Question 1

The statement of cash flows helps analysts evaluate the:

Accepted Answer

A)  Source of cash used for debt repayments. 
B)  Source of cash used for plant expansion. 
C)  Differences between income and net operating cash flow. 
D)  Source of cash used to finance investing activities. 
E)  All of these.

Question 2

A company reported net income of $112,000, operating cash flows of $57,000, total cash flows of $97,000, and average total assets of $962,000. Calculate its cash flow on total assets ratio.

Accepted Answer

The answer of A company reported net income of $112,000,...

Question 3

A purchase of land in exchange for shares is disclosed on the statement of cash flows or in a note to the statement.

Accepted Answer

A) True 
 B)False

Question 4

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

Accepted Answer

A)  Operating activities. 
B)  Financing activities. 
C)  Investing activities. 
D)  Schedule of noncash investing or financing activity. 
E)  None of these. This is not reported on the statement of cash flows.

Question 5

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:

Accepted Answer

A)  Direct method of reporting net cash provided or used by operating activities. 
B)  Cash basis of accounting. 
C)  Classified statement of cash flows. 
D)  Indirect method of reporting net cash provided or used by operating activities. 
E)  Net method of reporting cash flows from operating activities.

Question 6

In preparing a company's statement of cash flows for the most recent year, the following information is available: Loss on the sale of equipment $ 14,000
Purchase of equipment $145,000
Proceeds from the sale of equipment $126,000
Repayment of outstanding bonds $ 87,000
Purchase of treasury shares $ 62,000
Issuance of ordinary shares $ 96,000
Purchase of land $115,000
Increase in accounts receivable during the year $ 43,000
Decrease in accounts payable during the year $ 75,000
Payment of cash dividends $ 35,000
Net cash flows from investing activities for the year were:

Accepted Answer

A)  $134,000 of net cash used by investing activities. 
B)  $134,000 of net cash provided by investing activities. 
C)  $120,000 of net cash used by investing activities. 
D)  $252,000 of net cash used by investing activities. 
E)  $221,000 of net cash provided by investing activities.

Question 7

Of the following, which one affects cash during a period?

Accepted Answer

A)  The declaration of a bonus issue or share dividend. 
B)  Writing off an uncollectible account receivable. 
C)  The declaration of a cash dividend. 
D)  An adjusting entry recognizing the expiration of prepaid insurance. 
E)  The payment of interest expense accrued in a previous accounting period.

Question 8

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in wages payable is added to income.

Accepted Answer

A) True 
 B)False

Question 9

For each of the following independent cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

Accepted Answer

The answer of For each of the following independent cases,...

Question 10

Cash flow amounts and their timing should be considered when planning and analyzing operating activities.

Accepted Answer

A) True 
 B)False

Question 11

When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to income.

Accepted Answer

A) True 
 B)False

Question 12

The first line item in the operating activities section for a statement of cash flows prepared using the indirect method is:

Accepted Answer

A)  Cash. 
B)  Cash received from customers. 
C)  Increase (decrease) in accounts receivable. 
D)  Income. 
E)  Adjustments to net income.

Question 13

The declaration of cash dividends never changes the balance of retained earnings.

Accepted Answer

A) True 
 B)False

Question 14

Hancock reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year. Hancock's net cash flows from operations were $2,204 million. Calculate the cash flow on total assets ratio for Hancock.

Accepted Answer

The answer of Hancock reported assets of $13,362 million at...

Question 15

The following information is available for the Eldridge Company:
   Additional information:
(1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired.
(2) Old machinery with an original cost of $45,060 was sold for $2,520 cash.
(3) New machinery was purchased for $81,060 cash.
(4) Cash dividends of $40,320 were paid. Management wishes to classify this under financing activities.
(5) Additional shares were issued for cash.
Prepare a complete statement of cash flows for year 2011 using the indirect method.

Accepted Answer

The answer of The following information is available for the...

Question 16

A company reported that its bonds with a par value of $50,000 and a carrying amount of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:

Accepted Answer

A)  $(3,000). 
B)  $(60,000). 
C)  $(57,000). 
D)  Zero. This is an operating activity. 
E)  Zero. This is an investing activity.

Question 17

When preparing a statement of cash flows on the indirect method, each of the following should be classified as an operating activity cash flow except:

Accepted Answer

A)  An increase in accounts receivable. 
B)  A decrease in accounts payable. 
C)  A gain from disposal of a long-term asset 
D)  An increase in prepaid expenses. 
E)  A decrease in accrued expenses payable.

Question 18

The cash flow on total assets ratio is calculated by:

Accepted Answer

A)  Dividing cash flows from operations by average total assets. 
B)  Dividing total cash flows by average total assets. 
C)  Dividing average total assets by cash flows from investing activities. 
D)  Dividing average total assets by total cash flows. 
E)  Total cash flows divided by average total assets times 365.

Question 19

When preparing the operating activities section of the statement of cash flows using the indirect method, nonoperating gains are added to income.

Accepted Answer

A) True 
 B)False

Question 20

A cash equivalent is an investment that:

Accepted Answer

A)  Is readily convertible to a known amount of cash. 
B)  Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes. 
C)  Generally is within 3 months of its maturity date. 
D)  Is highly liquid. 
E)  All of these.

Exam 16: Statement of Cash Flows

The statement of cash flows helps analysts evaluate the:

A company reported net income of $112,000, operating cash flows of $57,000, total cash flows of $97,000, and average total assets of $962,000. Calculate its cash flow on total assets ratio.

A purchase of land in exchange for shares is disclosed on the statement of cash flows or in a note to the statement.

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:

Of the following, which one affects cash during a period?

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in wages payable is added to income.

For each of the following independent cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

Cash flow amounts and their timing should be considered when planning and analyzing operating activities.

When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to income.

The first line item in the operating activities section for a statement of cash flows prepared using the indirect method is:

The declaration of cash dividends never changes the balance of retained earnings.

Hancock reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year. Hancock's net cash flows from operations were $2,204 million. Calculate the cash flow on total assets ratio for Hancock.

A company reported that its bonds with a par value of $50,000 and a carrying amount of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:

When preparing a statement of cash flows on the indirect method, each of the following should be classified as an operating activity cash flow except:

The cash flow on total assets ratio is calculated by:

When preparing the operating activities section of the statement of cash flows using the indirect method, nonoperating gains are added to income.

A cash equivalent is an investment that: