Question 1

Match the terms with the definitions.
-Investing and financing activities that involve no cash flows, but represent a significant change in the company's financial position.

Accepted Answer

A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows

Question 2

Interest received on loans made to borrowers is an example of a financing activity.

Accepted Answer

A) True 
 B)False

Question 3

Although the accrual basis of accounting is an excellent method for measuring profitability, it does not explain why a company's liquidity has improved or worsened.

Accepted Answer

A) True 
 B)False

Question 4

An example of a cash outflow from investing activities is

Accepted Answer

A)  issuance of a notes payable. 
B)  making a loan to another company. 
C)  cash dividends paid. 
D)  the purchase of treasury stock.

Question 5

(Appendix) The following activities took place at Amity Harbor Corporation during the past year. Indicate whether each activity is a cash inflow (+) or cash outflow (−), and whether it is an operating (O), investing (I), or financing (F) activity.

Accepted Answer

The answer of (Appendix) The following activities took place at...

Question 6

An example of a cash inflow from operating activities is

Accepted Answer

A)  cash received from the sale of merchandise. 
B)  proceeds from the sale of productive assets. 
C)  proceeds from discounting notes receivable. 
D)  proceeds from additional investments by the owners.

Question 7

Gains on the sale of plant and equipment should be subtracted from net income when computing cash from operating activities.

Accepted Answer

A) True 
 B)False

Question 8

Match the terms with the definitions.
-A method of reporting cash from operating activities in which net income is adjusted for transactions that affect both net income and cash from operating activities but in different ways.

Accepted Answer

A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows

Question 9

Cash generated from operating activities may be computed and reported using

Accepted Answer

A)  the direct method only. 
B)  the indirect method only. 
C)  either the direct and indirect methods. 
D)  the combination method.

Question 10

(Appendix) A decrease in Accounts Receivable represents an increase in the cash generated from sales.

Accepted Answer

A) True 
 B)False

Question 11

The statement of cash flows is divided into three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

Accepted Answer

A) True 
 B)False

Question 12

Under the indirect method, a decrease in Accounts Payable must be subtracted from net income when computing cash from operating activities.

Accepted Answer

A) True 
 B)False

Question 13

Cash generated from operating activities has traditionally been computed by combining the direct and the indirect methods.

Accepted Answer

A) True 
 B)False

Question 14

Match the terms with the definitions.
-A financial statement associated with the operating, investing, and financing activities of a company.

Accepted Answer

A) cash equivalents 
B) direct method 
C) financing activities 
D) indirect method 
E) investing activities
F)noncash investing and financing activities
G)operating activities
H)statement of cash flows

Question 15

(Appendix) Cash flows from investing activities are computed and reported in the same manner under the direct and indirect method.

Accepted Answer

A) True 
 B)False

Question 16

The managers of a business have the dual objective of generating net income (profitability) and keeping the enterprise solvent (liquidity).

Accepted Answer

A) True 
 B)False

Question 17

Some investing and financing activities involve no cash flows so they

Accepted Answer

A)  represent no significant financial change. 
B)  should be included in the three main sections of the statement of cash flows. 
C)  should be reported in a separate section of the statement of cash flows. 
D)  must be converted to cash at the end of the accounting period.

Question 18

Achieving profitability will automatically assure sufficient amounts of cash.

Accepted Answer

A) True 
 B)False

Question 19

Under the indirect method, an increase in Accounts Receivable must be added to net income when computing cash from operating activities.

Accepted Answer

A) True 
 B)False

Question 20

Those transactions dealing with the exchange of cash between the firm and its owners (stockholders) and creditors are called

Accepted Answer

A)  investing activities. 
B)  operating activities. 
C)  financing activities. 
D)  planning activities.

Exam 23: Statement of Cash Flows

Match the terms with the definitions. -Investing and financing activities that involve no cash flows, but represent a significant change in the company's financial position.

Interest received on loans made to borrowers is an example of a financing activity.

Although the accrual basis of accounting is an excellent method for measuring profitability, it does not explain why a company's liquidity has improved or worsened.

An example of a cash outflow from investing activities is

(Appendix) The following activities took place at Amity Harbor Corporation during the past year. Indicate whether each activity is a cash inflow (+) or cash outflow (−), and whether it is an operating (O), investing (I), or financing (F) activity.

An example of a cash inflow from operating activities is

Gains on the sale of plant and equipment should be subtracted from net income when computing cash from operating activities.

Match the terms with the definitions. -A method of reporting cash from operating activities in which net income is adjusted for transactions that affect both net income and cash from operating activities but in different ways.

Cash generated from operating activities may be computed and reported using

(Appendix) A decrease in Accounts Receivable represents an increase in the cash generated from sales.

The statement of cash flows is divided into three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

Under the indirect method, a decrease in Accounts Payable must be subtracted from net income when computing cash from operating activities.

Cash generated from operating activities has traditionally been computed by combining the direct and the indirect methods.

Match the terms with the definitions. -A financial statement associated with the operating, investing, and financing activities of a company.

(Appendix) Cash flows from investing activities are computed and reported in the same manner under the direct and indirect method.

The managers of a business have the dual objective of generating net income (profitability) and keeping the enterprise solvent (liquidity).

Some investing and financing activities involve no cash flows so they

Achieving profitability will automatically assure sufficient amounts of cash.

Under the indirect method, an increase in Accounts Receivable must be added to net income when computing cash from operating activities.

Those transactions dealing with the exchange of cash between the firm and its owners (stockholders) and creditors are called