Deck 24: The Statement of Cash Flows

Question 1

The cash received from issuing common stock is not reported on the statement of cash flows.

Answer 1

False

Question 2

Operating activities are routine business transactions that include providing services, paying wages, borrowing funds, selling stock, and paying dividends.

Answer 2

False

Question 3

Current assets and current liabilities are often referred to as operating assets and liabilities.

Answer 3

True

Question 4

By analyzing past cash flows, financial statement users can identify the primary sources and uses of cash.

Question 5

The payment of cash dividends to stockholders would be classified as an outflow of cash for a financing activity.

Question 6

The statement of cash flows provides information about cash flows from operating activities, investing activities, and financing activities.

Question 7

An increase or decrease in accounts payable during a fiscal period has no effect on the net cash provided by operating activities.

Question 8

When a firm issues a long-term note payable, the amount that it receives for the note is considered a cash inflow from financing activities.

Question 9

When the net income is reconciled with the net cash provided by operating activities, depreciation expense is added to the net income.

Question 10

The starting point for analyzing cash flows from operating activities is the beginning balance of cash.

Question 11

Decreases in current assets must be deducted from net income to arrive at cash flows from operating activities.

Question 12

The Financial Accounting Standards Board prefers the indirect method of preparing the statement of cash flows.

Question 13

In computing the cash flows from operating activities section, a loss from the sale of long-term assets must be deducted from net income.

Question 14

There is usually a difference between the net income reported on the income statement and the net cash from operating activities shown on the statement of cash flows.

Question 15

Interest expense is treated as an outflow of cash from a financing activity.

Question 16

The resale of treasury stock for cash is classified as a cash inflow from financing activities.

Question 17

When the net income is adjusted to arrive at the net cash provided by operating activities, the amount of the bond premium amortized is added to the net income.

Question 18

If the income statement reports a net loss for the year, the loss is not reported in the operating activities section of the statement of cash flows.

Question 19

If a firm's accounts receivable increased during the fiscal period, it is necessary to subtract the amount of the increase from the net income when computing the net cash provided by operating activities.

Question 20

A sale of used equipment for cash produces an inflow of cash from investing activities.

Question 21

Net income must be adjusted for changes in current assets and liabilities, such as accounts receivable and accounts payable, when determining the net cash provided by .

Question 22

Noncash investing and financing activities, such as the issuance of bonds to acquire business property, do not require disclosure as the cash account is not affected.

Question 23

The purpose of the is to report the cash balance at the beginning and end of the fiscal period and to show the sources and uses of cash during the period.

Question 24

A gain on the sale of equipment is reported in the section of the statement of cash flows.

Question 25

On the statement of cash flows, cash and consist of currency, bank accounts, and short-term, highly liquid investments.

Question 26

The FASB requires companies to report the Statement of Cash Flows using the direct method.

Question 27

The statement of cash flows assumes that the basis of accounting is used when recording transactions and preparing the balance sheet and income statement.

Question 28

On the statement of cash flows, the is reconciled with the net cash provided by operating activities.

Question 29

Cash flows from activities are the result of routine business transactions such as buying and selling merchandise.

Question 30

When using the Direct Method of preparing the Statement of Cash Flows, interest expense is treated as an outflow of cash in the section.

Question 31

The cash flows from investing activities and cash flows from financing activities are the same in both the direct and indirect methods.

Question 32

The payment of bonds at maturity would be treated as a cash in the section of the statement of cash flows.

Question 33

The schedule of supplements the income statement, showing selling and administrative expenses in greater detail.

Question 34

The purchase of treasury stock is treated as a cash outflow in the section of the statement of cash flows.

Question 35

A complete set of published financial statements for a corporation must include a statement of cash flows.

Question 36

Issuing stock for cash and paying dividends in cash would be classified as on the statement of cash flows.

Question 37

If the indirect method of preparing the statement of cash flows is used, a note disclosing the amount of interest and income taxes paid during the period must accompany the statement.

Question 38

If a corporation issued stock for $85,000 in cash, received $35,000 in cash from the issuance of a long-term loan, and paid cash dividends totaling $24,000, the net cash provided by financing activities would be .

Question 39

Purchases and sales of land, buildings, and equipment for cash are shown as on the statement of cash flows.

Question 40

When the method of preparing the statement of cash flows is used, the interest and income taxes paid during the period are disclosed in notes accompanying the statement.

Question 41

Investing activities include:

A)purchases of merchandise for cash.
B)increase in accounts receivable.
C)purchases of prepaid expense items such as supplies and insurance for cash.
D)purchases of plant and equipment for cash.

Question 42

A decrease in merchandise inventory is:

A)a use of cash under operating activities.
B)a source of cash under operating activities.
C)not reported on the statement of cash flows.
D)a source of cash under investing activities.

Question 43

The amortization of the premium on bonds payable is reported in the section of the Statement of Cash Flows.

