Deck 16: The Cash Flow Statement

Question 1

The term cash,as used on the cash flow statement,includes all of the following,EXCEPT:

A) cash on hand.
B) cash due from customers within 30 days.
C) cash in bank.
D) cash equivalents.

Answer 1

B

Question 2

Which of the following sections from the cash flow statement includes activities that affect profit on the income statement?

A) The non-cash investing and financing section
B) The financing section
C) The investing section
D) The operating section

Answer 2

D

Question 3

Which of the following describes the operating activities as shown in the cash flow statement?

A) Shows the beginning and ending balance of cash
B) Includes transactions that primarily impact current assets and current liabilities
C) Includes increases and decreases in non-current assets
D) Includes transactions affecting the capitalisation of the business

Answer 3

B

Question 4

Which of the following describes the investing activities as shown in the cash flow statement?

A) Shows the beginning and ending balance of cash
B) Includes increases and decreases in non-current assets
C) Includes transactions affecting the revenues and expenses of the business
D) Includes transactions that primarily impact current assets and current liabilities

Question 5

Which of the following are the three major categories included on the cash flow statement?

A) Financial, operating and internal control activities
B) Investing, capital and financing activities
C) Investing, operating and contracting activities
D) Investing, operating and financing activities

Question 6

Which of the following sections from the cash flow statement includes activities that increase and decrease non-current liabilities and owners' equity?

A) The financing section
B) The investing section
C) The non-cash investing and financing section
D) The operating section

Question 7

Which of the following is NOT a true statement about the cash flow statement?

A) It shows where cash came from and how it was spent.
B) It shows how the profits or losses of the company were generated.
C) It reports why cash increased or decreased.
D) It covers a specific span of time, the same as the income statement.

Question 8

Which of the following sections from the cash flow statement includes purchases and sales of non-current assets?

A) The investing section
B) The financing section
C) The operating section
D) The non-cash investing and financing section

Question 9

The cash flow statement explains the difference between profit and the change in cash balance.

Question 10

The three activities of the cash flow statement in order of importance,from most important to least important,are:

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

Question 11

Which one of the following is a principal function of the cash flow statement?

A) To evaluate the level of debt and leverage of a company
B) To predict future profit growth
C) To calculate the turnover of inventory
D) To predict the ability to pay debts and dividends

Question 12

Which of the following describes the financing activities as shown in the cash flow statement?

A) Includes transactions that primarily impact current assets and current liabilities
B) Includes transactions affecting the non-current liabilities and equity of the business
C) Includes increases and decreases in non-current assets
D) Shows the beginning and ending balance of cash

Question 13

Which of the following sections from the cash flow statement includes activities that increase and decrease non-current assets?

A) The financing section
B) The investing section
C) The non-cash investing and financing section
D) The operating section

Question 14

For purposes of the cash flow statement,cash includes cash on hand,cash in the bank and cash equivalents.

Question 15

Which of the following statements accurately describes the cash flow statement?

A) It shows the link between profit and earnings per share.
B) It indicates when long-term debt will mature.
C) It shows the relative proportion of debt and assets.
D) It shows the link between accrual-based income and the cash reported on the balance sheet.

Question 16

For anything to be considered a cash equivalent,the asset must be:

A) convertible to cash within six months or less.
B) convertible to cash within one year.
C) convertible to cash within five years.
D) convertible to cash at will.

Question 17

Which of the following are the activities that are included in the operating activities section of the cash flow statement?

A) Activities that obtain the cash needed to launch and sustain the business are included in the operating activities section.
B) Activities that increase or decrease non-current assets are included in the operating activities section.
C) Activities that pertain to construction of new facilities are included in the operating activities section.
D) Activities that create revenue or expenses in the entity's major line of business are included in the operating activities section.

Question 18

A cash flow statement is generated to show:

A) the expenses the company incurred during the time period.
B) the inflow and outflow of cash during the time period.
C) how profits were generated.
D) the revenues the company has earned.

Question 19

Cash equivalents are assets that can be converted to cash within one year.

Question 20

Which of the following sections from the cash flow statement includes activities that create revenue,expenses,gains and losses?

A) The financing section
B) The non-cash investing and financing section
C) The investing section
D) The operating section

Question 21

The direct method of preparing the cash flow statement provides a clearer way of analysing cash flow information than the indirect method.

Question 22

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

A) The operating section
B) The investing section
C) The non-cash investing and financing section
D) The financing section

Question 23

Which of the following is the CORRECT order of the sections on a cash flow statement?

