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) Managing activities. 
A) Operating activities. 
B) Financing activities. 
C) Investing activities. 
D) Managing activities.

Question 2

Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year.Use the following code: O = operating activities,I = investing activities,and F = financing activities
Assume this company uses the direct method.If the event does not involve a cash flow that should be included in the statement of cash flows,use an X.
________ (a)Declared a dividend to be paid early next year.
________ (b)Recorded depreciation expense for the current year.
________ (c)At year-end,paid rent in advance for the next six months.
________ (d)Issued capital stock for cash;management plans to use this cash to invest in marketable securities.
________ (e)Sold a parcel of unused land at a loss.
________ (f)Collected principal amount due on a note receivable.
________ (g)Used the cash received in d,above,to purchase marketable securities.
________ (h)Collected interest due on note receivable described in f,above.
________ (i)Made an adjusting entry to accrue interest payable at year-end.
________ (j)Collected account receivable from a customer who made a large credit purchase in a prior period.
Answer: X
(a)Declared a dividend to be paid early next year.
X (b)Recorded depreciation expense for the current year.
O (c)At year-end,paid rent in advance for the next six months.
F (d)Issued capital stock for cash;management plans to use this cash to invest in marketable securities.
I (e)Sold a parcel of unused land at a loss.
I (f)Collected principal amount due on a note receivable.
I (g)Used the cash received in d,above,to purchase marketable securities.
O (h)Collected interest due on note receivable described in f,above.
X (i)Made an adjusting entry to accrue interest payable at year-end.
O (j)Collected account receivable from a customer who made a large credit purchase in a prior period.
Difficulty: 1 Easy
Topic: Cash Flows from Operating Activities;Cash Flows from Investing Activities
Learning Objecti: 13-03 Compute the major cash flows relating to operating activities. ;13-04 Compute the cash flows relating to investing and financing activities.
Bloom's: Remember
AACSB: Analytical Thinking
-Computation of operating cash flows
The financial statements of Custom Corporation provide the following information for the current year:
   Using this information,compute for the current year:

Accepted Answer

(a)Cash received from customers: $801,00

Question 3

[The following information applies to the questions displayed below.]
An analysis of Korman Corporation's Investment in Marketable Securities account during 2018 disclosed the following:
   Korman's 2018 income statement included a $40,000 gain on sale of marketable securities and $30,000 dividend income from marketable securities.All payments and proceeds relating to marketable securities transactions were in cash.
-How should the transactions involving marketable securities be classified in Korman's statement of cash flows for 2018?

Accepted Answer

A) The purchase of marketable securities,sales of marketable securities,and receipt of dividends are all classified as investing activities. 
B) The purchase and the sale of marketable securities are classified as investing activities;the receipt of dividends is classified as an operating activity. 
C) The purchase of marketable securities is classified as an investing activity;the sale of marketable securities is classified as a financing activity;the receipt of dividends is classified as an operating activity. 
D) The purchase and the sale of marketable securities are classified as investing activities;the receipt of dividends is classified as a financing activity. 
A) The purchase of marketable securities,sales of marketable securities,and receipt of dividends are all classified as investing activities. 
B) The purchase and the sale of marketable securities are classified as investing activities;the receipt of dividends is classified as an operating activity. 
C) The purchase of marketable securities is classified as an investing activity;the sale of marketable securities is classified as a financing activity;the receipt of dividends is classified as an operating activity. 
D) The purchase and the sale of marketable securities are classified as investing activities;the receipt of dividends is classified as a financing activity.

Question 4

Which of the following would not be presented in the cash flows from operating activities section of the statement of cash flows when the direct method is used?

Accepted Answer

A) Dividends paid. 
B) Dividends received. 
C) Neither dividends paid nor dividends received would be shown. 
D) Both dividends paid and dividends received would be shown. 
A) Dividends paid. 
B) Dividends received. 
C) Neither dividends paid nor dividends received would be shown. 
D) Both dividends paid and dividends received would be shown.

Question 5

[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.
-The amount of cash paid by Johnson to acquire plant assets during the current year was:

Accepted Answer

A) $ 53,000. 
B) $267,000. 
C) $ 42,000. 
D) $160,000. 
A) $ 53,000. 
B) $267,000. 
C) $ 42,000. 
D) $160,000.

Question 6

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

Accepted Answer

A) Collections from customers for sales of goods. 
B) Interest and dividends received. 
C) Payments of interest. 
D) Payments of dividends. 
A) Collections from customers for sales of goods. 
B) Interest and dividends received. 
C) Payments of interest. 
D) Payments of dividends.

Question 7

[The following information applies to the questions displayed below.]
The financial statements of York,Inc. ,provide the following information for the current year:
  
-Compute the amount of cash payments for operating expenses.

