Deck 13: Differential Analysis: The Key to Decision Making

Question 1

Money received from issuing bonds payable would be included as part of a company's financing activities on the statement of cash flows.

Answer 1

True

Question 2

When a company pays a supplier for inventory it has purchased,the cash outflow is recorded in the investing activities section of the statement of cash flows.

Answer 2

False

Question 3

Collecting the principal on a loan to another company would be reported on the investing activities section of the statement of cash flows.

Answer 3

True

Question 4

The collection of a loan made to a supplier would be treated as an investing activity on a statement of cash flows.

Question 5

Paying wages and salaries to employees is classified as a cash outflow in the operating activities section of the statement of cash flows.

Question 6

When a company pays cash to repurchase its own common stock,this is reported as a cash outflow in the financing activities section of the statement of cash flows.

Question 7

In the statement of cash flows,collecting cash from customers is treated as a cash inflow in the financing activities section.

Question 8

Paying interest to lenders is classified as an operating activity on the statement of cash flows.

Question 9

When computing the net cash provided by operating activities under the indirect method on the statement of cash flows,an increase in prepaid expenses would be added to net income.

Question 10

Cash payments to repay the principal amount of debt are reported as a cash outflow in the investing activities section of the statement of cash flows.

Question 11

Insurance and utility expenses are considered operating activities on the statement of cash flows.

Question 12

The statement of cash flows relies on a fundamental principle of double-entry bookkeeping;namely,the change in the cash balance must equal the change in total liabilities and stockholders' equity.

Question 13

Cash equivalents on the statement of cash flows consist of any investment that can be converted into cash within one year.

Question 14

Buying property,plant,or equipment would be reported as a cash outflow on the investing activities section of the statement of cash flows.

Question 15

Cash received from the sale of equipment the company had used in its own operations would be considered an operating activity on a statement of cash flows.

Question 16

Paying taxes to governmental bodies is considered a cash outflow in the operating activities section on the statement of cash flows.

Question 17

Dukas Corporation's net cash provided by operating activities was $218,000;its net income was $203,000;its capital expenditures were $146,000;and its cash dividends were $49,000.
Required:
Determine the company's free cash flow.

Question 18

The net cash provided by operating activities on the statement of cash flows does not include any dividends paid to the company's own shareholders.

Question 19

Investing activities on the statement of cash flows generate cash inflows and outflows related to borrowing from and repaying principal to creditors and completing transactions with the company's owners such as selling or repurchasing shares of common stocks and paying dividends.

Question 20

Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows,a decrease in inventory would be added to net income.

Question 21

Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows,an increase in accounts receivable would be subtracted from net income.

Question 22

Negative free cash flow suggests that the company generated enough cash flow from its operating activities to fund its capital expenditures and dividend payments.

Question 23

In a statement of cash flows,a change in an income taxes payable account would be recorded in the:

A)operating activities section.
B)financing activities section.
C)investing activities section.
D)stockholders' equity section.

Question 24

The amount of depreciation added to net income equals the sum of the debits to the Accumulated Depreciation account.

Question 25

Which of the following would be considered a cash inflow in the financing activities section of the statement of cash flows?

A)Issuing bonds payable.
B)Receiving cash from customers.
C)Sale of equipment.
D)Collection of a loan made to another company.

Question 26

Which of the following would be classified as a financing activity on the statement of cash flows?

A)Paying suppliers for inventory purchases.
B)Interest paid to lenders.
C)Lending money to another company.
D)Repurchasing capital stock from owners.

Question 27

In a statement of cash flows,the sale of a long-term investment would ordinarily be classified as:

A)an operating activity.
B)a financing activity.
C)an investing activity.
D)a lending activity.

Question 28

In a statement of cash flows,which of the following would be classified as an investing activity?

A)The sale of the company's own common stock for cash.
B)The sale of equipment.
C)Interest paid to a lender.
D)The issuance of bonds payable.

Question 29

Negative free cash flow does not automatically signal poor performance.

Question 30

Which of the following items would not be classified as an operating activity on the statement of cash flows?

A)Cash received from customers.
B)Dividends paid to the company's own stockholders.
C)Payments to government agencies for taxes.
D)Cash paid to compensate employees.

Question 31

Free cash flow decreases when a company issues common stock for cash.

Question 32

Which one of the following transactions should be classified as a financing activity on the statement of cash flows?

A)Purchase of equipment.
B)Purchase of the company's own stock.
C)Sale of a long-term investment.
D)Payment of interest to a lender.

Question 33

Free cash flow is net cash provided by operating activities less capital expenditures.

Question 34

Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows,an increase in property,plant,and equipment is subtracted from net income.

Question 35

In a statement of cash flows,issuing bonds payable affects the:

A)operating activities section.
B)financing activities section.
C)investing activities section.
D)free cash flow activities section.

