Question 1

Which of the following statements is correct concerning the computation required to determine cash collected from customers under the direct method?

Accepted Answer

A)  An increase in Accounts Receivable is added to net income.
B)  A decrease in Accounts Receivable is added to net income.
C)  An increase in Accounts Receivable is added to Sales Revenue.
D)  A decrease in Accounts Receivable is added to Sales Revenue. D

Question 2

Kringle Co. issued bonds during the year. This would be considered a _______ of cash, and would be reported in the _______ section of the Statement of Cash Flows.

Accepted Answer

A)  source, financing
B)  use, investing
C)  source, investing
D)  use, financing A

Question 3

The gains and losses on the sale of equipment under the direct method would be reported:

Accepted Answer

A)  in the investing section of the cash flow statement.
B)  in the operating section of the cash flow statement.
C)  in the financing section of the cash flow statement.
D)  they are not reported on the cash flow statement. D

Question 4

Acquisitions and sales of long-term assets belong in the financing section of a cash flow statement using the indirect method.

Accepted Answer

A) True 
 B)False

Question 5

Cash payments for inventory are computed as- Total inventory purchased plus a decrease in Accounts Payable OR minus an increase in Accounts Payable.

Accepted Answer

A) True 
 B)False

Question 6

If $10,000 was generated from operations, $1,000 was used for investing activities and $7,000 was generated from financing activities, the cash balance must have increased by:

Accepted Answer

A)  $7,000.
B)  $4,000.
C)  $16,000.
D)  $18,000.

Question 7

Exchanging stock for a building under the direct method would be reported:

Accepted Answer

A)  in the investing section of the cash flow statement.
B)  in the operating section of the cash flow statement.
C)  in the financing section of the cash flow statement.
D)  as a separate disclosure.

Question 8

One formula for determining cash collections from customers is to take Sales plus the increase in Accounts Receivable.

Accepted Answer

A) True 
 B)False

Question 9

Are all decreases to cash the result of an unfavorable situation?

Accepted Answer

A)  Yes, decreases to cash are always bad.
B)  No, cash could decrease as a result of acquiring long-term assets which the company needs to expand or stay competitive.
C)  Yes, cash could decrease as a result of paying off long-term debt which is an unfavorable action to take.
D)  No, cash could decrease because the company issued more stock.

Question 10

A Statement of Cash Flows shows the company's sources of cash, but does not detail how the cash was used by the company.

Accepted Answer

A) True 
 B)False

Question 11

Because depreciation is not cash-based, it is NOT reported in the direct method of the Statement of Cash Flows.

Accepted Answer

A) True 
 B)False

Question 12

The following information is available for Allsport Company. What amount was paid for merchandise during the current year (2016)?

Accepted Answer

A)  $535,000
B)  $572,800
C)  $498,800
D)  $571,200

Question 13

The investing and financing sections of the Statement of Cash Flows are the same for the indirect and direct method.

Accepted Answer

A) True 
 B)False

Question 14

The following information is available for Bestway Company. What amount is paid for merchandise for the current year (2016)?

Accepted Answer

A)  $888,000
B)  $916,000
C)  $1,374,000
D)  $914,000

Question 15

Losses on the sale of long-term assets are:

Accepted Answer

A)  added to operating activities.
B)  subtracted from operating activities.
C)  added to investing activities.
D)  subtracted from investing activities.

Question 16

If $9,000 was generated from operations (indirect method); $3,000 was used for investing activities; and $8,000 was generated from financing activities, the cash balance:

Accepted Answer

A)  increased by $8,000.
B)  increased by $4,000.
C)  increased by $14,000.
D)  decreased by $20,000.

Question 17

The accuracy of the Statement of Cash Flows can be verified by computing the change in the balance of the:

Accepted Answer

A)  cash and cash equivalent accounts.
B)  equity account.
C)  revenue accounts.
D)  asset and liability accounts.

Question 18

Operating expenses (other than depreciation)for the year were $360,000. Accrued expenses increased by $37,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

A)  $397,000.
B)  $360,000.
C)  $323,000.
D)  $37,000.

Question 19

The Bobblehead Company has an Accounts Receivable turnover of 33 days, an inventory turnover of 77 days and an Accounts Payable turnover of 39 days. Bobblehead's cash conversion cycle is:

Accepted Answer

A)  149 days.
B)  83 days.
C)  71 days.
D)  5 days.

Question 20

A decrease in a current liability causes an increase in cash.

Accepted Answer

A) True 
 B)False

Exam 11: The Statement of Cash Flows

Which of the following statements is correct concerning the computation required to determine cash collected from customers under the direct method?

Kringle Co. issued bonds during the year. This would be considered a _ of cash, and would be reported in the _ section of the Statement of Cash Flows.

The gains and losses on the sale of equipment under the direct method would be reported:

Acquisitions and sales of long-term assets belong in the financing section of a cash flow statement using the indirect method.

Cash payments for inventory are computed as- Total inventory purchased plus a decrease in Accounts Payable OR minus an increase in Accounts Payable.

If $10,000 was generated from operations, $1,000 was used for investing activities and $7,000 was generated from financing activities, the cash balance must have increased by:

Exchanging stock for a building under the direct method would be reported:

One formula for determining cash collections from customers is to take Sales plus the increase in Accounts Receivable.

Are all decreases to cash the result of an unfavorable situation?

A Statement of Cash Flows shows the company's sources of cash, but does not detail how the cash was used by the company.

Because depreciation is not cash-based, it is NOT reported in the direct method of the Statement of Cash Flows.

The following information is available for Allsport Company. What amount was paid for merchandise during the current year (2016) ?

The investing and financing sections of the Statement of Cash Flows are the same for the indirect and direct method.

The following information is available for Bestway Company. What amount is paid for merchandise for the current year (2016) ?

Losses on the sale of long-term assets are:

If $9,000 was generated from operations (indirect method) ; $3,000 was used for investing activities; and $8,000 was generated from financing activities, the cash balance:

The accuracy of the Statement of Cash Flows can be verified by computing the change in the balance of the:

Operating expenses (other than depreciation) for the year were $360,000. Accrued expenses increased by $37,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

The Bobblehead Company has an Accounts Receivable turnover of 33 days, an inventory turnover of 77 days and an Accounts Payable turnover of 39 days. Bobblehead's cash conversion cycle is:

A decrease in a current liability causes an increase in cash.