Deck 16: Statement of Cash Flows

Question 1

If a business issued bonds payable in exchange for land, the transaction would be reported in a separate schedule on the statement of cash flows.

Answer 1

True

Question 2

Cash flows from investing activities, as part of the statement of cash flows, include payments for the acquisition of fixed assets.

Answer 2

True

Question 3

The statement of cash flows reports a firm's major sources of cash receipts and major uses of cash payments for a period.

Answer 3

True

Question 4

Cash flows from investing activities, as part of the statement of cash flows, include receipts from the issuance of bonds payable.

Question 5

The direct method of preparing the operating activities section of the statement of cash flows reports major classes of gross cash receipts and gross cash payments.

Question 6

Under the direct method of reporting cash flows from operations, the major source of cash is cash received from customers.

Question 7

Cash flows from investing activities, as part of the statement of cash flows, include payments for the purchase of treasury stock.

Question 8

The statement of cash flows is an optional financial statement.

Question 9

Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents.

Question 10

Cash outflows from financing activities include the payment of cash dividends, the acquisition of treasury stock, and the repayment of amounts borrowed.

Question 11

The main disadvantage of the direct method of reporting cash flows from operating activities is that the necessary data are often costly to accumulate.

Question 12

There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) the direct method and (2) the indirect method.

Question 13

The statement of cash flows is one of the basic financial statements.

Question 14

The statement of cash flows shows the effects on cash of a company's operating, investing, and financing activities.

Question 15

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.

Question 16

Cash flows from investing activities, as part of the statement of cash flows, include receipts from the sale of land.

Question 17

Cash flows from financing activities, as part of the statement of cash flows, include payments for dividends.

Question 18

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Question 19

The acquisition of land in exchange for common stock is an example of noncash investing and financing activity.

Question 20

Cash flows from operating activities, as part of the statement of cash flows, include cash transactions that enter into the determination of net income.

Question 21

A cash flow per share amount should be reported on the statement of cash flows.

Question 22

When using the worksheet method to analyzing noncash accounts , no order of analysis is required, but it is more efficient to start with Retained Earnings and proceed upward in the account listing.

Question 23

In determining the cash flows from operating activities for the statement of cash flows by the indirect method, the depreciation expense for the period is added to the net income for the period.

Question 24

The declaration and issuance of a stock dividend would be reported on the statement of cash flows.

Question 25

Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $37,000.

Question 26

Under the indirect method, expenses that do not affect cash are added to net income in the operating activities section of the statement of cash flows.

Question 27

If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in of the operating activities section of the statement of cash flows (prepared by the indirect method).

Question 28

Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section.

Question 29

Using the indirect method, if land costing $85,000 was sold for $145,000, the amount reported in the financing activities section of the statement of cash flows would be $85,000.

Question 30

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the net decrease in inventories from the beginning to the end of the period is added to net income for the period.

Question 31

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the amortization of bond discount for the period is deducted from the net income for the period.

Question 32

If $475,000 of bonds payable are sold at 101, $475,000 would be reported in the cash flows from financing activities section of the statement of cash flows.

Question 33

A building with a cost of $153,000 and accumulated depreciation of $42,000 was sold for a $11,000 gain. When using the indirect method, the cash generated from this investing activity was $121,000.

Question 34

If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per share, the statement of cash flows would report net cash flow from financing activities as $165,000.

Question 35

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

Question 36

Rarely would the cash flows from operating activities, as reported on the statement of cash flows, be the same as the net income reported on the income statement.

Question 37

Cash paid to acquire treasury stock should be shown on the statement of cash flows from investing activities.

Question 38

Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400. Under the indirect method, the cash flow from operations is $32,400.

Question 39

If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be reported in the cash flows from financing activities section of the statement of cash flows.

Question 40

In preparing the statement of cash flows, the correct order of reporting cash activities is Financing, Operating, Investing.

Question 41

Which of the following would not be found in a Schedule of Noncash Investing and Financing Activities, reported at the end of a Statement of Cash Flows?

A) equipment acquired in exchange for a note payable
B) bonds payable exchanged for capital stock
C) purchase of treasury stock
D) capital stock issued to acquire fixed assets

Question 42

Which of the following can be found on the statement of cash flows?

A) cash flows from operating activities
B) total assets
C) total changes in stockholders' equity
D) changes in retained earnings

Question 43

Preferred stock issued in exchange for land would be reported in the statement of cash flows in

A) the cash flows from financing activities section
B) the cash flows from investing activities section
C) a separate schedule
D) the cash flows from operating activities section

Question 44

To determine cash payments for operating expenses for the cash flow statement using the direct method, a decrease in prepaid expenses is added to operating expenses other than depreciation.

Question 45

Which of the following concepts of cash is not appropriate to use in preparing the statement of cash flows?

A) cash
B) cash and money market funds
C) cash and cash equivalents
D) cash and U.S. treasury bonds

Question 46

Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity and dividends.