A) Financing, investing, operating
B) Investing, operating, financing
C) Operating, financing, investing
D) Operating, investing, financing

Question 24

Which of the following statements about the cash flow statement is TRUE?

A) The operating activities section of both the direct and the indirect method is the same.
B) The indirect method and the direct method will both show the same end results.
C) The direct method begins with profit and adjusts to calculate operating cash flows.
D) The indirect method shows three types of cash flows but the direct method does not.

Question 25

The financing activities section of the cash flow statement includes paying dividends and paying off loans.

Question 26

The Australian Accounting Standards require the cash flow statement to be prepared using either the direct method or the indirect method.

Question 27

Most public companies use the direct method to prepare their cash flow statement because the calculations are simpler.

Question 28

Which of the following sections from the cash flow statement includes the issue of shares and the payment of dividends?

A) The non-cash investing and financing section
B) The operating section
C) The financing section
D) The investing section

Question 29

The cash flow from investing activities appears exactly the same whether the company uses the direct or the indirect method to prepare the cash flow statement.

Question 30

Which of the following would NOT appear on a cash flow statement prepared using the direct method?

A) Increase/decrease in current liabilities
B) Payments to suppliers
C) Interest received
D) Collections from customers

Question 31

The total net amount of cash flow from operating activities will be the same whether you use the direct or the indirect method of preparing the statement of cash flow.

Question 32

The direct method starts with profit and reconciles to cash flows from operating activities.

Question 33

Which of the following sections from the cash flow statement includes the purchase and buy-back of shares?

A) The non-cash investing and financing section
B) The financing section
C) The investing section
D) The operating section

Question 34

The financing section of the cash flow statement reflects transactions in the equity accounts only.

Question 35

The investing activities section of the cash flow statement reflects the cash flows that increase or decrease non-current assets.

Question 36

Interest expense incurred on a bill payable would be included in the financing section of the cash flow statement.

Question 37

Which of the following statements about the cash flow statement is FALSE?

A) The indirect method begins with profit and adjusts to calculate operating cash flows.
B) Both the direct and indirect methods include three types of cash flows.
C) The operating activities section of both the direct and the indirect method is the same.
D) The indirect method and the direct method will produce the same amount of cash flow.

Question 38

The direct and indirect methods will give slightly different results due to the differences in accrual and cash accounting.

Question 39

Which of the following would NOT be classified as an operating activity?

A) Dividends paid
B) Interest received
C) Interest paid
D) Dividends received

Question 40

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

A) Increase/decrease in current assets
B) Adjustments to profit
C) Adjustments for gains and losses on sale of property
D) Cash payments for salaries

Question 41

A payment of interest on a loan would be considered a:

A) non-cash activity.
B) cash outflow from investing activities.
C) cash outflow from financing activities.
D) cash outflow from operating activities.

Question 42

Mei Company uses the direct method to prepare its cash flow statement.Refer to the following information reported for the year 2017:
Cost of sales,$150,000
Inventory,beginning balance,$29,000
Inventory,ending balance,$61,000
Accounts payable,beginning balance,$8000
Accounts payable,ending balance,$5500
Operating expenses,$27,000
Accrued liabilities,beginning balance,$2700
Accrued liabilities,ending balance,$6300
In the operating activities section of the cash flow statement,what amount will be shown for payments to suppliers? Assume Accrued liabilities relate to Operating expenses.

A) $161,100
B) $184,500
C) $207,900
D) $161,500

Question 43

Thomas Ltd uses the direct method to prepare its cash flow statement.Refer to the following information reported for the year 2016:
Sales revenue,$41,000
Interest revenue,$700
Accounts receivable,beginning balance,$13,500
Accounts receivable,ending balance,$26,000
There were no amounts reported for Interest receivable.
In the operating activities section of the cash flow statement,what amount will be shown for total cash receipts?

A) $13,500
B) $54,500
C) $29,200
D) $26,000

Question 44

A company's Inventory account increased $28,300 and its Accounts payable account decreased $20,000 during the year.The Accounts payable relates only to the acquisition of inventory.Sales were $795,900 and Cost of sales was $549,800.What was the payment made to the suppliers of inventory?

A) $48,300
B) $578,100
C) $598,100
D) $569,800

Question 45

An outflow of cash from an investing activity would be:

A) paying cash dividends to shareholders.
B) buying back shares from shareholders.
C) issuing bills payable.
D) making loans to third parties.

Question 46

Which of the following would be considered an operating activity on the cash flow statement?

