Deck 17: Statement of Cash Flows

Question 1

The receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities.

Answer 1

False

Question 2

All major financing and investing activities affect cash.

Answer 2

False

Question 3

Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income.

Answer 3

False

Question 4

Financial statement readers can determine future investing and financing transactions by examining a company's statement of cash flows.

Question 5

The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.

Question 6

The sale of land for cash would be classified as a cash inflow from an investing activity.

Question 7

Using the indirect method an increase in accounts receivable during a period is deducted from net income in calculating cash provided by operations.

Question 8

A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions.

Question 9

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

Question 10

The payment of interest on bonds payable is classified as a cash outflow from operating activities.

Question 11

In preparing a statement of cash flows the issuance of debt should be reported separately from the retirement of debt.

Question 12

Cash provided by operations is generally equal to operating income.

Question 13

The statement of cash flows is a required statement that must be prepared along with an income statement balance sheet and retained earnings statement.

Question 14

For external reporting a company must prepare either an income statement or a statement of cash flows but not both.

Question 15

Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

Question 16

Using the indirect method an increase in accounts payable during a period is deducted from net income in calculating cash provided by operations.

Question 17

Noncash investing and financing activities must be reported in the body of a statement of cash flows.

Question 18

A statement of cash flows indicates the sources and uses of cash during a period.

Question 19

A statement of cash flows should help investors and creditors assess the entity's ability to generate future income.

Question 20

The statement of cash flows classifies cash receipts and payments as operating nonoperating financial and extraordinary activities.

Question 21

The primary purpose of the statement of cash flows is to

A) provide information about the investing and financing activities during a period.
B) prove that revenues exceed expenses if there is a net income.
C) provide information about the cash receipts and cash payments during a period.
D) facilitate banking relationships.

Question 22

Free cash flow equals cash provided by operations less capital expenditures and cash dividends.

Question 23

Operating expenses + an increase in prepaid expenses - a decrease in accrued expenses payable = cash payments for operating expenses.

Question 24

In preparing a statement of cash flows an increase in the Common Stock and Treasury Stock accounts during a period would be an investing activity.

Question 25

Cash provided by operating activities fails to take into account that a company must invest in new fixed assets just to maintain its current level of operations.

Question 26

Financing activities include the obtaining of cash from issuing debt and repaying the amounts borrowed.

Question 27

During a period cost of goods sold + an increase in inventory + an increase in accounts payable = cash paid to suppliers.

Question 28

During the year Income Tax Expense amounted to $30000 and Income Taxes Payable increased by $4000; therefore the cash paid for income taxes was $26000.

Question 29

Under the direct method the formula for computing cash collections from customers is sales revenues plus the increase in accounts receivable or minus the decrease in accounts receivable.

Question 30

The use of a worksheet to prepare a statement of cash flows is optional.

Question 31

Under the indirect method retained earnings is adjusted for items that affected reported net income but did not affect cash.

Question 32

In preparing net cash flow from operating activities using the direct method each item in the income statement is adjusted from the accrual basis to the cash basis.

Question 33

The statement of cash flows

A) must be prepared on a daily basis.
B) summarizes the operating financing and investing activities of an entity.
C) is another name for the income statement.
D) is a special section of the income statement.

Question 34

The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities.

Question 35

Which one of the following items is not generally used in preparing a statement of cash flows?

A) Adjusted trial balance
B) Comparative balance sheets
C) Current income statement
D) Additional information

Question 36

The reconciling entry for depreciation expense in a worksheet is a credit to Accumulated Depreciation and a debit to Operating-Depreciation Expense.

Question 37

The statement of cash flows should help investors and creditors assess each of the following except the

A) entity's ability to generate future income.
B) entity's ability to pay dividends.
C) reasons for the difference between net income and net cash provided by operating activities.
D) cash investing and financing transactions during the period.

Question 38

A loss on sale of equipment is added to net income in determining cash provided by operations under the indirect method.

Question 39

Analysis of the changes in all of the noncash balance sheet accounts will explain the change in the Cash account.

Question 40

The change in cash is equal to the change in liabilities less the change in equity plus the change in noncash assets.

Question 41

The statement of cash flows reports each of the following except

A) cash receipts from operating activities.
B) cash payments from investing activities.
C) the net change in cash.
D) cash sales.

Question 42

In preparing a statement of cash flows a conversion of bonds into common stock will be reported in

A) the financing section.
B) the "extraordinary" section.
C) a separate schedule or note to the financial statements.
D) the stockholders' equity section.

