Question 1

In the long run,it is most important that a company has positive cash flow from ________.

Accepted Answer

A) operating activities 
B) investing activities 
C) financing activities 
D) none of these; it is better to have negative cash flows in the long run

Question 2

The indirect method for the preparation of the statement of cash flows starts ________.

Accepted Answer

A) with net income and makes adjustments for all the items that are not cash 
B) by converting every number on the income statement to its cash amount 
C) by estimating the sources of cash and the uses of cash 
D) with cash collected from customers

Question 3

The following information is from X,Inc.'s December 31,2011 annual report:  Note: X,Inc.does not sell to its customers on account; it collects cash from its customers in advance.
Cash collected from customers on X,Inc.'s statement of cash flows equals ________.

Accepted Answer

A) $90,000 
B) $98,000 
C) $88,000 
D) $92,000

Question 4

There are two acceptable ways to report cash from operating activities: the investment method and the finance method.

Accepted Answer

A) True 
 B)False

Question 5

Free cash flow measures a company's ability to engage in long-term investment opportunities.

Accepted Answer

A) True 
 B)False

Question 6

Indicate whether each of the following items is either a cash inflow or outflow and in which section of the statement of cash flows it would be reported.

Accepted Answer

The answer of Indicate whether each of the following items...

Question 7

Which of the following will NOT cause cash from operating activities to differ from net income?

Accepted Answer

A) Dividends 
B) Accounts receivable 
C) Depreciation 
D) Accounts payable

Question 8

Cash transactions related to loans and cash contributions from and distributions to owners are investing activities.

Accepted Answer

A) True 
 B)False

Question 9

The indirect method for the preparation of the statement of cash flows ________.

Accepted Answer

A) is recommended by the FASB 
B) is not in conformity with GAAP 
C) is the preferred method used by businesses 
D) is not in conformity with IFRS

Question 10

Which of the following events is not a source of cash?

Accepted Answer

A) collection of accounts receivable 
B) receipt of loan proceeds 
C) sale of treasury stock 
D) amortization of a patent

Question 11

Team Shirts,Inc.had $80,000 of salaries expense and $10,000 of salary payable at the beginning of the year.The cash paid for salaries was $78,000.Calculate the amount of salary payable at the end of the year.

Accepted Answer

The answer of Team Shirts,Inc.had $80,000 of salaries expense and...

Question 12

Match between columns
                        Premises: cash from operating activities minus dividends and capital expenditures
section of the statement of cash flows,which includes all cash receipts and cash disbursements for routine sales and purchases made in the course of doing business
managers use this information internally to anticipate any cash shortages
section of the statement of cash flows,which includes all cash receipts and all cash disbursements for loans,contributions from owners,and distributions to owners
method of preparing the operating activities section of the statement of cash flows,which shows every cash inflow and every cash outflow
method of preparing the operating activities section of the statement of cash flows,which starts with net income and makes adjustments for all the items that are not cash
section of the statement of cash flows,which includes all cash receipts and all cash disbursements for long-term business assets

Accepted Answer

The Answer of indirect method and cash budget and cash is...

Question 13

There are two acceptable ways to report cash from operating activities: the direct method and the indirect method.

Accepted Answer

A) True 
 B)False

Question 14

During its first year of business,Gnu,Inc.sold $200,000 of merchandise to customers on account.At the end of the year Gnu,Inc.had accounts receivable of $40,000.How much cash did the company collect from credit customers during the year?

Accepted Answer

A) $200,000 
B) $240,000 
C) $160,000 
D) $40,000

Question 15

Cash collected from customers will be less than the revenue for the same period if the accounts receivable balance increases.

Accepted Answer

A) True 
 B)False

Question 16

During the year,Team Shirts,Inc.had net cash from operating activities of $50,000; it paid $20,000 in dividends; it purchased equipment for $30,000; and it purchased office supplies for $10,000.Free cash flow for the year was ________.

Accepted Answer

A) $0 
B) $(10,000) 
C) $10,000 
D) $100,000

Question 17

Negative cash flow from operating activities on the statement of cash flows most likely indicates a company is ________.

Accepted Answer

A) borrowing more than it is paying off 
B) buying more long-term assets than it is selling 
C) paying off more of its debts than it is borrowing 
D) in poor financial health

Question 18

What should all companies prepare in order to anticipate liquidity problems?

Accepted Answer

The answer of What should all companies prepare in order...

Question 19

The following information is from Avatar,Inc.'s December 31,2011 annual report:  Note: Avatar always collects cash from its customers in advance.
Cash collected from customers on Avatar,Inc.'s statement of cash flows equals ________.

Accepted Answer

A) $80,000 
B) $89,000 
C) $84,000 
D) $76,000

Question 20

Team Shirts,Inc.had a beginning balance in Accounts receivable of $4,000 on November 1.The balance on November 30 was $5,100.Total credit sales were $63,000.What amount of cash was collected from customers for November?

Accepted Answer

The answer of Team Shirts,Inc.had a beginning balance in Accounts...

Exam 9: Preparing and Analyzing the Statement of Cash Flows

In the long run,it is most important that a company has positive cash flow from ________.

The indirect method for the preparation of the statement of cash flows starts ________.

The following information is from X,Inc.'s December 31,2011 annual report: Note: X,Inc.does not sell to its customers on account; it collects cash from its customers in advance. Cash collected from customers on X,Inc.'s statement of cash flows equals ________.

There are two acceptable ways to report cash from operating activities: the investment method and the finance method.

Free cash flow measures a company's ability to engage in long-term investment opportunities.

Indicate whether each of the following items is either a cash inflow or outflow and in which section of the statement of cash flows it would be reported.

Which of the following will NOT cause cash from operating activities to differ from net income?

Cash transactions related to loans and cash contributions from and distributions to owners are investing activities.

The indirect method for the preparation of the statement of cash flows ________.

Which of the following events is not a source of cash?

Team Shirts,Inc.had $80,000 of salaries expense and $10,000 of salary payable at the beginning of the year.The cash paid for salaries was $78,000.Calculate the amount of salary payable at the end of the year.

Match each of the following items with the appropriate definition.Use each item only once.

There are two acceptable ways to report cash from operating activities: the direct method and the indirect method.

During its first year of business,Gnu,Inc.sold $200,000 of merchandise to customers on account.At the end of the year Gnu,Inc.had accounts receivable of $40,000.How much cash did the company collect from credit customers during the year?

Cash collected from customers will be less than the revenue for the same period if the accounts receivable balance increases.

During the year,Team Shirts,Inc.had net cash from operating activities of $50,000; it paid $20,000 in dividends; it purchased equipment for $30,000; and it purchased office supplies for $10,000.Free cash flow for the year was ________.

Negative cash flow from operating activities on the statement of cash flows most likely indicates a company is ________.

What should all companies prepare in order to anticipate liquidity problems?

The following information is from Avatar,Inc.'s December 31,2011 annual report: Note: Avatar always collects cash from its customers in advance. Cash collected from customers on Avatar,Inc.'s statement of cash flows equals ________.

Team Shirts,Inc.had a beginning balance in Accounts receivable of $4,000 on November 1.The balance on November 30 was $5,100.Total credit sales were $63,000.What amount of cash was collected from customers for November?