A) Payment to purchase equipment
B) The sale of inventory
C) The receipt of cash from sale of equipment
D) Dividends paid to shareholders

Question 47

Creditor and shareholder transactions are considered ________ activities.

A) non-cash
B) investing
C) financing
D) operating

Question 48

Of the following,which is NOT a cash outflow from an investing activity?

A) Loans made to another party
B) A share buy-back
C) Purchase of long-term investments, such as the shares of another company
D) Purchase of land

Question 49

Parmesan Company uses the direct method for its cash flow statement.It reports the following information regarding the year 2016:
From the income statement:
Sales revenue,$270,000
Cost of sales,$213,000
Operating expenses,$31,000
From the balance sheet:
$$\begin{array} { | l | l | l | } \hline& { \text { Beginning balance } } & \text { Ending balance } \\\hline \text { Accounts receivable: } & \$ 15,000 & \$ 18,000 \\\hline \text { Inventory: } & 23,900 & 18,100 \\\hline \text { Accounts payable: } & 6300 & 13,700 \\\hline \text { Accrued liabilities: } & 4300 & 1500 \\\hline\end{array}$$

On the cash flow statement,what amount will be shown for collections from customers?

A) $270,000
B) $273,000
C) $33,000
D) $267,000

Question 50

Which of the following sections from the cash flow statement would include the payment of a bill payable by issuing ordinary shares?

A) The payment of a bill payable by issuing ordinary shares would be included in the financing section.
B) The payment of a bill payable by issuing ordinary shares would be included in the investing section.
C) The payment of a bill payable by issuing ordinary shares would be included in the operating section.
D) The payment of a bill payable by issuing ordinary shares would be included in the non-cash investing and financing section.

Question 51

Davis Company uses the direct method to prepare its cash flow statement.Refer to the following information reported for the year 2016:
Operating expenses,$27,000
Accrued liabilities,beginning balance,$3400
Accrued liabilities,ending balance,$5500
What amount was paid to suppliers for operating expenses on a cash basis?

A) $30,400
B) $32,500
C) $29,100
D) $24,900

Question 52

Cash received from selling inventory would be considered a:

A) cash inflow from financing activities.
B) cash inflow from operating activities.
C) cash outflow from operating activities.
D) cash inflow from investing activities.

Question 53

Which of the following is NOT a cash outflow from an operating activity?

A) Payment of interest on a loan
B) Payment for purchasing inventory
C) Payments to the government for taxes
D) Payment of dividends

Question 54

Which of the following sections from the cash flow statement includes borrowing money and paying off loans?

A) The non-cash investing and financing section
B) The operating section
C) The financing section
D) The investing section

Question 55

Gladiator Ltd uses the direct method to prepare its cash flow statement.Refer to the following information reported for the year 2016:
Cost of sales,$132,000
Inventory,beginning balance,$26,000
Inventory,ending balance,$65,000
Accounts payable,beginning balance,$7900
Accounts payable,ending balance,$5400
What is the amount of cash paid for inventory?

A) $173,500
B) $93,000
C) $168,500
D) $171,000

Question 56

Avatar Company uses the direct method to prepare its cash flow statement.Refer to the following information reported for the year 2016:

Question 57

Sonesta Company owed one of its creditors $250 000 but did not have enough cash to repay the debt.Following lengthy negotiations,the parties agreed that Sonesta would issue 100 000 ordinary shares to settle the debt.This transaction would be reported in the financing section of the cash flow statement.

Question 58

Arturo Sales purchased some equipment for $12 000 by issuing a six-month bill payable.How would this transaction be shown on the cash flow statement?

A) In the non-cash financing and investing activities section
B) In the investing activities section
C) In the financing activities section
D) In the operating activities section

Question 59

Of the following,which is NOT a cash inflow from a financing activity?

A) Earning interest revenue
B) Issuing ordinary shares
C) Borrowing money on a long-term bill
D) Selling treasury shares

Question 60

Which of the following items would be included as an operating activity on the cash flow statement?

A) A payment of dividends
B) A payment of interest
C) A share buy-back
D) An issue of shares

Question 61

Qtopia Company uses the direct method to prepare its cash flow statement.It has reported Cost of sales of $70 000 on its income statement for the year 2016.If the balance in accounts payable (for inventory suppliers only)has gone down by $5 000 during the year,then $5 000 will have to be added to $70 000 as part of the process to calculate payments to suppliers for inventory purchases.

Question 62

Issuing preference shares to shareholders would be a financing activity.

