Question 1

Use the direct method of cash flows to answer the question.
  Compute the change in accounts payable during the year.

Accepted Answer

The answer of Use the direct method of cash flows...

Question 2

Which of the following activities are included in the investing activities section of the statement of cash flows?

Accepted Answer

A) Activities that obtain the cash needed to launch and sustain the business 
B) Activities that increase or decrease long-term assets 
C) Activities that create revenue or expenses in the entity's major line of business 
D) None of the above

Question 3

Financing activities include transactions that affect long-term liabilities and stockholder's equity on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 4

All of the following are cash inflows from a financing activity except

Accepted Answer

A) additional owner investment. 
B) issuance of stock. 
C) mortgage proceeds. 
D) interest revenue on loans.

Question 5

A company's income statement reports $30,000 depreciation expenses during the period. Using the direct method to prepare the statement of cash flows, how would the depreciation expense be reported on the statement of cash flows?

Accepted Answer

A) Depreciation expense would be an addition under investing activities. 
B) Depreciation expense would be an addition under financing activities. 
C) Depreciation expense would be a deduction under operating activities. 
D) Depreciation expense would not be reported on the statement of cash flows.

Question 6

A company uses the indirect method to prepare the statement of cash flows. It presents the following data on its financial statements:  *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts payable?

Accepted Answer

A) The increase of $8000 will be subtracted from net income. 
B) The increase of $8000 will be added to net income. 
C) The increase of $8000 will be subtracted from cost of goods sold. 
D) The increase of $8000 will be added to cost of goods sold.

Question 7

Using the direct method to prepare the statement of cash flows, how would the amount of cash payments to employees categorized on the statement of cash flows?

Accepted Answer

A) Cash payments to employees would be equal to salary expense plus the beginning balance in salaries payable. 
B) Cash payments to employees would be equal to salary expense plus the ending balance in salaries payable. 
C) Cash payments to employees would be equal to salary expense plus the decrease in salaries payable. 
D) Cash payments to employees would be equal to salary expense plus the increase in salaries payable.

Question 8

Which of the following statements is true about the information in a statement of cash flows?

Accepted Answer

A) The statement of cash flows contains information about stock splits and stock dividends distributed by the company. 
B) The statement of cash flows contains information about the business's ability to generate positive cash flows in future periods. 
C) The statement of cash flows contains information about the business's percentage change in each item of revenue and expense. 
D) The statement of cash flows contains information about the differences between net income and additions to retained earnings.

Question 9

A payment of interest on a loan would be considered a

Accepted Answer

A) cash outflow from investing activities. 
B) cash outflow from operating activities. 
C) cash outflow from financing activities. 
D) cash outflow from depreciation.

Question 10

On the statement of cash flows, which of the following would be considered an investing activity?

Accepted Answer

A) A purchase of treasury stock 
B) A sale of land 
C) Depreciation of equipment 
D) A sale of inventory

Question 11

A company sells treasury stock for an amount less than its acquisition cost. If the company prepares the statement of cash flows using the indirect method or the direct method, where would this transaction appear?

Accepted Answer

A) The sale of treasury stock would be presented in the investing activities section as a cash receipt under both methods. 
B) The sale of treasury stock would be presented in the non-cash investing and financing activities section under both methods. 
C) The sale of treasury stock would be presented in the operating activities section as a reduction in net income under the indirect method and as a cash receipt under the direct method. 
D) The sale of treasury stock would be presented in the financing activities section as a cash receipt under both methods.

Question 12

A company uses the indirect method to prepare the statement of cash flows. In determining the net cash flow from operating activities, which of the following items would be added to net income?

Accepted Answer

A) An increase in dividends paid would be added to net income. 
B) An increase in accrued liabilities would be added to net income. 
C) A decrease in accounts payable would be added to net income. 
D) A gain on the sale of land would be added to net income.

Question 13

A company uses the indirect method to prepare the statement of cash flows. It sold a piece of equipment at a gain of $5600. The equipment was purchased several years ago for $75,500 and had accumulated depreciation of $58,900. What is reported under the operating activities section on the statement of cash flows?