Question 47

Sales reported on the income statement were $372,000. The accounts receivable balance declined $4,500 over the year. The amount of cash received from customers was $367,500.

Question 48

Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

A) purchase of noncurrent assets
B) purchase of treasury stock
C) discarding an asset that had been fully depreciated
D) payment of cash dividends

Question 49

Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows?

A) retirement of bond payable
B) acquisition of treasury stock
C) declaration of stock dividends
D) issuance of long-term debt

Question 50

There is no difference in the Investing and Financing sections of the statement of cash flows using the indirect and direct method.

Question 51

To determine cash payments for merchandise for the cash flow statement using the direct method, a decrease in accounts payable is added to the cost of merchandise sold.

Question 52

On the statement of cash flows, the cash flows from operating activities section would include

A) receipts from the issuance of capital stock
B) receipts from the sale of investments
C) payments for the acquisition of investments
D) cash receipts from sales activities

Question 53

To determine cash payments for operating expenses for the cash flow statement using the direct method, a decrease in accrued expenses is added to operating expenses other than depreciation.

Question 54

Free cash flow is cash flow from operations, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends.

Question 55

Cash paid to purchase long-term investments would be reported in the statement of cash flows in

A) the cash flows from operating activities section
B) the cash flows from financing activities section
C) the cash flows from investing activities section
D) a separate schedule

Question 56

Under the direct method of preparing a Statement of Cash Flows, the gain on the sale of land is not adjusted or reported as part of cash flows from operating activities.

Question 57

Cash inflows and outflows are netted in the investing or financing sections of the statement of cash flows but are separately disclosed to give the reader full information.

Question 58

To determine cash payments for income tax for the cash flow statement using the direct method, an increase in income taxes payable is added to the income tax expense.

Question 59

Which of the following is not one of the four basic financial statements?

A) balance sheet
B) statement of cash flows
C) statement of changes in financial position
D) income statement

Question 60

The manner of reporting cash flows from investing and financing activities will be different under the direct method as compared to the indirect method.

Question 61

A ten-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under

A) investing activities
B) financing activities
C) noncash investing and financing activities
D) operating activities

Question 62

Which one of the following below should be added to net income in calculating net cash flow from operating activities using the indirect method?

A) a gain on the sale of land
B) a decrease in accounts payable
C) an increase in accrued liabilities
D) dividends paid on common stock

Question 63

Which of the following should be shown on a statement of cash flows under the financing activity section?

A) the purchase of a long-term investment in the common stock of another company
B) the payment of cash to retire a long-term note
C) the proceeds from the sale of a building
D) the issuance of a long-term note to acquire land

Question 64

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in

A) the cash flows from financing activities section
B) the cash flows from investing activities section
C) a separate schedule
D) the cash flows from operating activities section

Question 65

Cash receipts received from the issuance of a mortgage notes payable would be classified as

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

Question 66

Financing activities include

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

Question 67

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

A) an increase in inventory
B) a decrease in accounts payable
C) preferred dividends declared and paid
D) a decrease in accounts receivable

Question 68

On the statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include

A) receipts from the sale of investments
B) amortization of premium on bonds payable
C) payments for cash dividends
D) receipts from the issuance of capital stock

Question 69

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

A) depreciation expense
B) gain on sale of land
C) a loss on the sale of equipment
D) dividends declared and paid

Question 70

Cash flow per share is

A) required to be reported on the balance sheet
B) required to be reported on the income statement
C) required to be reported on the statement of cash flows
D) not required to be reported on any statement

Question 71

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 72

Cash paid for preferred stock dividends should be shown on the statement of cash flows under

A) investing activities
B) financing activities
C) noncash investing and financing activities
D) operating activities

Question 73

The last item on the statement of cash flows prior to the schedule of noncash investing and financing activities reports

A) the increase or decrease in cash
B) cash at the end of the year
C) net cash flow from investing activities
D) net cash flow from financing activities

Question 74

A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under

A) investing activities
B) financing activities
C) noncash investing and financing activities
D) operating activities

Question 75

Investing activities include

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

Question 76

Which one of the following below would not be classified as an operating activity?

A) interest expense
B) income taxes
C) payment of dividends
D) selling expenses

Question 77

Which of the following is a noncash investing and financing activity?

A) payment of a cash dividend
B) payment of a six-month note payable
C) purchase of merchandise inventory on account
D) issuance of common stock to acquire land

Question 78

The statement of cash flows is not useful for:

A) planning future investing and financing activities
B) determining a company's ability to pay its debts
C) determining a company's ability to pay dividends
D) calculating the net worth of a company

Question 79

Cash receipts from interest and dividends are classified as

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

Question 80

Which of the following below increases cash?

A) depreciation expense
B) acquisition of treasury stock
C) borrowing money by issuing a six-month note
D) the declaration of a cash dividend