Question 63

Selling property,plant and equipment would be considered a cash inflow from investing.

Question 64

How would the issue of ordinary shares for cash be entered on a worksheet?

A) Debit Retained earnings and credit Share capital.
B) Debit Share capital and credit Proceeds from issue of ordinary shares.
C) Debit Share capital and credit Retained earnings.
D) Debit Proceeds from issue of ordinary shares and credit Share capital.

Question 65

Which of the following transactions would be shown in the non-cash investing and financing activities section of the cash flow statement?

A) Sold equipment with book value of $4 000 in exchange for $1 000 cash and a $3 000 bill
B) Purchased a building in exchange for 10 000 ordinary shares
C) Borrowed $22 000 cash on a bill payable
D) Issued 10 000 shares at $5 per share

Question 66

Parmesan Company uses the direct method for its statement of cash flow.It reports the following information regarding the year 2016:
From the income statement:
Sales revenues,$269,000
Cost of sales,$213,000
Operating expenses,$36,000
Net profit,$20,000
From the balance sheet:
$$\begin{array} { | l | l | l | } \hline&{ \text { Beginning balance } } & \text { Ending balance } \\\hline \text { Accounts receivable: } & \$ 14,800 & \$ 17,900 \\\hline \text { Inventory: } & 23,500 & 18,500 \\\hline \text { Accounts payable: } & 6800 & 13,500 \\\hline \text { Accrued liabilities: } & 4200 & 1800 \\\hline\end{array}$$

Assume that there were no sales of Non-current assets,no Interest revenue and no expenses other than the expenses shown above.Also,assume that Accounts payable are for purchases of inventory only.On the cash flow statement,what amount will be shown for the net cash flow from operating activities?

A) $26,200
B) $64,600
C) $13,300
D) $20,000

Question 67

In creating a cash flow statement using the indirect method,which of the following statements is TRUE about depreciation expense?

A) It is added back to purchases of non-current assets under investing activities.
B) It is added back as an adjustment to profit in the operating activities section.
C) It is shown as a negative cash flow under operating activities.
D) It is shown as a negative cash flow in the investing activities section.

Question 68

The only part that differs in a cash flow statement using the direct method from one using the indirect method is the:

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

Question 69

Christopher Ltd is preparing its cash flow statement using the indirect method.It provides the following information about transactions for the year:
Non-current assets,net-beginning balance: $111,000
Non-current assets,net-ending balance: $144,000
Equipment costing $67,000 was purchased for cash
Equipment with a net asset value of $12,000 was sold for $17,000
Depreciation expense of $19,000 was recorded during the year
What was the amount of net cash provided by (used for)investing activities?

A) $(31,000)
B) $(69,000)
C) $50,000
D) $(50,000)

Question 70

Qtopia Company uses the direct method to prepare its cash flow statement.It has reported sales revenue of $100 000 on its income statement for the year 2016.If the balance in accounts receivable has gone up by $4 000 during the year,then $4 000 will have to be added to $100 000 to calculate collections from customers.

Question 71

Qtopia Company uses the direct method to prepare its cash flow statement.It has reported Cost of sales of $70 000 on its income statement for the year 2016.If the balance in the inventory account has gone up by $2 000 during the year,then $2 000 will have to be added to $70 000 as part of the process to calculate payments to suppliers for inventory purchases.

Question 72

Parmesan Company uses the direct method for its cash flow statement.It reports the following information regarding the year 2016:
From the income statement:
Sales revenue,$266,000
Cost of sales,$215,000
Operating expenses,$31,000
From the balance sheet:
$$\begin{array} { | l | l | l | } \hline& { \text { Beginning balance } } & \text { Ending balance } \\\hline \text { Accounts receivable: } & \$ 14,600 & \$ 17,900 \\\hline \text { Inventory: } & 24,100 & 17,900 \\\hline \text { Accounts payable: } & 6000 & 13,500 \\\hline \text { Accrued liabilities: } & 4000 & 2000 \\\hline\end{array}$$

On the cash flow statement,what amount will be shown for payments to suppliers for inventory purchases? (Assume that Accounts payable are for purchases of inventory only.)

A) $208,800
B) $213,700
C) $201,300
D) $216,300

Question 73

Buying property,plant and equipment would be considered a cash outflow from financing.