Question 44

Information from Zwatsch Company's income statement is as follows: net income $32,000, depreciation expense $5,200; loss on sale of plant assets $1,600; gain on retirement of bonds
$10,000; an increase in accounts receivable of $4,200 and dividend payments of $4,400. The net cash provided by operating activities is:

A)$24,600.
B)$20,200.
C)$49,800.
D)$41,400.

Question 45

A decrease in current liabilities is:

A)a source of cash under operating activities.
B)not reported on the statement of cash flows.
C)a use of cash under operating activities.
D)a use of cash under investing activities.

Question 46

Operating activities include:

A)changes in accounts receivable.
B)purchases of plant and equipment for cash.
C)issuance of common stock.
D)payment of dividends to shareholders.

Question 47

When calculating the net cash provided by operating activities, a gain on the sale of equipment should:

A)not be used in the calculation.
B)be added to the net income.
C)be subtracted from the net income.
D)be reported in the cash flows from financing activities section.

Question 48

The income statement reports a loss of $5,000 from the sale of equipment. As a result, the statement of cash flows would report a:

A)$5,000 increase in investing activities.
B)$5,000 decrease in investing activities.
C)$5,000 decrease in operating activities.
D)$5,000 increase in operating activities.

Question 49

A corporation received $130,000 in cash from the sale of a building and paid $68,000 in cash for the purchase of some new machinery. As a result, the statement of cash flows would report:

A)$68,000 as the net cash used in financing activities.
B)$130,000 as the net cash provided by investing activities.
C)$62,000 as the net cash provided by investing activities.
D)$130,000 as the net cash provided by financing activities.

Question 50

The net cash provided by operating activities is affected by:

A)the issue of bonds payable for cash.
B)a purchase of land for cash.
C)a change in merchandise inventory.
D)proceeds of cash investments by stockholders.

Question 51

Operating activities include all except:

A)a decrease in accounts receivable.
B)an increase in wages payable.
C)the payment of dividends to shareholders.
D)a decrease in accounts payable.

Question 52

A decrease in accounts payable from $86,000 to $72,000 will be reported on the statement of cash flows as a:

A)$14,000 use of operating activity funds.
B)$14,000 source of operating activity funds.
C)$14,000 source of investing activity funds.
D)$14,000 use of investing activity funds.

Question 53

Information from Zurich Company's income statement is as follows: net income $15,600, depreciation expense $11,800; gain on sale of equipment $3,000; proceeds from the sale of land
$22,000. The net cash provided by operating activities is:

A)$46,400.
B)$15,600.
C)$24,400.
D)$6,800.

Question 54

Cash and cash equivalents, as used on the statement of cash flows, consist of:

A)only currency and bank accounts.
B)only bank accounts.
C)currency, bank accounts, and all investments.
D)currency, bank accounts and short-term, highly liquid investments.

Question 55

A corporation received $45,000 in cash from the sale of a building and paid $96,000 in cash for the purchase of new machinery. As a result, the statement of cash flows would report:

A)$45,000 as the net cash used in financing activities.
B)$45,000 as the net cash provided by investing activities.
C)$96,000 as the net cash used in investing activities.
D)$51,000 as the net cash used by investing activities.

Question 56

An example of a financing activity is:

A)the sale of merchandise for cash.
B)the purchase of a building.
C)the sale of used equipment for cash.
D)the issue of stock for cash.

Question 57

A corporation received $89,000 in cash from the sale of common stock and used the proceeds to pay $72,000 in bonds payable. As a result, the statement of cash flows would report:

A)$17,000 as the net cash provided by financing activities.
B)$17,000 as the net cash provided by investing activities.
C)$72,000 as the net cash used in investing activities.
D)$89,000 as the net cash provided by financing activities.

Question 58

are transactions that involve the acquisition or disposal of assets that will not be used or consumed in routine operations.

Question 59

Financing activities include all of the following except:

A)purchases of plant and equipment for cash.
B)payment of dividends to shareholders.
C)receipt of cash upon the issuance of bonds.
D)repurchase of company stock.

Question 60

Which of the following is reported on the statement of cash flows as a financing activity?

A)Declaration of a cash dividend.
B)Payment of a cash dividend.
C)Issuance of a stock dividend.
D)Stock split.

Question 61

Cinders Inc, reported net income of $75,000 and a loss on the sale of plant assets of $17,000. The cash received from the sale of the plant assets was $52,000. Cinders also issued additional shares of stock for $25,000 and paid dividends of $6,200. Calculate the net cash provided or used by investing activities.
A)$35,000 net cash provided.

A)$69,000 net cash used.
B)$52,000 net cash provided
D)$20,800 net cash used.

Question 62

Windwhirl Company reported net income of $150,000 and a $5,000 gain on the sale of equipment. The cash received from the sale of equipment was $27,000. Windwhirl issued additional shares of stock for $237,000, paid off a $196,000 bond issue recorded at par and paid $51,000 in dividends during the year. Calculate the net cash provided or (used)by financing activities.

A)($5,000).
B)$17,000.
C)($10,000).
D)$162,000.

