Question 1

Amortization expense is deducted from net income in the cash flows from operating activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 2

The activity from the Long-Term Investments account for Rice Corporation appears below. In addition, the income statement shows a loss on the sale of investments of $16,000.
  Based on the information given, compute the amounts to be shown and indicate how they would appear on the statement of cash flows. Assume that the indirect method is being used and that the investments were purchased for cash.

Accepted Answer

The answer of The activity from the Long-Term Investments account...

Question 3

Royer Corporation engaged in this transaction: Acquired long-term investment by issuance of long-term debt.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

A)  Investing activities section 
B)  Operating activities section 
C)  Schedule of noncash investing and financing transactions 
D)  Financing activities section

Question 4

A decrease in plant assets shown in the investing activities section of the statement of cash flows would be presented based on the amount of the resulting gain or loss incurred.

Accepted Answer

A) True 
 B)False

Question 5

To determine whether a company's operations are covering its dividend payments, it is best to focus on which of the following sections of the statement of cash flows?

Accepted Answer

A)  Operating activities 
B)  Financing activities 
C)  Investing activities and financing activities 
D)  Operating activities and investing activities

Question 6

The indirect method of preparing a statement of cash flows

Accepted Answer

A)  eliminates the need for a schedule of noncash investing and financing transactions. 
B)  provides a different result than the direct method. 
C)  adjusts net income for changes in current accounts. 
D)  shows collections from customers rather than the change in Accounts Receivable.

Question 7

During 2009, Heckart Corporation had sales of $250,000, net income of $25,000, average total assets of $350,000, dividend payments of $17,500, net cash flows from operating activities of $36,000, purchases of plant assets of $37,500, and sales of plant assets of $45,000. Cash flows to assets equals (Round amounts to one decimal place)

Accepted Answer

A)  18.0 percent. 
B)  14.4 percent. 
C)  12.0 percent. 
D)  10.3 percent.

Question 8

Royer Corporation engaged in this transaction: Collected accounts receivable.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

A)  Does not represent a cash flow 
B)  Operating activities section 
C)  Financing activities section 
D)  Investing activities section

Question 9

The payment of taxes would be included in the operating activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 10

Cash flows to sales is a measure of free cash flow.

Accepted Answer

A) True 
 B)False

Question 11

Royer Corporation engaged in this transaction: Paid income taxes.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

A)  Schedule of noncash investing and financing transactions 
B)  Investing activities section 
C)  Operating activities section 
D)  Financing activities section

Question 12

Using the indirect method, calculate the amount of net cash flows from operating activities from the following data. Show your work.

Accepted Answer

The answer of Using the indirect method, calculate the amount...

Question 13

Cash equivalents include money market accounts, commercial paper, U.S. Treasury bills, and other short-term investments or marketable securities.

Accepted Answer

A) True 
 B)False

Question 14

Royer Corporation engaged in this transaction: Purchased land and building with a mortgage.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

A)  Financing activities section 
B)  Operating activities section 
C)  Investing activities section 
D)  Schedule of noncash investing and financing transactions

Question 15

When preparing a statement of cash flows using the indirect method, an increase in dividends payable is added to net income.

Accepted Answer

A) True 
 B)False

Question 16

Indicate on the blanks below the letter of the type of activity (O = operating activity, F = financing activity, I = investing activity, N = noncash transaction) each of the following transactions represents.
_____ 1. Company sold shares of its own stock for cash.
_____ 2. Acquired land and buildings by issuance of long-term mortgage payable.
_____ 3. Declared and paid cash dividends.
_____ 4. Received interest income.
_____ 5. Exchanged shares of stock for 15-year bonds.
_____ 6. Paid the U.S. Treasury for income taxes.
_____ 7. Collected proceeds from the sale of a long-term investment at cost.
_____ 8. Declared stock dividends.
_____ 9. Paid off long-term debt with cash.
_____ 10. Purchased equipment with cash.

Accepted Answer

The answer of Indicate on the blanks below the letter...

Question 17

A U.S. Treasury bill with an original maturity of one year or less is considered a cash equivalent.

Accepted Answer

A) True 
 B)False

Question 18

Royer Corporation engaged in this transaction: Amortization of a patent. Assume use of the indirect approach.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

A)  Schedule of noncash investing and financing transactions 
B)  Financing activities section 
C)  Investing activities section 
D)  Operating activities section

Question 19

Use the following data for Tatum Music Company to prepare a statement of cash flows using the indirect method for the year ended June 30, 2010.
   Additional information:

Accepted Answer

The answer of Use the following data for Tatum Music...

Question 20

Issuance of notes, either long- or short-term, would be reflected in the financing activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Exam 15: The Statement of Cash Flows

Amortization expense is deducted from net income in the cash flows from operating activities section of the statement of cash flows.

Royer Corporation engaged in this transaction: Acquired long-term investment by issuance of long-term debt. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

A decrease in plant assets shown in the investing activities section of the statement of cash flows would be presented based on the amount of the resulting gain or loss incurred.

To determine whether a company's operations are covering its dividend payments, it is best to focus on which of the following sections of the statement of cash flows?

The indirect method of preparing a statement of cash flows

Royer Corporation engaged in this transaction: Collected accounts receivable. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

The payment of taxes would be included in the operating activities section of the statement of cash flows.

Cash flows to sales is a measure of free cash flow.

Royer Corporation engaged in this transaction: Paid income taxes. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Using the indirect method, calculate the amount of net cash flows from operating activities from the following data. Show your work.

Cash equivalents include money market accounts, commercial paper, U.S. Treasury bills, and other short-term investments or marketable securities.

Royer Corporation engaged in this transaction: Purchased land and building with a mortgage. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

When preparing a statement of cash flows using the indirect method, an increase in dividends payable is added to net income.

A U.S. Treasury bill with an original maturity of one year or less is considered a cash equivalent.

Royer Corporation engaged in this transaction: Amortization of a patent. Assume use of the indirect approach. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Use the following data for Tatum Music Company to prepare a statement of cash flows using the indirect method for the year ended June 30, 2010. Additional information:

Issuance of notes, either long- or short-term, would be reflected in the financing activities section of the statement of cash flows.