Question 74

Rodriguez Ltd uses the indirect method to prepare its cash flow statement.Refer to the following portion of the comparative balance sheet:
Rodriguez Ltd
Comparative balance sheet
as at 31 December 2017 and 2016
$$\begin{array} { | l | l | l | l | } \hline & { 2017 } & { 2016 } & { \text { Increase/decrease } } \\\hline \text { Cash } & \$ 21,000 & \$ 24,000 & \$ 3000 \\\hline \text { Accounts receivable } & 32,000 & 40,000 & - 8000 \\\hline \text { Inventory } & 60,000 & 26,000 & 34,000 \\\hline \text { Plant and equipment } & 123,000 & \$ 1,000 & 32,000 \\\hline \text { Accumulated depreciation - plant } & & & \\\text { and equipment } & ( 46,000 ) & ( 43,000 ) & ( 80,000 ) \\\hline \text { Total assets } & \$ 190,000 & \$ 138,000 & \$ 135,000 \\\hline\end{array}$$
Additional information provided by the company includes the following:
Additional information provided by the company includes the following:
1) Equipment costing $68,000 was purchased for cash.
2) Equipment with a cost of $34,000 and accumulated depreciation of $7100 was sold for $48,000.
What was the amount of net cash provided by (used for) investing activities?

A) $(20,000)
B) $251,000
C) $20,000
D) $(251,000)

Question 75

Avatar Company uses the direct method to prepare its cash flow statement.Please refer to the following information:
• Repayments on long-term bills payable: $40 000
• New borrowing on long-term bills payable: $34 000
Which of the following statements is accurate regarding the cash flow statement?

A) $40 000 will be shown as a positive cash flow in the financing section.
B) $34 000 will be shown as a positive cash flow in the investing section.
C) $40 000 will be shown as a negative cash flow in the investing section.
D) $34 000 will be shown as a positive cash flow in the financing section.

Question 76

Qtopia Company uses the direct method to prepare its cash flow statement.It has reported operating expenses of $21 000 on its income statement for the year 2016.If the balance in accrued liabilities has gone up by $1 000 during the year,then $1 000 will have to be added to $21 000 as part of the process to calculate payments to suppliers for operating expenses.

Question 77

Parmesan Company uses the direct method for its cash flow statement.It reports the following information regarding the year 2016:
From the income statement:
Sales revenue,$268,000
Cost of sales,$211,000
Operating expenses,$36,000
From the balance sheet:
$$\begin{array} { | l | l | l | } \hline& { \text { Beginning balance } } & \text { Ending balance } \\\hline \text { Accounts receivable: } & \$ 15,000 & \$ 17,800 \\\hline \text { Inventory: } & 24,100 & 18,000 \\\hline \text { Accounts payable: } & 6100 & 13,800 \\\hline \text { Accrued liabilities: } & 4800 & 2000 \\\hline\end{array}$$

On the cash flow statement,what amount will be shown for payments to suppliers for operating expenses? (Assume that Accounts payable are for purchases of inventory only and Accrued liabilities relate to operating expenses.)

A) $38,800
B) $40,800
C) $36,000
D) $34,000

Question 78

Rodriguez Ltd uses the indirect method to prepare the cash flow statement.Refer to the following income statement:
Rodriguez Ltd
Income statement
For the year ended 31 December 2016
$$\begin{array} { | l | l | l | } \hline \text { Sales revenue } & \$ 156,000 & \\\hline \text { Interest revenue } & 6400 & \\\hline \text { Loss on sale of non-current assets } & ( 5000 ) & \\\hline \text { Total revenues and gains } & & \$ 157,400 \\\hline \text { Cost of sales } & 110,000 & \\\hline \text { Salary expense } & 19,000 & \\\hline \text { Depreciation expense } & 7000 & \\\hline \text { Other operating expenses } & 13,200 & \\\hline \text { Interest expense } & 16,200 & \\\hline \text { Income taxexpense } & 5900 & \\\hline \text { Total expenses } & & 171,300 \\\hline \text { Profit (loss) } & & \$ \underline { - 13,900 } \\\hline\end{array}$$
Additional information provided by the company includes the following:
Current assets,other than cash,decreased by $5200
Current liabilities increased by $2400
How much is the net cash provided by operating activities?

A) $10,200
B) -21,500
C) $5700
D) -$700

Question 79

How would a new issue of ordinary shares be shown on the cash flow statement?

A) Negative cash flow in the investing section
B) Positive cash flow in the financing section
C) Positive cash flow in the investing section
D) Negative cash flow in the financing section

Question 80

Which would NOT be included in the operating activities section of an indirect method statement of cash flow?

A) Changes in accounts receivable
B) Changes in long-term bills payable
C) Changes in inventory
D) Changes in accounts payable