Deck 21: Statement of Cash Flows

Question 1

Operating cash flow 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

Answer 1

C

Question 2

In the statement of cash flows (indirect method), which event would cause cash flow from operations to decrease?

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

Answer 2

A

Question 3

Cash included on the statement of cash flows can include which of the following?

A) Only money in the bank
B) Only cash on-hand
C) Cash, money market accounts, and government securities
D) None of the above are correct.

Answer 3

C

Question 4

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 5

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.

Question 6

Which of the following is considered a cash inflow?

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

Question 7

This statement summarizes the sources and uses of cash by a company during an accounting period.

A) Statement of Retained Earnings
B) Statement of Cash Flows
C) Income Statement
D) Balance Sheet

Question 8

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 9

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

A) Net cash flow from managing activities
B) Net cash flow from financing activities
C) Net cash flow from retained earnings activities
D) Net cash flow from start-up activities

Question 10

Activities such as selling merchandise and services to customers and paying salaries and other expenses needed to continue earning the operating revenue are classified as:

A) Financing activities.
B) Investing activities.
C) Operating activities.
D) Management activities.

Question 11

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

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

Question 12

Which of the following is considered a cash outflow?

A) Decrease in Accounts Payable
B) Decrease in Supplies
C) Decrease in Prepaid Expenses
D) Decrease in Accounts Receivable

Question 13

Activities relating to raising money from investors and creditors such as the issuance of common stock are classified as:

A) Financing activities.
B) Investing activities.
C) Operating activities.
D) Management activities.

Question 14

A ___________ balance sheet lists the financial condition for two or more years in a side-by-side manner.

A) corresponding
B) derived
C) comparative
D) conclusive

Question 15

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 16

A statement of cash flows' 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 17

Which of the following would 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) Purchase of equipment
C) Decrease in Notes Payable
D) Increase in Notes Payable

Question 18

Under the indirect method, which of the following 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 prepaid expense
C) Adding an increase in salaries payable
D) All are proper adjustments to net income.

Question 19

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

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

Question 20

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 21

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

A) Decrease in Inventory
B) Increase in Accounts Payable
C) Purchase of Equipment
D) Sale of Equipment

Question 22

Orion Corporation reported net income of $31,000, depreciation expenses of $18,000, an increase in Accounts Payable of $3,000 and a decrease in Accounts Receivable of $2,500. Under the indirect method, net cash flow from operating activities is:

A) $38,300
B) $54,500
C) $23,700
D) $35,300

Question 23

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 24

Collins Corporation reported net income of $45,000; depreciation expenses of $20,000; a decrease in Accounts Payable of $2,000; and an increase in Accounts Receivable of $4,000. Net cash flow from operating activities using the indirect method is:

A) $65,000.
B) $25,000.
C) $59,000.
D) $71,000.

Question 25

The records of Aaron Paint Co. showed the issuance of a long-term note in the amount of $15,900; issuance of Common Stock in the amount of $50,900; and payment of dividends in the amount of $21,100. The amount of Net Cash Flow from Financing Activities using the indirect method is:

A) $87,900.
B) $45,700.
C) $13,900.
D) $56,100.

Question 26

The net income reported on the income statement for the current year was $70,000. Depreciation Expense recorded on fixed assets was $18,000. What is the net cash flow from operations that would appear on a cash flow statement using the indirect method?

A) $70,000
B) $88,000
C) $18,000
D) $52,000

Question 27

The records of Amy's Flowers showed Net Loss, $20,000; Depreciation Expense, $31,000; and decrease in Supplies on Hand, $8,000. The amount of Net Cash Flow from Operating Activities using the indirect method is:

A) ($19,000).
B) $3,000.
C) $19,000.
D) -$3,000.

Question 28

The records of Lily's Landing showed a purchase of equipment in the amount of $17,100; sale of equipment in the amount of $41,200; a purchase of land in the amount of $10,400, and a loan to a borrower in the amount of $4,100. The amount of Net Cash Flow from Investing Activities using the indirect method is:

A) $9,600.
B) ($9,600).
C) $52,000.
D) $72,800.

Question 29

Sears Inc.'s Net Income was $56,000. Other accounts that changed included: Accounts Receivable decreased by $25,000; Merchandise Inventory increased by $15,000; Accounts Payable increased by $4,400; and Salaries Payable increased by $6,200. The amount of Net Cash Flow from Operating Activities using the indirect method is:

A) $76,600.
B) $81,000.
C) $50,600.
D) $26,600.

Question 30

Blair Corporation's Accounts Receivable decreased by $15,000 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 the operating activities section.
B) Add the increase to the net income in the operating activities section.
C) Add the decrease in the investing activities section.
D) Subtract the increase in the financing activities section.

Question 31

Which of the following adjustments would be in error when computing cash from financing using the indirect method?

A) Increase cash when issuing Common Stock
B) Decrease cash when purchasing Treasury Stock
C) Decrease cash when issuing Common Stock
D) None of the above

Question 32

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 33

Which of the following adjustments would be in error when computing cash from investing using the indirect method?

A) Increase cash when purchasing equipment
B) Increase cash when selling equipment
C) Decrease cash when purchasing land
D) None of the above

Question 34

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

Question 35

The records of Ashley Boutique showed Net Loss, $30,000 Depreciation Expense, $21,000 and decrease in Supplies on Hand, $25,000. The amount of Net Cash Flow from Operating Activities using the indirect method is:

A) $34,000.
B) $16,000.
C) -$16,000.
D) -$34,000.