Question 43

Lending money and collecting the loans are

A) operating activities.
B) investing activities.
C) financing activities.
D) Non-cash investing and financing activities.

Question 44

Financing activities involve

A) lending money.
B) acquiring investments.
C) issuing debt.
D) acquiring long-lived assets.

Question 45

If a company reports a net loss it

A) may still have a net increase in cash.
B) will not be able to pay cash dividends.
C) will not be able to get a loan.
D) will not be able to make capital expenditures.

Question 46

Of the items below the one that appears first on the statement of cash flows is

A) noncash investing and financing activities.
B) net increase (decrease) in cash.
C) cash at the end of the period.
D) cash at the beginning of the period.

Question 47

The order of presentation of activities on the statement of cash flows is

A) operating investing and financing.
B) operating financing and investing.
C) financing operating and investing.
D) financing investing and operating.

Question 48

The acquisition of land by issuing common stock is

A) a noncash transaction which is not reported in the body of a statement of cash flows.
B) a cash transaction and would be reported in the body of a statement of cash flows.
C) a noncash transaction and would be reported in the body of a statement of cash flows.
D) only reported if the statement of cash flows is prepared using the direct method.

Question 49

Each of the following is an example of a significant noncash activity except

A) conversion of bonds into common stock.
B) exchanges of plant assets.
C) issuance of debt to purchase assets.
D) stock dividends.

Question 50

The cash effects of transactions that create revenues and expenses are

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

Question 51

Each of the following are particularly interested in the statement of cash flows except

A) creditors.
B) employees.
C) shareholders.
D) government agencies.

Question 52

The statement of cash flows will not report the

A) amount of checks outstanding at the end of the period.
B) sources of cash in the current period.
C) uses of cash in the current period.
D) change in the cash balance for the current period.

Question 53

Which of the following transactions does not affect cash during a period?

A) Write-off of an uncollectible account
B) Collection of an accounts receivable
C) Sale of treasury stock
D) Exercise of the call option on bonds payable

Question 54

Significant noncash transactions would not include

A) conversion of bonds into common stock.
B) asset acquisition through bond issuance.
C) treasury stock acquisition.
D) exchange of plant assets.

Question 55

Investing activities include

A) collecting cash on loans made.
B) obtaining cash from creditors.
C) obtaining capital from owners.
D) repaying money previously borrowed.

Question 56

In addition to the three basic financial statements which of the following is also a required financial statement?

A) the "Cash Budget"
B) the Statement of Cash Flows
C) the Statement of Cash Inflows and Outflows
D) the "Cash Reconciliation"

Question 57

Generally the most important category on the statement of cash flows is cash flows from

A) operating activities.
B) investing activities.
C) financing activities.
D) significant noncash activities.

Question 58

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is

A) cash flows from operating activities.
B) cash flows from investing activities.
C) cash flows from financing activities.
D) usually different from year to year.

Question 59

If a company has both an inflow and outflow of cash related to property plant and equipment the

A) two cash effects can be netted and presented as one item in the investing activities section.
B) cash inflow and cash outflow should be reported separately in the investing activities section.
C) two cash effects can be netted and presented as one item in the financing activities section.
D) cash inflow and cash outflow should be reported separately in the financing activities section.

Question 60

Cash receipts from interest and dividends are classified as

A) financing activities.
B) investing activities.
C) operating activities.
D) either financing or investing activities.

Question 61

Indicate where the payment of income taxes would appear if at all on the statement of cash flows.

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

Question 62

If a loss of $25000 is incurred in selling (for cash) office equipment having a book value of $90000 the total amount reported in the cash flows from investing activities section of the statement of cash flows is

A) $65000.
B) $90000.
C) $115000.
D) $25000.

Question 63

Jean's Vegetable Market had the following transactions during 2016:
1) Issued $50000 of par value common stock for cash.
2) Repaid a 6 year note payable in the amount of $22000.
3) Acquired land by issuing common stock of par value $50000.
4) Declared and paid a cash dividend of $7000.
5) Sold a long-term investment (cost $3000) for cash of $6000.
6) Acquired an investment in IBM stock for cash of $10000.
What is the net cash provided by financing activities?

A) $21000
B) $67000
C) $28000
D) $0

Question 64

Jean's Vegetable Market had the following transactions during 2016:
1) Issued $50000 of par value common stock for cash.
2) Repaid a 6 year note payable in the amount of $22000.
3) Acquired land by issuing common stock of par value $100000.
4) Declared and paid a cash dividend of $2000.
5) Sold a long-term investment (cost $3000) for cash of $8000.
6) Acquired an investment in IBM stock for cash of $15000.
What is the net cash provided (used) by investing activities?