Accepted Answer

A) $138,600 
B) $141,750 
C) $189,000 
D) $174,825 
A) $138,600 
B) $141,750 
C) $189,000 
D) $174,825

Question 8

Which of the following is not true regarding the direct and indirect methods of computing net cash flow from operating activities?

Accepted Answer

A) Both methods result in the same dollar amount of cash flow from operating activities. 
B) Both methods involve adjusting entries to the company's books so that the accounting records reflect the figures shown in the statement of cash flows. 
C) Both methods are acceptable to the FASB for reporting purposes. 
D) Both methods convert accrual-based income statement amounts to cash flow results. 
A) Both methods result in the same dollar amount of cash flow from operating activities. 
B) Both methods involve adjusting entries to the company's books so that the accounting records reflect the figures shown in the statement of cash flows. 
C) Both methods are acceptable to the FASB for reporting purposes. 
D) Both methods convert accrual-based income statement amounts to cash flow results.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Cigna Corporation's 2018 net income is smaller than net cash flow from operating activities.Which of the following would not be an explanation of why net income is smaller than net cash flow from operating activities?

Accepted Answer

A) Cigna paid dividends to shareholders during 2018. 
B) Cigna's accounts payable increased during 2018. 
C) Cigna recognized depreciation expense in 2018. 
D) Cigna sold equipment at a loss in 2018. 
A) Cigna paid dividends to shareholders during 2018. 
B) Cigna's accounts payable increased during 2018. 
C) Cigna recognized depreciation expense in 2018. 
D) Cigna sold equipment at a loss in 2018.

Question 11

If a company uses the indirect method to prepare its statement of cash flows,it must provide a supplementary schedule showing the computation of net cash flow from operating activities using the direct method.

Accepted Answer

A) True 
 B)False

Question 12

Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year.Use the following code: O = operating activities,I = investing activities,and F = financing activities
Assume this company uses the direct method.If the event does not involve a cash flow that should be included in the statement of cash flows,use an X.
________ (a)Declared a dividend to be paid early next year.
________ (b)Recorded depreciation expense for the current year.
________ (c)At year-end,paid rent in advance for the next six months.
________ (d)Issued capital stock for cash;management plans to use this cash to invest in marketable securities.
________ (e)Sold a parcel of unused land at a loss.
________ (f)Collected principal amount due on a note receivable.
________ (g)Used the cash received in d,above,to purchase marketable securities.
________ (h)Collected interest due on note receivable described in f,above.
________ (i)Made an adjusting entry to accrue interest payable at year-end.
________ (j)Collected account receivable from a customer who made a large credit purchase in a prior period.
Answer: X
(a)Declared a dividend to be paid early next year.
X (b)Recorded depreciation expense for the current year.
O (c)At year-end,paid rent in advance for the next six months.
F (d)Issued capital stock for cash;management plans to use this cash to invest in marketable securities.
I (e)Sold a parcel of unused land at a loss.
I (f)Collected principal amount due on a note receivable.
I (g)Used the cash received in d,above,to purchase marketable securities.
O (h)Collected interest due on note receivable described in f,above.
X (i)Made an adjusting entry to accrue interest payable at year-end.
O (j)Collected account receivable from a customer who made a large credit purchase in a prior period.
Difficulty: 1 Easy
Topic: Cash Flows from Operating Activities;Cash Flows from Investing Activities
Learning Objecti: 13-03 Compute the major cash flows relating to operating activities. ;13-04 Compute the cash flows relating to investing and financing activities.
Bloom's: Remember
AACSB: Analytical Thinking
-Comparison of cash flows and accrual basis
Underhill Corporation's statement of cash flows for 2018 shows the following information regarding investing activities:
   Underhill Corporation's income statement for 2018 includes the following items:
   (a)All payments and proceeds relating to these transactions were in cash.Using this information,compute the following:

Accepted Answer

(a)(1)$425,000 (cash proceeds)- $179,000

Question 13

[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 received from customers during the current year.

Accepted Answer

A) $530,000 
B) $510,000 
C) $520,000 
D) $ 80,000 
A) $530,000 
B) $510,000 
C) $520,000 
D) $ 80,000

Question 14

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

Accepted Answer

A) Payment of interest on a bank loan. 
B) Payment of the principal amount owed on a bank loan. 
C) Payment of an account payable to a merchandise supplier. 
D) Payment of income taxes. 
A) Payment of interest on a bank loan. 
B) Payment of the principal amount owed on a bank loan. 
C) Payment of an account payable to a merchandise supplier. 
D) Payment of income taxes.

Question 15

During the current year,Atkins,Inc.sold a parcel of land for $840,000 cash.The land had been purchased by Atkins several years ago for $410,000.Atkins,Inc.uses the indirect method to prepare its statement of cash flows.In order to reconcile net income to net cash flow from operating activities,net income must be:

Accepted Answer

A) Decreased by $410,000. 
B) Decreased by $430,000. 
C) Increased by $430,000. 
D) Not adjusted because the sale of land is classified as an investing activity. 
A) Decreased by $410,000. 
B) Decreased by $430,000. 
C) Increased by $430,000. 
D) Not adjusted because the sale of land is classified as an investing activity.

