Deck 13: The Statement of Cash Flows

Question 1

Which of the following sections from the statement of cash flows includes activities that affect current assets and current liabilities on the balance sheet?

A) Activities that affect current assets and current liabilities on the balance sheet are included in the investing section.
B) Activities that affect current assets and current liabilities on the balance sheet are included in the financing section.
C) Activities that affect current assets and current liabilities on the balance sheet are included in the operating section.
D) Activities that affect current assets and current liabilities on the balance sheet are not included in any of the above-mentioned sections.

Answer 1

Activities that affect current assets and current liabilities on the balance sheet are included in the operating section.

Question 2

Which of the following sections from the statement of cash flows includes activities that increase and decrease long-term liabilities and owners' equity?

A) Activities that increase and decrease long-term liabilities and owners' equity are included in the financing section.
B) Activities that increase and decrease long-term liabilities and owners' equity are included in the operating section.
C) Activities that increase and decrease long-term liabilities and owners' equity are included in the investing section.
D) Activities that increase and decrease long-term liabilities and owners' equity are not included in any of the above-mentioned sections.

Answer 2

Activities that increase and decrease long-term liabilities and owners' equity are included in the financing section.

Question 3

Which of the following sections from the statement of cash flows includes the purchase and sale of treasury stock?

A) The purchase and sale of treasury stock are included in the financing section.
B) The purchase and sale of treasury stock are included in the operating section.
C) The purchase and sale of treasury stock are included in the investing section.
D) The purchase and sale of treasury stock are not included in any of the above-mentioned sections.

Answer 3

The purchase and sale of treasury stock are included in the financing section.

Question 4

Which of the following sections from the statement of cash flows would include the purchase of a building totally financed by a mortgage?

A) The purchase of a building totally financed by a mortgage would be included in the investing section.
B) The purchase of a building totally financed by a mortgage would be included in the operating section.
C) The purchase of a building totally financed by a mortgage would be included in the financing section.
D) The purchase of a building totally financed by a mortgage would not be included in any of the above-mentioned sections.

Question 5

Which of the following sections from the statement of cash flows would include the acquisition of a building by issuing common stock?

A) The acquisition of a building by issuing common stock would be included in the investing section.
B) The acquisition of a building by issuing common stock would be included in the financing section.
C) The acquisition of a building by issuing common stock would be included in the operating section.
D) The acquisition of a building by issuing common stock would not be included in any of the above-mentioned sections.

Question 6

Which of the following sections from the statement of cash flows includes loans to others and collections on loans?

A) Loans to others and collections of loans are included in the financing section.
B) Loans to others and collections of loans are included in the investing section.
C) Loans to others and collections of loans are included in the operating section.
D) Loans to others and collections of loans are not included in any of the above-mentioned sections.

Question 7

Which of the following are the activities that are included in the investing activities section of the statement of cash flows?

A) Activities that increase or decrease long-term assets are included in the investing activities section.
B) Activities that obtain the cash needed to launch and sustain the business are included in the investing activities section.
C) Activities that create revenue or expenses in the entity's major line of business are included in the investing activities section.
D) None of the above is an accurate description of the investing activities section.

Question 8

Which of the following sections from the statement of cash flows would include the issuance of a stock dividend?

A) The issuance of a stock dividend would be included in the operating section.
B) The issuance of a stock dividend would be included in the financing section.
C) The issuance of a stock dividend would be included in the investing section.
D) The issuance of a stock dividend would not be included in any of the above-mentioned sections.

Question 9

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements.
$$\begin{array} { | l | r | r | } \hline & \text { December 31, 2007 } & \text { December 31, 2006 } \\\hline \text { Accounts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost of goods sold } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventory } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary expense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts receivable?

A) The increase of $10,000 will be subtracted from sales revenue.
B) The increase of $10,000 will be added to net income.
C) The increase of $10,000 will be added to sales revenue.
D) The increase of $10,000 will be subtracted from net income

Question 10

A cash flow statement shows $13,000 from operations, ($9,000) from investing, and $21,000 from financing. The cash balance must have increased or decreased by:

A) $13,000.
B) $25,000.
C) $ 9,000.
D) $34,000.

