Question 1

The Prepaid Rent balance has decreased during the year. How would this affect the Statement of Cash Flows operations section under the indirect method?

Accepted Answer

A) It is already included in the net income. 
B) It would be added back to net income. 
C) It would be subtracted from net income. 
D) It does not affect the cash flow from operations.

Question 2

The difference between the direct and indirect methods is the format of the financing section.

Accepted Answer

A) True 
 B)False

Question 3

Operating expenses (other than depreciation)for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

A) $335,000. 
B) $342,000. 
C) $328,000. 
D) $7,000.

Question 4

From the Income Statement and Balance Sheet information listed below, what amount of cash was paid for salaries and wages during 2016?

Accepted Answer

A) $153,700 
B) $143,400 
C) $160,300 
D) $180,900

Question 5

The direct method of formatting a Statement of Cash Flows starts with net income.

Accepted Answer

A) True 
 B)False

Question 6

Caesario Company's Accounts Receivable increased by $39,000 and their Accounts Payable decreased by $19,000. What is the net effect on cash from operations under the indirect method?

Accepted Answer

A) +$58,000 
B) -$20,000 
C) -$58,000 
D) +$20,000

Question 7

From the Income Statement and Balance Sheet information listed below, what amount of cash was paid for salaries and wages during 2016?

Accepted Answer

A) $212,500 
B) $217,500 
C) $215,000 
D) $233,300

Question 8

A company issues common stock to settle a debt, this would be classified as a(n):

Accepted Answer

A) noncash investing and financing activity. 
B) investing activity. 
C) operating activity. 
D) financing activity.

Question 9

Which of the following is NOT a part of financing activities?

Accepted Answer

A) Paying dividends 
B) Issuing stock 
C) Paying off loans 
D) Buying land

Question 10

Cash received from issuing stock would be included in investing activities.

Accepted Answer

A) True 
 B)False

Question 11

Operating Cash Flows affect:

Accepted Answer

A) current assets and current liabilities. 
B) long-term asset accounts. 
C) equity accounts. 
D) long-term liability accounts.

Question 12

Under the direct method, paying and collecting interest on loans are:

Accepted Answer

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

Question 13

In the indirect method of Cash Flows, which of the following would be added to net income?

Accepted Answer

A) A decrease in Supplies 
B) An increase in Prepaid Rent 
C) A decrease in Sales Tax Payable 
D) An increase in Inventory

Question 14

The cash flow statement is the communicating link between the:

Accepted Answer

A) Statement of Stockholders' Equity and the cash reported on the Balance Sheet. 
B) Income Statement and the Statement of Stockholders' Equity. 
C) cash reported on the Balance Sheet and the accrual based Income Statement. 
D) cash reported on the Balance Sheet and the Statement of Stockholders' Equity.

Question 15

Payments to suppliers include payments for which of the following?

Accepted Answer

A) Inventory 
B) Employee compensation 
C) Income taxes 
D) All of the above.

Question 16

Under the indirect method of cash flow, which of the following adjustments would NOT be made to net income when computing cash from operating activities?

Accepted Answer

A) Add an increase in Accounts Payable 
B) Add Depreciation Expense 
C) Add a decrease in Accounts Payable 
D) Subtract the gain on sale of land

Question 17

On its Statement of Cash Flows, Mike's Motors reported cash flow from operating activities of $108,000, cash flow from investing activities of $87,000, and cash flow from financing activities of ($61,000). Mike's Motors invested $55,000 cash in long-term assets. Mike's Motors' free cash flow is:

Accepted Answer

A) $32,000. 
B) $6,000. 
C) $53,000. 
D) $79,000.

Question 18

Most businesses prefer to use the indirect method of formatting a Statement of Cash Flows.

Accepted Answer

A) True 
 B)False

Question 19

A transaction acquiring land by issuing a note for the full purchase price would not appear on the cash flow statement because no cash was involved, but it may be disclosed in a separate section.

Accepted Answer

A) True 
 B)False

Question 20

Under the direct method, gains and losses on the sale of a fixed asset are reported in the investing section of the cash flow statement.

Accepted Answer

A) True 
 B)False

Exam 11: The Statement of Cash Flows

The Prepaid Rent balance has decreased during the year. How would this affect the Statement of Cash Flows operations section under the indirect method?

The difference between the direct and indirect methods is the format of the financing section.

Operating expenses (other than depreciation) for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

From the Income Statement and Balance Sheet information listed below, what amount of cash was paid for salaries and wages during 2016?

The direct method of formatting a Statement of Cash Flows starts with net income.

Caesario Company's Accounts Receivable increased by $39,000 and their Accounts Payable decreased by $19,000. What is the net effect on cash from operations under the indirect method?

From the Income Statement and Balance Sheet information listed below, what amount of cash was paid for salaries and wages during 2016?

A company issues common stock to settle a debt, this would be classified as a(n) :

Which of the following is NOT a part of financing activities?

Cash received from issuing stock would be included in investing activities.

Operating Cash Flows affect:

Under the direct method, paying and collecting interest on loans are:

In the indirect method of Cash Flows, which of the following would be added to net income?

The cash flow statement is the communicating link between the:

Payments to suppliers include payments for which of the following?

Under the indirect method of cash flow, which of the following adjustments would NOT be made to net income when computing cash from operating activities?

On its Statement of Cash Flows, Mike's Motors reported cash flow from operating activities of $108,000, cash flow from investing activities of $87,000, and cash flow from financing activities of ($61,000) . Mike's Motors invested $55,000 cash in long-term assets. Mike's Motors' free cash flow is:

Most businesses prefer to use the indirect method of formatting a Statement of Cash Flows.

A transaction acquiring land by issuing a note for the full purchase price would not appear on the cash flow statement because no cash was involved, but it may be disclosed in a separate section.

Under the direct method, gains and losses on the sale of a fixed asset are reported in the investing section of the cash flow statement.