Accepted Answer

A) Cash proceeds of $22,200 are subtracted from net income. 
B) Cash proceeds of $22,200 are added to net income. 
C) The gain of $5600 is added to net income. 
D) The gain of $5600 is subtracted from net income.

Question 14

If a corporation shows a net loss on its income statement, which of the following is true?

Accepted Answer

A) The company may not be able to sell stock. 
B) The company may continue to have a net increase in cash. 
C) The company may not be able to pay dividends. 
D) The company may continue to have an increase in retained earnings.

Question 15

A company uses the direct method to prepare the statement of cash flows. It presents the following data on its financial statements:  *Relates solely to the acquisition of inventory
Which of the following is correct about salaries payable in the operating activities category of the cash flow statement?

Accepted Answer

A) The increase of $10,000 will be subtracted from salary expense to determine payments to employees. 
B) The increase of $10,000 will be subtracted from net income. 
C) The increase of $10,000 will be added to salary expense to determine payments to employees. 
D) The increase of $10,000 will be added to net income.

Question 16

The three sections of the Statement of Cash Flows are operating activities, investing activities, and financing activities.

Accepted Answer

A) True 
 B)False

Question 17

A company sold equipment with a book value of $12,000 at a gain of $2500. How much can be reported in the investing activities section of the statement of cash flows as cash received upon the sale of the equipment?

Accepted Answer

A) The cash received upon the sale of the equipment is $9500. 
B) The cash received upon the sale of the equipment is $2500 
C) The cash received upon the sale of the equipment is $14,500. 
D) The cash received upon the sale of the equipment is $2500.

Question 18

Which of the following would not appear on a statement of cash flows prepared using the direct method?

Accepted Answer

A) Cash receipts from customers 
B) Cash payments for insurance 
C) Depreciation expense 
D) Cash payments for salaries and wages

Question 19

When using the indirect method in the statement of cash flows, the company would add the net change in a current asset account if the balance increased over time.

Accepted Answer

A) True 
 B)False

Question 20

A company purchases land using its common stock. If the company prepares the statement of cash flows using the indirect method or the direct method, where would this transaction appear?

Accepted Answer

A) The purchase of land would be presented in the financing activities section as a cash payment under both methods. 
B) The purchase of land would be presented in the investing activities section as a cash payment under both methods. 
C) The purchase of land would be presented in the operating activities section as a reduction in net income under the indirect method and as a cash payment under the direct method. 
D) The purchase of land would be presented in the non-cash investing and financing activities section under both methods.

Exam 13: Statement of Cash Flows

Use the direct method of cash flows to answer the question. Compute the change in accounts payable during the year.

Which of the following activities are included in the investing activities section of the statement of cash flows?

Financing activities include transactions that affect long-term liabilities and stockholder's equity on the balance sheet.

All of the following are cash inflows from a financing activity except

A company's income statement reports $30,000 depreciation expenses during the period. Using the direct method to prepare the statement of cash flows, how would the depreciation expense be reported on the statement of cash flows?

A company uses the indirect method to prepare the statement of cash flows. It presents the following data on its financial statements: *Relates solely to the acquisition of inventory What will appear in the operating activities section related to accounts payable?

Using the direct method to prepare the statement of cash flows, how would the amount of cash payments to employees categorized on the statement of cash flows?

Which of the following statements is true about the information in a statement of cash flows?

A payment of interest on a loan would be considered a

On the statement of cash flows, which of the following would be considered an investing activity?

A company sells treasury stock for an amount less than its acquisition cost. If the company prepares the statement of cash flows using the indirect method or the direct method, where would this transaction appear?

A company uses the indirect method to prepare the statement of cash flows. In determining the net cash flow from operating activities, which of the following items would be added to net income?

If a corporation shows a net loss on its income statement, which of the following is true?

The three sections of the Statement of Cash Flows are operating activities, investing activities, and financing activities.

A company sold equipment with a book value of $12,000 at a gain of $2500. How much can be reported in the investing activities section of the statement of cash flows as cash received upon the sale of the equipment?

Which of the following would not appear on a statement of cash flows prepared using the direct method?

When using the indirect method in the statement of cash flows, the company would add the net change in a current asset account if the balance increased over time.

A company purchases land using its common stock. If the company prepares the statement of cash flows using the indirect method or the direct method, where would this transaction appear?