Question 36

Big Toy Corporation's records show net income of $30,000; depreciation expense of $12,000; and cash dividends declared and paid of $1,000. The amount of cash provided by operating activities using the indirect method is:

A) $43,000.
B) $42,000.
C) $30,000.
D) $18,000.

Question 37

The records of Billie's Surfboards showed a purchase of equipment in the amount of $24,800; sale of equipment in the amount of $14,900; and a purchase of land in the amount of $30,500. The amount of Net Cash Flow from Investing Activities using the indirect method is:

A) $70,200.
B) $9,200.
C) $40,400.
D) ($40,400).

Question 38

Of the following, which has a positive 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) Increase in Prepaid Insurance

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

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 41

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 42

Salaries Payable 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 43

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

Question 44

The following information is given for Arizona Company: 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 45

The final cash amount on the statement of cash flows needs to match the cash balance shown on the balance sheet.

Question 46

Issuing Treasury Stock is considered an investing activity.

Question 47

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 48

How would the purchase of land affect the statement of cash flows investing section-indirect method?

A) It would affect the investing section positively.
B) It would affect the investing section negatively.
C) It would decrease the operating section of the statement of cash flows.
D) Does not affect the cash flow from investing.

Question 49

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

Question 50

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

Question 51

A change in Accounts Payable is considered an operating activity.

Question 52

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) ________ Decrease of supplies
b) ________ Decrease of accounts payable
c) ________ Declaration of cash dividends
d) ________ Purchase of building for cash
e) ________ Increase of accounts receivable
f) ________ Sold plant equipment for cash
g) ________ Borrowed money from a bank
h) ________ Payment on principal of a note

Question 53

Issuing Common Stock is considered a financing activity.

Question 54

How would the issuance of Common Stock affect the statement of cash flows financing section-indirect method?

A) It would affect the financing section positively.
B) It would affect the financing section negatively.
C) It would increase the investing section of the statement of cash flows.
D) Does not affect the cash flow from financing.

Question 55

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

Question 56

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 57

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

A) Increase to Dividends
B) Increase in Accounts Payable
C) Issuing Common Stock
D) Sale of Equipment

Question 58

Selling equipment is considered an investing activity.

Question 59

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 60

If a company issues a comparative balance sheet showing the change in the cash balance, a statement of cash flows is needed.

Question 61

The distinction between the indirect and direct methods only applies to the cash flows from which section?

A) Operating activities
B) Financing activities
C) Investing activities
D) There is no distinction between the methods.

Question 62

Operating expenses other than depreciation expense for the year were $30,500. Prepaid expenses increased by $9,400. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

A) $39,900.
B) $9,400.
C) $30,500.
D) $21,100.

Question 63

If Salaries Expense was $38,000, and there was a decrease in Salaries Payable of $15,000, what would be the cash amount paid for Salaries?

A) $53,000
B) $23,000
C) $15,000
D) $38,000

Question 64

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 65

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 66

If Cost of Goods Sold was $25,000, there was a decrease in Inventory of $5,000, and an increase in Accounts Payable of $5,700, what would be the cash amount paid for Merchandise Inventory?

A) $25,700
B) $14,300
C) $35,700
D) $24,300

Question 67

If Insurance Expense was $7,100, and there was a decrease in Prepaid Insurance of $4,700, what would be the cash amount paid for Insurance?

A) $2,400
B) $11,800
C) $7,100
D) $4,700

Question 68

If $38,000 was generated in sales and there was an increase to Accounts Receivable of $3,100, what would be the cash amount received from customers?

A) $38,000
B) $3,100
C) $34,900
D) $41,100

Question 69

Cost of merchandise sold for the year was $370,000. Inventories were $34,000 and $80,000 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) $450,000.
B) $416,000.
C) $80,000.
D) $370,000.

Question 70

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 71

If $40,000 was generated from operations, $9,000 was used for investing activities, and $4,000 was provided by financing activities, the cash balance would:

A) increase by $35,000.
B) decrease by $35,000.
C) increase by $40,000.
D) increase by $31,000.

Question 72

If $31,000 net cash was used in operations, $12,000 was used for investing activities, and $25,000 was provided by financing activities, the cash balance would:

A) increase by $18,000.
B) decrease by $18,000.
C) increase by $68,000.
D) increase by $25,000.

Question 73

If $97,000 net cash was provided by operations, $33,000 was used for investing activities, and $15,400 was provided by financing activities, the cash balance would:

A) increase by $79,400.
B) decrease by $64,000.
C) increase by $145,400.
D) increase by $112,400.

Question 74

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 75

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 76

Operating expenses other than depreciation expense for the year were $332,000. Prepaid expenses increased by $5,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

A) $332,000.
B) $337,000.
C) $327,000.
D) $5,000.

Question 77

Cost of merchandise sold for the year was $760,000. Inventories were $20,000 and $110,000 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) $760,000.
B) $850,000.
C) $870,000.
D) $780,000.

Question 78

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.

Question 79

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 80

If Salaries Payable increased, the amount of the increase would result in what computation to Salaries Expense?

A) Added to Salaries Expense
B) Nothing would change with Salaries Expense
C) Subtracted from Salaries Expense
D) Multiplied by Salaries Expense