Deck 21: Statement of Cash Flows

Question 1

Which of the following would NOT be included in the net cash flows from operating activities section of a cash flow statement using the indirect method?

A)Decrease in Accounts Payable
B)Increase in Inventory
C)Decrease in Accounts Receivable.
D)Increase in Notes Payable.

Answer 1

D

Question 2

When preparing the statement of cash flows by the indirect method,if current assets have decreased,the difference is:

A)added to net income.
B)added to investments.
C)deducted from net income.
D)subtracted from investments.

Answer 2

A

Question 3

Transactions involving the purchase and sale of fixed assets would be considered:

A)buying and selling activities.
B)financing activities.
C)operating activities.
D)investing activities.

Answer 3

D

Question 4

An outflow of cash from investing activities would be:

A)the issuance of stock.
B)the sale of investment in equity securities.
C)interest received on loans.
D)the purchase of fixed assets.

Question 5

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

A)An increase in Inventory
B)A decrease in Prepaid Insurance
C)A decrease in Accounts Payable
D)An increase in Accounts Receivable

Question 6

Which of the following is reported in the statement of cash flows?

A)net cash flow from managing activities
B)net cash flow from illegal activities
C)net cash flow from start-up activities
D)net cash flow from financing activities

Question 7

Which of the following,under the indirect method,is not a proper adjustment to net income to arrive at net cash flow from operations?

A)Adding a decrease in inventory
B)Adding an increase in salaries payable
C)Adding an increase in prepaid expense
D)All are proper adjustments to net income.

Question 8

The activity that is probably the most important indicator of financial health is the net cash flow from:

A)buying and selling activities.
B)financing activities.
C)operating activities.
D)investing activities.

Question 9

Using the indirect method for cash flows,depreciation expense is added to net income to determine the:

A)cash flow from investing activities.
B)cash flow from financing activities.
C)cash flow from operating activities.
D)cash flow from fixed asset activities.

Question 10

A statement of cash flows is helpful in:

A)evaluating past performance.
B)analyzing the earnings of the company.
C)predicting future cash flows.
D)Both A and C.

Question 11

The statement of cash flows provides information about all of the following except:

A)organizing activities.
B)investing activities.
C)operating activities.
D)financing activities.

Question 12

A cash inflow from a financing activity would be:

A)paying cash dividends.
B)issuing stock or bonds.
C)paying interest on notes payable.
D)making payments for additional inventory.

Question 13

When preparing the statement of cash flows by the indirect method,if an accrued payable decreases,the difference is:

A)added to net income.
B)added to investments.
C)deducted from net income.
D)not considered in the statement of cash flows using the indirect method.

Question 14

Which of the following statements is true as it pertains to the statement of cash flows?

A)It has three main sections: net cash flow from operating,investing,and financing activities.
B)It may only be computed directly.
C)It is a statement used to better understand the equity of a company.
D)All of the above are correct.

Question 15

A statement of cash flow's purpose is to:

A)report the earnings of the company for an accounting period.
B)report the financial condition of the company.
C)report the changes in equity for a company.
D)summarize the sources and uses of cash by a company during an accounting period.

Question 16

The difference between the direct and indirect methods of computing the cash flow statement occurs in the:

A)financing activities section.
B)operating activities section.
C)investing activities section.
D)managing activities section.

Question 17

If Accounts Receivable increases on a comparative balance sheet,this means:

A)collections were more than sales.
B)credit sales are decreasing.
C)credit sales are increasing more than collections.
D)None of these answers is correct.

Question 18

When preparing the statement of cash flows by the indirect method,if current liabilities decrease,the difference is:

A)added to net income.
B)added to investments.
C)deducted from net income.
D)subtracted from investments.

Question 19

Operating activities deal with which types of accounts?

A)Current liabilities and owner's equity
B)Current and intangible assets
C)Current assets and current liabilities
D)Current assets and owner's equity

Question 20

If,on the comparative balance sheet,Accounts Payable has increased,the amount of increase would be:

A)added to net income on the statement of cash flows (indirect method).
B)subtracted from net income on the statement of cash flows (indirect method).
C)ignored because cash is not involved.
D)None of these answers is correct.

Question 21

Carmen's Candies' Net Income was $40,000.Other accounts that changed included: Accounts Receivable decreased by $30,000;Merchandise Inventory increased by $20,000;Accounts Payable increased by $4,000;and Salaries Payable increased by $1,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

A)$33,000.
B)$47,000.
C)$55,000.
D)$61,000.

Question 22

Of the following,which has a negative effect on the computation of cash flow from operations using the indirect method?

A)Decrease in Inventory
B)Increase in Accounts Payable
C)Increase in Accounts Receivable
D)Decrease in Prepaid Insurance

Question 23

The records of Ashley Boutique showed Net Loss,$25,000;Depreciation Expense,$35,000;and decrease in Supplies on Hand,$8,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

A)$18,000.
B)$2,000.
C)($18,000).
D)($2,000).

