Question 1

Working capital is considered to be one of the prime indicators of liquidity.

Accepted Answer

A) True 
 B)False

Question 2

With the indirect method of presenting cash from operations, the income statement is essentially presented on a cash receipts and cash payments basis.

Accepted Answer

A) True 
 B)False

Question 3

Cash flow per share can be viewed as a substitute for earnings per share in terms of a firm's profitability.

Accepted Answer

A) True 
 B)False

Question 4

The conversion of long-term bonds into common stock is an example of a transaction involving two financing activities with no cash flow effect.

Accepted Answer

A) True 
 B)False

Question 5

Tim Company had sales of $30,000, increase in accounts payable of $5,000, decrease in accounts receivable of $1,000, increase in inventories of $4,000, and depreciation expense of $4,000.What was the cash collected from customers?

Accepted Answer

A)  $31,000 
B)  $35,000 
C)  $34,000 
D)  $25,000 
E)  $26,000

Question 6

The operating cash flow/total debt ratio is one that indicates a firm's ability to meet its current maturities of debt.

Accepted Answer

A) True 
 B)False

Question 7

Cash flow per share is usually higher than earnings per share.

Accepted Answer

A) True 
 B)False

Question 8

Conroy Company had sales of $50,000, increase in accounts payable of $4,000, decrease in accounts receivable of $3,000, tax expense of $5,000, and an increase in taxes payable of $1,000.What was the cash outflow for taxes?

Accepted Answer

A)  $54,000 
B)  $4,000 
C)  $6,000 
D)  $53,000 
E)  $45,000

Question 9

Payment of cash dividends is an operating activity.

Accepted Answer

A) True 
 B)False

Question 10

Amortization of patents can be added to income in the operations section of the statement of cash flows because:

Accepted Answer

A)  it is not a tax deductible expense 
B)  it results in a cash inflow 
C)  it does not require the outlay of cash 
D)  patent amortization is not an expense 
E)  it represents an inflow of cash

Question 11

Which of the following is the focus for the statement of cash flows?

Accepted Answer

A)  cash 
B)  cash and cash equivalents 
C)  current assets 
D)  working capital 
E)  none of the answers are correct

Question 12

Which of the following transactions is not reflected in a statement of cash flows?

Accepted Answer

A)  sale of treasury stock 
B)  declaration of a stock dividend 
C)  purchase of foreign subsidiary with cash 
D)  issuance of convertible bonds 
E)  purchase of equipment with cash

Question 13

The purchase of equipment using cash is an investing activity.

Accepted Answer

A) True 
 B)False

Question 14

The acquisition of land using notes payable is an example of a noncash transaction.

Accepted Answer

A) True 
 B)False

Question 15

In a statement of cash flows (indirect method), depreciation expense should be presented as:

Accepted Answer

A)  a cash flow from financing activities 
B)  a cash flow from investing activities 
C)  a deduction from net income 
D)  an addition to net income 
E)  a financial activity

Question 16

Which of the following accounts is not part of working capital?

Accepted Answer

A)  cash 
B)  accounts receivable 
C)  inventory 
D)  accounts payable 
E)  investments

Question 17

Sale of equipment for cash is an operating activity.

Accepted Answer

A) True 
 B)False

Question 18

The income statement does not fairly represent the cash from operations.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not an item added back to income in the operations section of the statement of cash flows when using the indirect presentation?

Accepted Answer

A)  depreciation 
B)  amortization of goodwill 
C)  increase in deferred income taxes 
D)  amortization of bond premium 
E)  amortization of patents

Exam 10: Statement of Cash Flows

Working capital is considered to be one of the prime indicators of liquidity.

With the indirect method of presenting cash from operations, the income statement is essentially presented on a cash receipts and cash payments basis.

Cash flow per share can be viewed as a substitute for earnings per share in terms of a firm's profitability.

The conversion of long-term bonds into common stock is an example of a transaction involving two financing activities with no cash flow effect.

Tim Company had sales of $30,000, increase in accounts payable of $5,000, decrease in accounts receivable of $1,000, increase in inventories of $4,000, and depreciation expense of $4,000.What was the cash collected from customers?

The operating cash flow/total debt ratio is one that indicates a firm's ability to meet its current maturities of debt.

Cash flow per share is usually higher than earnings per share.

Conroy Company had sales of $50,000, increase in accounts payable of $4,000, decrease in accounts receivable of $3,000, tax expense of $5,000, and an increase in taxes payable of $1,000.What was the cash outflow for taxes?

Payment of cash dividends is an operating activity.

Amortization of patents can be added to income in the operations section of the statement of cash flows because:

Which of the following is the focus for the statement of cash flows?

Which of the following transactions is not reflected in a statement of cash flows?

The purchase of equipment using cash is an investing activity.

The acquisition of land using notes payable is an example of a noncash transaction.

In a statement of cash flows (indirect method) , depreciation expense should be presented as:

Which of the following accounts is not part of working capital?

Sale of equipment for cash is an operating activity.

The income statement does not fairly represent the cash from operations.

Which of the following is not an item added back to income in the operations section of the statement of cash flows when using the indirect presentation?