Question 1

Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method.
-Recognized a gain on the sale of the securities above.

Accepted Answer

A) Operating activity-add to net income 
B) Operating activity-deduct from net income 
C) Inflow from investing activity 
D) Outflow from investing activity 
E) Inflow from financing activity
F)Outflow from financing activity
G)Noncash investing and financing activity
H)Not reported on statement of cash flows

Question 2

Selected data from the financial statements of Ames Corporation for the years ended December 31, 2015 and 2016 are presented below.
  REQUIRED:
What is the amount of cash and cash equivalents at the end of 2016?

Accepted Answer

The answer of Selected data from the financial statements of...

Question 3

Which of the following statements regarding the statement of cash flows is true?

Accepted Answer

A)  The statement of cash flows analyzes the changes in consecutive balance sheets in conjunction with the income statement. 
B)  The statement of cash flows is organized as cash inflows less cash outflows. 
C)  The statement of cash flows analyzes only the changes in current assets and current liabilities. 
D)  The statement of cash flows is an optional financial statement.

Question 4

For the statement of cash flows, companies are required to classify their cash activities into three categories: operating, investing, and borrowing.

Accepted Answer

A) True 
 B)False

Question 5

Below are the transactions for the Louisville Company:  Based on these transactions, what is the net cash flow from financing activities?

Accepted Answer

A)  $285,000 net cash provided by financing activities. 
B)  $275,000 net cash used for financing activities. 
C)  $0, because cash inflows equal cash outflows from financing activities. 
D)  $440,000 net cash provided by financing activities.

Question 6

Assuming the indirect method for preparing the statement of cash flows is used, indicate whether these items should be added to net income A, deducted from net income D, or not be reported in the operating section of the statement under the indirect method NR.
-Decrease in accounts payable

Accepted Answer

A) Added A 
B) Deducted D 
C) Not reported NR

Question 7

The decrease in accounts receivable over a period results in an to net income reported in the operating activities section of the statement of cash flows using the indirect method.

Accepted Answer

The answer of The decrease in accounts receivable over a...

Question 8

An important activity for many companies is acquiring property.

Accepted Answer

The answer of An important activity for many companies is...

Question 9

Use the following selected data and additional information from the records of Utah Corp. to answer the questions that follow.
   1 Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000 during 2016.
2 Common stock was issued to retire bonds payable during 2016.
3 The only items affecting retained earnings in 2016 were net income and dividends declared and paid.
-Review the data for Utah Corp.
REQUIRED:
A What amount of cash was collected from customers during 2016?
B What is the amount paid for purchases of merchandise during 2016?
C What is the amount paid for operating expenses during 2016?

Accepted Answer

The answer of Use the following selected data and additional...

Question 10

The following items were reported on the balance sheets and income statement for Centerton Inc., a service company:  What amount would be reported in the operating activities section of the statement of cash flows for payments for operating expenses under the direct method?

Accepted Answer

A)  $186,000 
B)  $154,000 
C)  $180,000 
D)  $170,000

Question 11

Flannery Company uses a worksheet to prepare its statement of cash flows. The company also uses the indirect method for the Operating Activities section of its statement. For each of the following changes in the balance sheet, indicate what activity it affects and whether it is an addition or deduction.
-Accounts payable decreased

Accepted Answer

A) Deducted from Operating activity 
B) Added to Operating activity 
C) Deducted from Investing activity 
D) Added to Investing activity 
E) Deducted from Financing activity
F)Added to Financing activity

Question 12

Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method.
-Reissued treasury stock.

Accepted Answer

A) Operating activity-add to net income 
B) Operating activity-deduct from net income 
C) Inflow from investing activity 
D) Outflow from investing activity 
E) Inflow from financing activity
F)Outflow from financing activity
G)Noncash investing and financing activity
H)Not reported on statement of cash flows

Question 13

Under the , the net cash flow from operating activities is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments, and all accruals of future operating cash receipts or payments.

Accepted Answer

The answer of Under the , the net cash flow...

Question 14

The cash flow adequacy ratio can only be calculated if a company uses the direct method to report cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not an investing activity?

Accepted Answer

A)  Purchase of investments for cash. 
B)  Purchase of equipment for cash. 
C)  Sale of merchandise for cash. 
D)  Sale of land for cash.

Question 16

Cash flows from acquiring and disposing of long-term assets are classified as

Accepted Answer

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

Question 17

Occasionally, companies engage in important investing and financing activities which do not affect cash. If the amount of the transaction is significant, how should it be disclosed when financial statements are prepared?

Accepted Answer

A)  In the investing section if the amount of investing activities are greater than the financing activities amount. 
B)  In the financing section if the amount of financing activities are greater than the investing activities amount. 
C)  In a note to the financial statements or in a supplemental schedule. 
D)  The transaction does not need to be disclosed.

Question 18

Below is information for Toronto Imports Corp. for 2015 and 2016:  At the end of 2016, Toronto issued bonds at par value for $800,000 cash. The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2015 before their maturity date. All interest expense was paid in cash during 2016.
The following statements describe how Toronto reported the cash flow effects of the items described above on its 2016 statement of cash flows. The indirect method is used to prepare the operating activities section. Which of the following has been reported incorrectly by Toronto?

Accepted Answer

A)  Proceeds of $800,000 from the issuance of bonds were reported as a cash inflow in the financing activities section. 
B)  The loss on bond retirement of $15,000 was added to net income in the operating activities section. 
C)  Payments of $560,000 were reported as a cash outflow in the investing activities section. 
D)  Interest expense of $45,000 was not reported separately because it is included in net income in the operating activities section.

Question 19

Nordic Exports Inc. reported net income of $150,000 for 2015, but its cash balance decreased $40,000. Which financial statement should Nordic Exports' management refer to for an explanation of this situation?

Accepted Answer

A)  Balance Sheet 
B)  Income Statement 
C)  Statement of Retained Earnings 
D)  Statement of Cash Flows

Question 20

When using the direct method, how is the issuance of stock for cash shown on the statement of cash flows?

Accepted Answer

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

Exam 12: The Statement of Cash Flows

Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method. -Recognized a gain on the sale of the securities above.

Selected data from the financial statements of Ames Corporation for the years ended December 31, 2015 and 2016 are presented below. REQUIRED: What is the amount of cash and cash equivalents at the end of 2016?