financing activities;depreciation is classified as an operating activity. 
B) Purchases of plant assets and depreciation are classified as investing activities;sales of plant assets are classified as financing activities. 
C) Purchases and sales of plant assets are classified as investing activities;depreciation does not appear as an operating,financing,or investing activity. 
D) Since plant assets are used to generate income from operations,purchases,sales,and depreciation of plant assets are all classified as operating activities. C

Question 3

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  False

Question 4

Gannon Corporation uses the indirect method to prepare its statement of cash flows.Following this approach,a gain on sale of equipment was deducted from net income in computing net cash flow from operating activities.The most likely reason for this adjustment is that:

Accepted Answer

A) The sale of equipment did not result in the receipt of any cash by Gannon Corporation. 
B) The sale resulted in a cash receipt in an accounting period different from the period in which the gain was recognized. 
C) The amount of the gain recognized was not equal to the cash received. 
D) This type of transaction is not classified as an operating activity. 
A) The sale of equipment did not result in the receipt of any cash by Gannon Corporation. 
B) The sale resulted in a cash receipt in an accounting period different from the period in which the gain was recognized. 
C) The amount of the gain recognized was not equal to the cash received. 
D) This type of transaction is not classified as an operating activity.

Question 5

Which of the following does not create a difference between net income and the net cash flow from operations?

Accepted Answer

A) Non-operating gains and losses 
B) Depreciation expense 
C) Timing differences between credit sales and collections from customers 
D) Payment of a cash dividend 
A) Non-operating gains and losses 
B) Depreciation expense 
C) Timing differences between credit sales and collections from customers 
D) Payment of a cash dividend

Question 6

In 2018,Anderson Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000.In its statement of cash flows for 2018,Anderson should report the following with respect to the above transactions:

Accepted Answer

A) $363,000 net cash used by investing activities. 
B) $181,000 net cash used by investing activities;$27,000 net cash provided by operating activities. 
C) $181,000 net cash used by investing activities. 
D) $363,000 cash used by investing activities;$182,000 cash provided by financing activities. 
A) $363,000 net cash used by investing activities. 
B) $181,000 net cash used by investing activities;$27,000 net cash provided by operating activities. 
C) $181,000 net cash used by investing activities. 
D) $363,000 cash used by investing activities;$182,000 cash provided by financing activities.

Question 7

Cash flows from operating activities-indirect method
In the computation of net cash flows from operating activities for 2018 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 2018.
________ (b)A loss recognized on the sale of office equipment during 2018.
________ (c)Depreciation expense for 2018.
________ (d)Dividends,declared at the end of last year,paid to shareholders during the current year.
________ (e)An increase in inventory levels during 2018.
________ (f)A decrease in accounts receivable from customers during 2018.

Accepted Answer

(a)- (b)+

Question 8

The "bottom line" in a statement of cash flows shows:

Accepted Answer

A) The cash (including cash equivalents)on the balance sheet at the end of the period. 
B) Net increase or decrease in cash during the period. 
C) Net income,computed by the cash basis of accounting. 
D) Net cash flow from operating activities. 
A) The cash (including cash equivalents)on the balance sheet at the end of the period. 
B) Net increase or decrease in cash during the period. 
C) Net income,computed by the cash basis of accounting. 
D) Net cash flow from operating activities.

Question 9

In a statement of cash flows,the term "cash" includes both cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 10

Significance of cash flows
Saxony,Inc.is a relatively new business.In its first three years of operations,the company has recorded positive and increasing net cash flows from its operating activities.In each of these three years,the company has also reported a net loss on its income statement.Suggest at least one plausible explanation for these financial results.Given the net losses in the first three years of operations,should investors be concerned about the solvency and future profitability of Saxony? Explain.

Accepted Answer

In its first years of operations,Saxony

Question 11

Which of the following sets of data is sufficient to compute the amount of cash paid for merchandise?

Accepted Answer

A) Cost of goods sold,increase or decrease in inventory,increase or decrease in accounts payable. 
B) Increase or decrease in cash,increase or decrease in inventory,increase or decrease in accounts payable. 
C) Cost of goods sold,increase or decrease in accounts payable. 
D) Cost of goods sold. 
A) Cost of goods sold,increase or decrease in inventory,increase or decrease in accounts payable. 
B) Increase or decrease in cash,increase or decrease in inventory,increase or decrease in accounts payable. 
C) Cost of goods sold,increase or decrease in accounts payable. 
D) Cost of goods sold.

Question 12

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 13

The indirect method of computing cash flows from operations begins with net income.

Accepted Answer

A) True 
 B)False

Question 14

Depreciation expense reduces net income but does not reduce the net cash flow from operating activities.

Accepted Answer

A) True 
 B)False

Question 15

[The following information applies to the questions displayed below.]
The financial statements of Seldin,Inc. ,provide the following information for the current year:
  
-Seldin's net cash flow from operating activities for the current year is:

Accepted Answer

A) $57,000. 
B) $59,000. 
C) $61,000. 
D) $67,000. 
A) $57,000. 
B) $59,000. 
C) $61,000. 
D) $67,000.

Question 16

All of the following are considered cash equivalents except:

Accepted Answer

A) Marketable securities. 
B) Money market funds. 
C) Commercial paper. 
D) Treasury bills. 
A) Marketable securities. 
B) Money market funds. 
C) Commercial paper. 
D) Treasury bills.

Question 17

[The following information applies to the questions displayed below.]
The financial statements of Garver,Inc. ,provide the following information for the current year:
  
-Compute the cash payments for purchases of merchandise during the current year.

Accepted Answer

A) $260,000 
B) $250,000 
C) $266,000 
D) $254,000 
A) $260,000 
B) $250,000 
C) $266,000 
D) $254,000

Question 18

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

Question 19

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 20

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.

Exam 13: Statement of Cash Flows

When net cash flow from operating activities is presented by the direct method,the statement of cash flows is accompanied by a supplementary schedule reconciling:

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.

Gannon Corporation uses the indirect method to prepare its statement of cash flows.Following this approach,a gain on sale of equipment was deducted from net income in computing net cash flow from operating activities.The most likely reason for this adjustment is that:

Which of the following does not create a difference between net income and the net cash flow from operations?

In 2018,Anderson Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000.In its statement of cash flows for 2018,Anderson should report the following with respect to the above transactions:

The "bottom line" in a statement of cash flows shows:

In a statement of cash flows,the term "cash" includes both cash and cash equivalents.

Which of the following sets of data is sufficient to compute the amount of cash paid for merchandise?

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

The indirect method of computing cash flows from operations begins with net income.

Depreciation expense reduces net income but does not reduce the net cash flow from operating activities.

[The following information applies to the questions displayed below.] The financial statements of Seldin,Inc. ,provide the following information for the current year: -Seldin's net cash flow from operating activities for the current year is:

All of the following are considered cash equivalents except:

[The following information applies to the questions displayed below.] The financial statements of Garver,Inc. ,provide the following information for the current year: -Compute the cash payments for purchases of merchandise during the current year.

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?

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

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:

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