Question 24

There was a utility bill received but not paid.How would this nonpayment affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 25

When comparing net cash provided by operating activities using the indirect versus direct methods:

A)net cash is higher using the indirect method.
B)net cash is lower using indirect method.
C)there is no difference between the two methods.
D)depreciation expense is used in the direct method.

Question 26

Big Toy Corporation's records show net income of $20,000;depreciation expense of $10,000;and cash dividends declared and paid of $4,000.The amount of cash provided by operating activities using the indirect method is:

A)$40,000.
B)$30,000.
C)$20,000.
D)$10,000.

Question 27

The net income reported on the income statement for the current year was $40,000.Depreciation Expense recorded on fixed assets was $21,000.What is the net cash flow from operations that would appear on a cash flow statement using the indirect method?

A)$40,000
B)$61,000
C)$21,000
D)$19,000

Question 28

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

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

Question 29

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

A)$62,500.
B)$59,500.
C)$68,500.
D)$65,500.

Question 30

Collins Corporation reported net income of $35,000;depreciation expenses of $20,000;a decrease in Accounts Payable of $2,000;and an increase in Accounts Receivable of $3,000.Net cash flow from operating activities using the indirect method is:

A)$55,000.
B)$54,000.
C)$50,000.
D)$56,000.

Question 31

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

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

Question 32

The Accounts Receivable balance has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 33

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,and they will authorize payment by the discount date.How will this decision affect the period's cash flows from operations-indirect method?

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 34

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?

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 35

Which of the following items would be subtracted from Net Income to compute Net Cash Flow from Operating Activities under the indirect method?

A)A decrease in Merchandise Inventory
B)An increase in Accrued Payables
C)A decrease in Accounts Payable
D)A decrease in Prepaid Insurance

Question 36

Trundle Corporation reported net income of $40,000;depreciation expense of $11,000;sales of additional common shares of $20,000;and an increase in Accounts Payable of $7,000.Net cash flow from operating activities using the indirect method is:

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

Question 37

Rick Corporation's Accounts Receivable increased by $25,000 during the year.What is the adjustment to the cash flow statement when it is prepared by the indirect method?

A)Subtract the increase from the net income in operating activities section.
B)Add the increase to the net income in operating activities section.
C)Add the increase in the investing activities section.
D)Subtract the increase in the financing activities section.

Question 38

Which of the following adjustments would be in error if made to net income when computing cash from operations using the indirect method?

A)Add an increase in Accounts Payable
B)Add Depreciation Expense
C)Add an increase in Accounts Receivable
D)None of the above

Question 39

Of the following,which has a positive effect on the computation of cash flow from operations using the indirect method?

A)Decrease in Accounts Payable
B)Increase in Inventory
C)Decrease in Notes Payable
D)Depreciation Expense

Question 40

Fidelity Furniture's Net Income was $25,000.Other accounts that changed included: Accounts Receivable increased by $18,000;Merchandise Inventory decreased by $7,000;Accounts Payable increased by $4,000;and Salaries Payable decreased by $3,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

A)$57,000.
B)$43,000.
C)$37,000.
D)$15,000.

Question 41

An example of a noncash expense would be depreciation expense.

Question 42

The statement of cash flows can be used for evaluating,comparing,and predicting future cash flows.

Question 43

Discuss the purpose of a statement of cash flows,and describe its components.

Question 44

The income statement shows the financial condition of the company.

Question 45

The following information is given for Tripp Company,which uses the indirect method.

From the information provided,answer the following questions:
a)The cash flow from operating activities is ________.
b)The cash flow from investing activities is ________.
c)The cash flow from financing activities is ________.

Question 46

The balance of Supplies has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 47

Under the indirect method,net income is considered the primary source of cash from financing activities.

Question 48

The following information is given for Sunny Corporation:

The indirect method is used.The beginning Cash balance is $23,000.
Required:
Answer the following questions with the information provided above.
a)The cash flow from operating activities is ________.
b)The cash flow from investing activities is ________.
c)The cash flow from financing activities is ________.
d)The net change in cash is ________.
e)The ending balance of cash is ________.

Question 49

Depreciation Expense on factory equipment would be reported in the statement of cash flows prepared by the indirect method in:

A)the operating activities section.
B)the financing activities section.
C)the investing activities section.
D)None of the above

Question 50

According to GAAP,the statement of cash flows is one of four major financial statements.

Question 51

The purpose of a cash flow statement is to show the inflows and outflows of cash.

Question 52

The board of directors is considering approving a declaration and payment of dividends for the second quarter of the year.How will this decision affect the period's cash flows from operations-indirect method?