A) $15000
B) $33000
C) ($7000)
D) $8000

Question 65

In Jude Company land decreased $150000 because of a cash sale for $150000 the equipment account increased $60000 as a result of a cash purchase and Bonds Payable increased $120000 from issuance for cash at face value. The net cash provided by investing activities is

A) $150000.
B) $210000.
C) $90000.
D) $270000.

Question 66

The third (final) step in preparing the statement of cash flows is to

A) analyze changes in noncurrent asset and liability accounts.
B) compare the net change in cash with the change in the cash account reported on the balance sheet.
C) determine net cash provided by operating activities.
D) list the noncash activities.

Question 67

If a gain of $12000 is incurred in selling (for cash) office equipment having a book value of $110000 the total amount reported in the cash flows from investing activities section of the statement of cash flows is

A) $98000.
B) $122000.
C) $110000.
D) $12000.

Question 68

Accounts receivable arising from sales to customers amounted to $40000 and $55000 at the beginning and end of the year respectively. Income reported on the income statement for the year was $180000. Exclusive of the effect of other adjustments the cash flows from operating activities to be reported on the statement of cash flows is

A) $180000.
B) $195000.
C) $220000.
D) $165000.

Question 69

Adama Company reported a net loss of $6000 for the year ended December 31 2016. During the year accounts receivable increased $15000 merchandise inventory decreased $12000 accounts payable decreased by $20000 and depreciation expense of $12000 was recorded. During 2016 operating activities

A) used net cash of $17000.
B) used net cash of $29000.
C) provided net cash of $24000.
D) provided net cash of $21000.

Question 70

Bush Company reported net income of $60000 for the year. During the year accounts receivable decreased by $8000 accounts payable increased by $4000 and depreciation expense of $5000 was recorded. Net cash provided by operating activities for the year is

A) $48000.
B) $77000.
C) $59000.
D) $55000.

Question 71

Indicate where the issuance of common stock issued for cash would appear if at all on the indirect statement of cash flows.

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

Question 72

Wilson Company reported net income of $105000 for the year ended December 31 2016. During the year inventories decreased by $15000 accounts payable decreased by $20000 depreciation expense was $18000 and a gain on disposal of equipment of $9000 was recorded. Net cash provided by operating activities in 2016 using the indirect method was

A) $101000.
B) $109000.
C) $120000.
D) $118000.

Question 73

The net income reported on the income statement for the current year was $245000. Depreciation was $40000. Account receivable and inventories decreased by $12000 and $35000 respectively. Prepaid expenses and accounts payable increased respectively by $1000 and $8000. How much cash was provided by operating activities?

A) $296000
B) $339000
C) $323000
D) $311000

Question 74

Accounts receivable arising from sales to customers amounted to $86000 and $77000 at the beginning and end of the year respectively. Income reported on the income statement for the year was $290000. Exclusive of the effect of other adjustments the cash flows from operating activities to be reported on the statement of cash flows is

A) $290000.
B) $299000.
C) $213000.
D) $280000.

Question 75

The net income reported on the income statement for the current year was $220000. Depreciation recorded on plant assets was $35000. Accounts receivable and inventories increased by $2000 and $8000 respectively. Prepaid expenses and accounts payable decreased by $2000 and $12000 respectively. How much cash was provided by operating activities?

A) $200000
B) $235000
C) $220000
D) $255000

Question 76

Indicate where the purchase of land and a building with a mortgage would appear if at all on the indirect statement of cash flows.

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

Question 77

Vision Company purchased treasury stock with a cost of $16000 during 2016. During the year the company paid dividends of $20000 and issued bonds payable for proceeds of $860000. Cash flows from financing activities for 2016 total

A) $840000 net cash inflow.
B) $856000 net cash inflow.
C) $860000 net cash outflow.
D) $824000 net cash inflow.

Question 78

Indicate where the purchase of land for cash would appear if at all on the indirect statement of cash flows.

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

Question 79

Kanet Company issued common stock for proceeds of $386000 during 2016. The company paid dividends of $80000 and issued a long-term note payable for $95000 in exchange for equipment during the year. The company also purchased treasury stock that had a cost of $15000. The financing section of the statement of cash flows will report net cash inflows of

A) $291000.
B) $481000.
C) $306000.
D) $371000.

Question 80

Which one of the following items is not necessary in preparing a statement of cash flows?

A) Determine the change in cash
B) Determine the cash provided by operations
C) Determine cash from financing and investing activities
D) Determine the cash in all bank accounts