Question 1

The cash flow statement and Balance Sheet use accrual accounting.

Accepted Answer

A) True 
 B)False

Question 2

When preparing the Statement of Cash Flows by the indirect method,if current liabilities increase,the difference is:

Accepted Answer

A) added to net income. 
B) added to investing activities. 
C) deducted from net income. 
D) deducted from investing activities.

Question 3

An increase in long-term Mortgage Payable would mean a(n):

Accepted Answer

A) increase in cash flow from investing activities. 
B) decrease in cash flow from investing activities. 
C) increase in cash flow from financing activities. 
D) decrease in cash flow from financing activities.

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

Dividends received by a company appear in the operating activities section of a direct method cash flow statement.

Accepted Answer

A) True 
 B)False

Question 6

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 7

A company settles a long-term note payable plus interest by paying $68,000 cash toward the principal amount and $5,440 cash for the interest.Under the direct method of reporting interest,the $5,440 would be listed as a(n):

Accepted Answer

A) operating activity. 
B) financing activity. 
C) investing activity. 
D) separate disclosure only.

Question 8

The Accounts Payable 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 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

Free cash flow is the anticipated amount of cash available from operations after paying for planned financing of stock and paying dividends.

Accepted Answer

A) True 
 B)False

Question 11

Are all increases to cash from financing activities the result of a favorable situation?

Accepted Answer

A) Yes,an increase to cash is always good. 
B) No,cash could increase in this category as a result of replacing long-term assets. 
C) Yes,this increase would reflect the results of the company's daily activities. 
D) No,although some increases in this category could be positive,some,such as an increase in long-term debt might be the result of an unfavorable situation.

Question 12

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 13

Operating expenses other than depreciation for the year were $400,000.Accrued expenses increased by $35,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

A) $435,000. 
B) $400,000. 
C) $365,000. 
D) $35,000.

Question 14

On its Statement of Cash Flows,Aspen,Inc.reported cash flow from operating activities of $98,000,cash flow from financing activities of ($127,000),and cash flow from investing activities of $104,000.Aspen,Inc.invested $63,000 cash in long-term assets.Aspen,Inc.'s free cash flow is:

Accepted Answer

A) $35,000. 
B) $12,000. 
C) $64,000. 
D) $41,000.

Question 15

The Bobblehead Company has an Accounts Receivable turnover of 36 days,an inventory turnover of 77 days and an Accounts Payable turnover of 40 days.Bobblehead's cash conversion cycle is:

Accepted Answer

A) 153 days. 
B) 81 days. 
C) 73 days. 
D) 1 day.

Question 16

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

Accepted Answer

A) A decrease in inventory 
B) An increase in Prepaid Insurance 
C) A decrease in Accounts Payable 
D) An increase in Accounts Receivable

Question 17

An example of a cash outflow from financing activities is:

Accepted Answer

A) paying dividends in cash. 
B) buying additional inventory. 
C) selling land. 
D) collecting notes receivable.

Question 18

The purpose of the Statement of Cash Flows is to show:

Accepted Answer

A) the revenue earned. 
B) the profits that were earned. 
C) the expenses that were paid. 
D) how cash was received and used during the period.

Question 19

Investing 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 20

The Supplies 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.

Exam 11: The Statement of Cash Flows

The cash flow statement and Balance Sheet use accrual accounting.

When preparing the Statement of Cash Flows by the indirect method,if current liabilities increase,the difference is:

An increase in long-term Mortgage Payable would mean a(n) :

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

Dividends received by a company appear in the operating activities section of a direct method cash flow statement.

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

A company settles a long-term note payable plus interest by paying $68,000 cash toward the principal amount and $5,440 cash for the interest.Under the direct method of reporting interest,the $5,440 would be listed as a(n) :

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

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

Free cash flow is the anticipated amount of cash available from operations after paying for planned financing of stock and paying dividends.

Are all increases to cash from financing activities the result of a favorable situation?

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?

Operating expenses other than depreciation for the year were $400,000.Accrued expenses increased by $35,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

On its Statement of Cash Flows,Aspen,Inc.reported cash flow from operating activities of $98,000,cash flow from financing activities of ($127,000) ,and cash flow from investing activities of $104,000.Aspen,Inc.invested $63,000 cash in long-term assets.Aspen,Inc.'s free cash flow is:

The Bobblehead Company has an Accounts Receivable turnover of 36 days,an inventory turnover of 77 days and an Accounts Payable turnover of 40 days.Bobblehead's cash conversion cycle is:

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

An example of a cash outflow from financing activities is:

The purpose of the Statement of Cash Flows is to show:

Investing Cash Flows affect:

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