Question 63

Generally, if a short-term investment is to be classified as a cash equivalent,:

A)1 month from the date it was acquired.
B)3 months from the date it was acquired.
C)6 months from the date it was acquired.
D)12 months from the date it was acquired.

Question 64

Chattel Company sold equipment that originally cost $46,000 and accumulated depreciation in the amount of $38,200 for $8,000 cash.

-What amount is reported in the Cash Flows from Operating Activities section of the Statement of Cash Flows for the sale of this equipment?

A)$7,800
B)($200)
C)$8,000
D)$0

Question 65

An increase in accounts payable is:

A)added to the cash flows from investing activities.
B)subtracted from the net income when determining the net cash provided by operating activities.
C)added to the net income when determining the net cash provided by operating activities.
D)not used to calculate the net cash provided by operating activities.

Question 66

When using the indirect method of preparing the statement of cash flows, the payment of interest is considered to be:

A)an outflow of cash that results from a financing activity.
B)an outflow of cash that results from an investing activity.
C)an outflow of cash that results from an operating activity.
D)an activity that is not reported on the statement of cash flows.

Question 67

Which of the following would be reported as an investing activity on the statement of cash flows:

A)the issue of preferred stock.
B)the purchase of equipment for cash.
C)the issue of bonds and notes payable.
D)the resale of treasury stock.

Question 68

Doff Manufacturing Co. sold equipment that cost $13,300 and accumulated depreciation of $11,000 for $3,000 cash. How is the Cash Flows from Operating Activities affected?

A)The book value of $2,300 is added to Net Income
B)The gain of $700 is deducted from Net Income
C)The gain of $700 is added to Net Income
D)The $3,000 cash received from the sale is added to Net Income

Question 69

Transactions that provide cash to the business to fund its activities are:

A)operating activities.
B)financing activities.
C)investing activities.
D)outflows or uses of cash.

Question 70

When the net cash provided by operating activities is determined, the amortization of bond premium:

A)should be added to the net income.
B)should be subtracted from the net income.
C)should not be used in the calculation.
D)be subtracted from the net cash amount after other calculations have been made.

Question 71

Cannon Manufacturing Co. sold equipment that cost $18,000 for $6,000. A gain on sale of $1,000 was recorded. How is the Cash Flows from Operating Activities affected?

A)The gain of $1,000 is added to Net Income.
B)The gain of $1,000 is deducted from Net Income.
C)The $6,000 cash received is deducted from Net Income.
D)The $11,000 accumulated depreciation is added to Net Income.

Question 72

Chattel Company sold equipment that originally cost $46,000 and accumulated depreciation in the amount of $38,200 for $8,000 cash.

- What amount is reported in the Cash Flows from Investing Activities section of the Statement of Cash Flows for the sale of this equipment?

A)$7,800
B)$200
C)$8,000
D)$0

Question 73

Polyglot Services, Inc. sold equipment that cost $52,800 for $14,650 cash. The accumulated depreciation on the equipment on the date of the sale amounted to $37,600. What amount is reported in the Cash Flows from Investing Activities section of the Statement of Cash Flows for this sale of equipment?

A)$15,200
B)$0
C)$14,650
D)$550

Question 74

On a statement of cash flows, an increase in a prepaid expense:

A)is included in computing cash flows from operating activities.
B)is included in computing cash flows from investing activities.
C)is included in computing cash flows from financing activities.
D)is not used in computing cash flows.

Question 75

When calculating the net cash provided by operating activities, an increase in income taxes payable is:

A)subtracted from the net cash amount after other calculations have been made.
B)subtracted from the net income.
C)added to the net income.
D)not used in the calculation.

Question 76

Transactions for the acquisition or disposal of long-term assets are:
A)investing activities.

A)operating activities.
B)financing activities.
D)outflows or uses of cash.

Question 77

Anders Inc, reported that its bonds with a par value of $500,000 and a carrying value of $545,000 were retired for $525,000 resulting in a gain of $20,000. The amounts to be reported on the statement of cash flows include:

A)a $45,000 decrease in cash for financing activities
B)a $525,000 decrease in cash for investing activities and a $45,000 increase in financing activities.
C)a $20,000 decrease in cash from operating activities and a $525,000 decrease in cash for financing activities.
D)$20,000 increase in cash from operating activities and a $545,000 decrease in cash used for financing activities.

Question 78

On a statement of cash flows, depreciation expense is:

A)subtracted from net income in the computation of the net cash provided by operating activities.
B)added to net income in the computation of the net cash provided by operating activities.
C)treated as a cash outflow in the computation of the net cash used in investing activities.
D)treated as a cash inflow in the computation of the net cash used in investing activities.

Question 79

The method most often used by companies to prepare the statement of cash flows is the:

A)accrual method.
B)direct method.
C)indirect method.
D)deferral method.

Question 80

Chattel Company sold equipment that originally cost $46,000 and accumulated depreciation in the amount of $38,200 for $8,000 cash.

-What amount is reported in the Cash Flows from Financing Activities section of the Statement of Cash Flows for the sale of this equipment?

A)$8,000
B)$7,800
C)$200
D)$0