Question 11

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements.
$$\begin{array} { | l | r | r | } \hline & \text { December 31, 2007 } & \text { December 31, 2006 } \\\hline \text { Accounts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost of goods sold } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventory } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary expense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts payable?

A) The increase of $8,000 will be added to net income.
B) The increase of $8,000 will be subtracted from net income.
C) The increase of $8,000 will be subtracted from cost of goods sold.
D) The increase of $8,000 will be added to cost of goods sold.

Question 12

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements.
$$\begin{array} { | l | r | r | } \hline & \text { December 31, 2007 } & \text { December 31, 2006 } \\\hline \text { Accounts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost of goods sold } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventory } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary expense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to inventory?

A) The decrease of $19,000 will be subtracted from net income
B) The decrease of $19,000 will be subtracted from cost of goods sold.
C) The decrease of $19,000 will be added to cost of goods sold.
D) The decrease of $19,000 will be added to net income.

Question 13

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements. $$\begin{array} { | l | r | r | } \hline & \text { December 31, 2007 } & \text { December 31, 2006 } \\\hline \text { Accounts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost of goods sold } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventory } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary expense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?

A) The increase of $3,000 will be added to net income.
B) The increase of $3,000 will be added to cost of goods sold.
C) The increase of $3,000 will be subtracted from cost of goods sold.
D) The increase of $3,000 will be subtracted from net income

Question 14

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements.
$$\begin{array} { | l | r | r | } \hline & \text { December 31, 2009 } & \text { December 31,2008 } \\\hline \text { Accounts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost of goods sold } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventory } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary expense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts receivable?

A) The increase of $10,000 will be subtracted from sales to determine cash received from customers.
B) The increase of $10,000 will be subtracted from net income.
C) The increase of $10,000 will be added to sales to determine cash received from customers.
D) The increase of $10,000 will be added to net income.

Question 15

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements.
$$\begin{array} { | l | r | r | } \hline & \text { December 31, 2009 } & \text { December 31,2008 } \\\hline \text { Accounts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost of goods sold } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventory } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary expense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts payable?

A) The increase of $8,000 will be subtracted from purchases to determine payments to suppliers.
B) The increase of $8,000 will be added to net income.
C) The increase of $8,000 will be added to purchases to determine payments to suppliers.
D) The increase of $8,000 will be subtracted from net income

Question 16

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements.
$$\begin{array} { | l | r | r | } \hline & \text { December 31, 2009 } & \text { December 31,2008 } \\\hline \text { Accounts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost of goods sold } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventory } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary expense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to inventory?

A) The decrease of $19,000 will be subtracted from net income.
B) The decrease of $19,000 will be added to net income.
C) The decrease of $19,000 will be added to cost of goods sold to determine payments to suppliers.
D) The decrease of $19,000 will be subtracted from cost of goods sold to determine payments to suppliers.

Question 17

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements.
$$\begin{array} { | l | r | r | } \hline & \text { December 31, 2009 } & \text { December 31,2008 } \\\hline \text { Accounts receivable } & \$ 110,000 & \$ 100,000 \\\hline \text { Cost of goods sold } & 560,000 & \\\hline \text { Sales revenue } & 830,000 & \\\hline \text { Accounts payable* } & 75,000 & 67,000 \\\hline \text { Inventory } & 86,000 & 105,000 \\\hline \text { Salary payable } & 13,000 & 10,000 \\\hline \text { Salary expense } & 49,000 & 45,000 \\\hline\end{array}$$ *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?

A) The increase of $3,000 will be subtracted from net income.
B) The increase of $3,000 will be subtracted from salary expense to determine payments to employees.
C) The increase of $3,000 will be added to salary expense to determine payments to employees.
D) The increase of $3,000 will be added to net income.

Question 18

Which of the following would appear on a statement of cash flows prepared using the direct method?

A) Amortization expense would appear on the statement.
B) Loss on sale of equipment would appear on the statement.
C) Net income would appear on the statement.
D) Collections from customers would appear on the statement.