Question 16

Empire Company uses the indirect method to prepare its statement of cash flows.The following information has been gathered for the current period:   Solely on the basis of the above information,Empire's net cash flow from operating activities is:

Accepted Answer

A) $338,000. 
B) $428,000. 
C) $343,000. 
D) $358,000. 
A) $338,000. 
B) $428,000. 
C) $343,000. 
D) $358,000.

Question 17

At the end of 2018,Schenck Corporation sold its only piece of equipment for $9,000 cash,a price that resulted in a loss of $3,000.During 2018,depreciation expense recognized by Schenck was $1,000.Schenck uses the indirect method to compute net cash flow from operating activities.In reconciling net income to net cash flow from operating activities under the indirect method,the required adjustments based upon the given data:

Accepted Answer

A) Increase net income by $4,000. 
B) Increase net income by $1,000. 
C) Decrease net income by $4,000. 
D) Increase net income by $3,000. 
A) Increase net income by $4,000. 
B) Increase net income by $1,000. 
C) Decrease net income by $4,000. 
D) Increase net income by $3,000.

Question 18

Chapin Company reported net income of $410,000 for 2018.Balances of selected current asset and current liability accounts are as shown on the indicated dates:   -
Depreciation expense for 2018 amounted to $65,000.Using only the above information,compute Chapin's net cash flow from operating activities (indirect method)for 2018.

Accepted Answer

A) $470,600 
B) $467,400 
C) $460,600 
D) $448,600 
A) $470,600 
B) $467,400 
C) $460,600 
D) $448,600

Question 19

Royal Corporation uses the indirect method of computing net cash flow from operating activities and reported the following for 2018: Accounts receivable decreased by $10,300,merchandise inventory increased by $15,300,accounts payable decreased by $4,000,and income taxes payable increased by $18,800.If Royal Corporation reported net income for 2018 of $157,800 (including $34,800 of depreciation expense),net cash flow from operating activities for 2018 is:

Accepted Answer

A) $202,400. 
B) $132,800. 
C) $164,800. 
D) $221,700. 
A) $202,400. 
B) $132,800. 
C) $164,800. 
D) $221,700.

Question 20

At the end of the first year of operations,the balance sheet of Midwood Medical Supply showed the following account balances: Accounts Receivable,$5,000;Accounts Payable,$6,000;Inventory,$3,000;and Unexpired Insurance,$2,000.The corporation reported net income of $79,000 for the year,including depreciation expense of $5,000,and uses the indirect method of computing net cash flow from operating activities.Solely on the basis of this information,net cash flow from operating activities is:

Accepted Answer

A) $78,000. 
B) $82,000. 
C) $77,000. 
D) $80,000. 
A) $78,000. 
B) $82,000. 
C) $77,000. 
D) $80,000.

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

Which of the following would not be presented in the cash flows from operating activities section of the statement of cash flows when the direct method is used?

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

[The following information applies to the questions displayed below.] The financial statements of York,Inc. ,provide the following information for the current year: -Compute the amount of cash payments for operating expenses.

Which of the following is not true regarding the direct and indirect methods of computing net cash flow from operating activities?

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

Cigna Corporation's 2018 net income is smaller than net cash flow from operating activities.Which of the following would not be an explanation of why net income is smaller than net cash flow from operating activities?

If a company uses the indirect method to prepare its statement of cash flows,it must provide a supplementary schedule showing the computation of net cash flow from operating activities using the direct method.

[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 received from customers during the current year.

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

Empire Company uses the indirect method to prepare its statement of cash flows.The following information has been gathered for the current period: Solely on the basis of the above information,Empire's net cash flow from operating activities is:

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

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

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters

Exam 13: Statement of Cash Flows

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

Which of the following would not be presented in the cash flows from operating activities section of the statement of cash flows when the direct method is used?

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

[The following information applies to the questions displayed below.] The financial statements of York,Inc. ,provide the following information for the current year: -Compute the amount of cash payments for operating expenses.

Which of the following is not true regarding the direct and indirect methods of computing net cash flow from operating activities?

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

Cigna Corporation's 2018 net income is smaller than net cash flow from operating activities.Which of the following would not be an explanation of why net income is smaller than net cash flow from operating activities?

If a company uses the indirect method to prepare its statement of cash flows,it must provide a supplementary schedule showing the computation of net cash flow from operating activities using the direct method.

[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 received from customers during the current year.

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

Empire Company uses the indirect method to prepare its statement of cash flows.The following information has been gathered for the current period: Solely on the basis of the above information,Empire's net cash flow from operating activities is:

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

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

the Time Value of Money: Future Amounts and Present Values

Forms of Business Organization

Filters