Question 1

The income statement shows the results of the operations of the business.

Accepted Answer

A) True 
 B)False

Question 2

The board of directors is considering approving a plant expansion which will require a sizable advance payment to take place early this year. How will this decision affect the period's cash flows from investing-direct method?

Accepted Answer

A) It will increase this period's cash flows from investing. 
B) It will decrease this period's cash flows from investing. 
C) It will not affect this period's cash flows from investing. 
D) This is not listed in the statement of cash flows.

Question 3

The records of Ashley Boutique showed Net Loss, $30,000; Depreciation Expense, $25,000; and increase in Supplies on Hand, $5,000. The amount of Net Cash Flow from Operating Activities using the indirect method is:

Accepted Answer

A) $15,000. 
B) $20,000. 
C) ($10,000). 
D) ($15,000).

Question 4

Issuance of common stock for cash would result in:

Accepted Answer

A) an increase of cash flow from operating activities. 
B) a decrease of cash flow from investing activities. 
C) an increase of cash flow from financing activities. 
D) an increase of cash flow from investing activities.

Question 5

Management has authorized the purchase of a large quantity of inventory for early December. The purchase will have credit terms of 2/10, n/30, they will authorize payment by the discount date. How will this decision affect the period's cash flows from operations-indirect method?

Accepted Answer

A) It will increase this period's cash flows from operations. 
B) It will decrease this period's cash flows from operations. 
C) It will not affect this period's cash flows from operations. 
D) This does not affect cash flows from operations.

Question 6

In the statement of cash flows, which event would cause net income to be increased?

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 7

Depreciation is shown only when using the direct method of preparing a statement of cash flow.

Accepted Answer

A) True 
 B)False

Question 8

A business issues 10-year bonds payable in exchange for common stock. This transaction would be reported on the statement of cash flows in:

Accepted Answer

A) operating activities. 
B) financing activities. 
C) investing activities. 
D) a separate schedule.

Question 9

If $200,000 of a company's own stock is sold, it is shown in the financing activities section.

Accepted Answer

A) True 
 B)False

Question 10

Accounts Receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year. Income reported on the income statement for the year was $300,000. The cash flow from operating activities on the cash flow statement using the indirect method is:

Accepted Answer

A) $300,000. 
B) $330,000. 
C) $270,000. 
D) None of these answers are correct.

Question 11

Financing activities include transactions with owners and creditors.

Accepted Answer

A) True 
 B)False

Question 12

For each of the following items, indicate (by placing an X)whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+)or decreasing (-)the cash flows.
-

Accepted Answer

The answer of For each of the following items, indicate...

Question 13

The accuracy of the statement of cash flows, regardless of method used, can be verified by computing the change in the balance of:

Accepted Answer

A) cash. 
B) equity. 
C) revenue. 
D) liabilities.

Question 14

A statement of cash flows would not disclose the effect of which of the following transactions?

Accepted Answer

A) Stock dividends declared 
B) Bonds payable issued 
C) Purchase of treasury stock 
D) Capital stock issued to acquire fixed assets

Question 15

Smith Corporation reported net income of $54,000, depreciation expenses of $10,000, an increase in Accounts Payable of $3,000 and an increase in Accounts Receivable of $1,500. Under the indirect method, net cash flow from operating activities is:

Accepted Answer

A) $62,500. 
B) $59,500. 
C) $48,500. 
D) $65,500.

Question 16

Even though the cost of fuel oil is rising, management is considering using up the business's reserves and not ordering any more this period. How will this decision affect the period's cash flows from operations-indirect method?

Accepted Answer

A) It will increase this period's cash flows from operations. 
B) It will decrease this period's cash flows from operations. 
C) It will not affect this period's cash flows from operations. 
D) This does not affect cash flows from operations.

Question 17

Common stock in exchange for a warehouse would be reported in the statement of cash flows in:

Accepted Answer

A) a separate schedule. 
B) operating activities. 
C) financing activities. 
D) investing activities.

Question 18

Trundle Corporation reported net income of $40,000; depreciation expense of $1,000; sales of additional common shares of $25,000; and a decrease in Accounts Payable of $8,000. Net cash flow from operating activities using the indirect method is:

Accepted Answer

A) $41,000. 
B) $32,000. 
C) $33,000. 
D) $58,000.

Question 19

The cash flows from operating activities are reported by the direct method on the statement of cash flow. Determine the following:
a. If sales for the current year were $600,000 and accounts receivable decreased $25,500 during the year, what was the amount of cash received from customers?
b. If sales salaries expense for the current years was $80,000 and sales salaries payable increased $25,000 during the year, what was the amount of cash payments for sales salaries?

Accepted Answer

The answer of The cash flows from operating activities are...

Question 20

Of the following items, which is not classified as an investing activity on the statement of cash flows?

Accepted Answer

A) Sale of a plant asset for cash 
B) Purchasing land 
C) Collecting loans 
D) Selling goods and services

Exam 21: Statement of Cash Flows

The income statement shows the results of the operations of the business.

The board of directors is considering approving a plant expansion which will require a sizable advance payment to take place early this year. How will this decision affect the period's cash flows from investing-direct method?

The records of Ashley Boutique showed Net Loss, $30,000; Depreciation Expense, $25,000; and increase in Supplies on Hand, $5,000. The amount of Net Cash Flow from Operating Activities using the indirect method is:

Issuance of common stock for cash would result in:

Management has authorized the purchase of a large quantity of inventory for early December. The purchase will have credit terms of 2/10, n/30, they will authorize payment by the discount date. How will this decision affect the period's cash flows from operations-indirect method?

In the statement of cash flows, which event would cause net income to be increased?

Depreciation is shown only when using the direct method of preparing a statement of cash flow.

A business issues 10-year bonds payable in exchange for common stock. This transaction would be reported on the statement of cash flows in:

If $200,000 of a company's own stock is sold, it is shown in the financing activities section.

Accounts Receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year. Income reported on the income statement for the year was $300,000. The cash flow from operating activities on the cash flow statement using the indirect method is:

Financing activities include transactions with owners and creditors.

The accuracy of the statement of cash flows, regardless of method used, can be verified by computing the change in the balance of:

A statement of cash flows would not disclose the effect of which of the following transactions?

Smith Corporation reported net income of $54,000, depreciation expenses of $10,000, an increase in Accounts Payable of $3,000 and an increase in Accounts Receivable of $1,500. Under the indirect method, net cash flow from operating activities is:

Even though the cost of fuel oil is rising, management is considering using up the business's reserves and not ordering any more this period. How will this decision affect the period's cash flows from operations-indirect method?

Common stock in exchange for a warehouse would be reported in the statement of cash flows in:

Trundle Corporation reported net income of $40,000; depreciation expense of $1,000; sales of additional common shares of $25,000; and a decrease in Accounts Payable of $8,000. Net cash flow from operating activities using the indirect method is:

Of the following items, which is not classified as an investing activity on the statement of cash flows?