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 53

Identify each of the following transactions as an operating activity (O),an investing activity (I),a financing activity (F),or a transaction that is not reported on the statement of cash flows (N).
a)________ Receipt of interest
b)________ Increase of accounts payable
c)________ Borrowed money from a bank
d)________ Purchase of building for cash
e)________ Declaration of cash dividends
f)________ Sold plant equipment for cash
g)________ Increase of accounts receivable
h)________ Payment on principal of a note

Question 54

The Accounts Payable balance has increased during the year.How would this event affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 55

The following information is given for Nevada Times:

The indirect method is used.
Required:
Answer the following questions with the information provided above.
a)The cash flow from operating activities is ________.
b)The cash flow from investing activities is ________.
c)The cash flow from financing activities is ________.

Question 56

If a company issues a comparative balance sheet showing the change in the cash balance,a statement of cash flows is not needed.

Question 57

The Accounts Payable balance has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 58

For a statement of cash flows to be prepared,an accountant needs to compare changes in two balance sheets.

Question 59

Identify where each of the following transactions would be shown on the statement of cash flows when it is prepared by the indirect method.Identify each transaction as an operating activity (O),an investing activity (I),a financing activity (F),or transaction that is not reported on the statement of cash flows (N).
a)________ Paid for fire insurance in advance
b)________ Cash used to purchase new computers
c)________ Cash used to retire bonds outstanding
d)________ Depreciation expense
e)________ Cash used to purchase fixed assets
f)________ Cash proceeds from sale of the company's own stock
g)________ Bought back own stock
h)________ Received cash dividends

Question 60

The final cash amount on the statement of cash flows does not have to match the cash balance shown on the balance sheet.

Question 61

Cash generated from operating activities may be computed by using:

A)the indirect method.
B)the direct method.
C)the estimating method.
D)Both A and B

Question 62

Issuance of common stock for cash would result in:

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 63

Which of the following is a cash flow from investing activities?

A)Receiving cash from a bank
B)Payment of cash dividends
C)Sale or purchase of land
D)Cash received from customers.

Question 64

Transactions dealing with the exchange of cash between the firm and its owners (stockholders)and creditors are called:

A)planning activities.
B)financing activities.
C)investing activities.
D)operating activities.

Question 65

Cash flows from financing activities would include:

A)cash from equipment sold.
B)cash purchase of land.
C)cash from sale of common stock.
D)All of these answers are correct.

Question 66

The purchase of plant and equipment for cash would result in:

A)an increase in cash from investing activities.
B)a decrease in cash from investing activities.
C)an increase added to net income from operations.
D)a decrease subtracted from net income from operations.

Question 67

Cost of merchandise sold for the year was $850,000.Inventories were $60,000 and $120,000 at the beginning and end of the year,respectively.There were no changes in accounts payable from the beginning to the end of the year.Cash payment for merchandise to be reported on the cash flow statement using the direct method is:

A)$850,000.
B)$910,000.
C)$940,000.
D)$880,000.

Question 68

When using the direct method to determine the net cash flows from operating activities,major categories would include:

A)Cash received from bank.
B)Cash paid for salaries.
C)Cash paid for dividends.
D)Cash paid for equipment.

Question 69

Under the direct method of the statement of cash flows,cash paid for salaries would result in:

A)a decrease 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)a decrease of cash flow from financing activities.

Question 70

Which would go into the operating activities section of a statement of cash flows using the direct method?

A)Depreciation expense
B)Cash paid for inventory
C)Selling of plant,property and equipment
D)All of the above

Question 71

Which of the following is a cash outflow from a financing activity?

A)A purchase of inventory
B)A purchase of treasury stock
C)A payment to buy property
D)A loan made to a third party

Question 72

The section of the statement of cash flows from investing activities includes:

A)cash paid for inventory.
B)collecting loans and/or interest.
C)cash received from customers.
D)All of the above

Question 73

Operating expenses other than depreciation expense for the year were $335,000.Prepaid expenses increased by $7,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

A)$335,000.
B)$342,000.
C)$328,000.
D)$7,000.

Question 74

Operating expenses other than depreciation expense for the year were $400,000.Accrued expenses payable decreased by $35,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

A)$400,000.
B)$435,000.
C)$365,000.
D)$35,000.

Question 75

If $15,000 was generated from operations,$7,000 was used for investing activities,and $6,000 was provided by financing activities,the cash balance would:

A)increase by $14,000.
B)decrease by $20,000.
C)increase by $10,000.
D)increase by $2,000.

Question 76

Under the direct method of the statement of cash flows,a sale of merchandise inventory for cash is a(n):

A)managing activity.
B)investing activity.
C)financing activity.
D)operating activity.

Question 77

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

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

Question 78

Generally Accepted Accounting Principles prefer which method of computing cash flow from operating activities?

A)Combination method
B)Direct method
C)Indirect method
D)Adjusting method

Question 79

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?

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 80

The method of reporting cash flows from operating activities under which revenues and expenses on the income statement are adjusted to reflect the amount of cash received or expended for each item is the:

A)direct method.
B)indirect method.
C)combination method.
D)adjustment method.