Question 36

Free cash flow will increase if a company increases its accounts payable balance by delaying payments to suppliers.

Question 37

The direct method of preparing the statement of cash flows will show the same increase or decrease in cash as the indirect method.

Question 38

Tomlin Corporation prepares its statement of cash flows using the indirect method.Which of the following would be subtracted from net income in the operating activities section of the statement?

A)Option A
B)Option B
C)Option C
D)Option D

Question 39

Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows,a loss on the sale of an asset would be added to net income.

Question 40

When computing the net cash provided by operating activities under the indirect method on the statement of cash flows,a decrease in common stock would be subtracted from net income.

Question 41

Shoshoni Corporation prepares its statement of cash flows using the indirect method.Which of the following would be added to net income in the operating activities section of the statement?

A)Option A
B)Option B
C)Option C
D)Option D

Question 42

When computing the net cash provided by operating activities using the indirect approach on the statement of cash flows,which item below would NOT be added to net income?

A)Depreciation.
B)Loss on the sale of an asset.
C)Decrease in accounts payable.
D)Decrease in prepaid expenses.

Question 43

Kaeser Corporation's most recent balance sheet appears below: The company's net income for the year was $52 and it did not sell or retire any property,plant,and equipment during the year.Cash dividends were $9.The net cash provided by (used in)investing activities for the year was:

A)$17
B)$67
C)($17)
D)($67)

Question 44

Sonier Corporation's most recent balance sheet appears below: The net income for the year was $97.Cash dividends were $19.The company did not issue any bonds or repurchase any of its common stock during the year.The net cash provided by (used in)financing activities for the year was:

A)($43)
B)($19)
C)($25)
D)$1

Question 45

Adah Corporation prepares its statement of cash flows using the indirect method.Which of the following would be subtracted from net income in the operating activities section of the statement?

A)Option A
B)Option B
C)Option C
D)Option D

Question 46

Last year Burch Corporation's cash account decreased by $6,000.Net cash provided by investing activities was $13,000.Net cash used in financing activities was $30,000.On the statement of cash flows,the net cash flow provided by (used in)operating activities was:

A)($23,000)
B)($17,000)
C)($6,000)
D)$11,000

Question 47

An increase in accrued liabilities of $1,000 during a year would be shown on the company's statement of cash flows prepared under the indirect method as:

A)an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.
B)a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
C)a deduction of $1,000 under investing activities.
D)an addition of $1,000 under financing activities.

Question 48

Partin Corporation's cash and cash equivalents consist of cash and marketable securities.Last year the company's cash account increased by $31,000 and its marketable securities account decreased by $22,000.Cash provided by operating activities was $108,000.Net cash used in financing activities was $70,000.Based on this information,the net cash flow from investing activities on the statement of cash flows was:

A)a net $9,000 increase.
B)a net $29,000 decrease.
C)a net $38,000 increase.
D)a net $38,000 decrease.

Question 49

The Warrel Corporation reported the following data for last year: Based solely on this information,the net cash provided (used)by financing activities on the statement of cash flows would be:

A)$12,000
B)$34,000
C)($12,000)
D)($18,000)

Question 50

Which of the following would be added to net income in the operating activities section of a statement of cash flows prepared using the indirect method?

A)a decrease in accounts receivable.
B)an increase in prepaid expenses.
C)an increase in accrued liabilities.
D)an increase in property,plant and equipment.

Question 51

An increase in the Inventory account of a company from $10,000 at the beginning of the year to $15,000 at the end of the year would be shown on the company's statement of cash flows prepared under the indirect method as:

A)an addition to net income of $5,000 in order to arrive at net cash provided by operating activities.
B)a deduction from net income of $5,000 in order to arrive at net cash provided by operating activities.
C)an addition to net income of $15,000 in order to arrive at net cash provided by operating activities.
D)a deduction from net income of $10,000 in order to arrive at net cash provided by operating activities.

Question 52

The following transactions occurred last year at Jolly Corporation: Based solely on the above information,the net cash provided by financing activities for the year on the statement of cash flows would be:

A)$179,000
B)$59,000
C)($109,000)
D)$46,000

Question 53

Tani Corporation's most recent balance sheet appears below: The company's net income for the year was $18 and it did not sell or retire any property,plant,and equipment during the year.Cash dividends were $4.The net cash provided by (used in)investing activities for the year was:

A)($45)
B)$45
C)($3)
D)$3

Question 54

Klicker Corporation's most recent balance sheet appears below: The company's net income for the year was $152 and it did not issue any bonds or repurchase any of its common stock during the year.Cash dividends were $40.The net cash provided by (used in)financing activities for the year was:

A)($49)
B)($40)
C)$4
D)($13)

Question 55

Excerpts from Aultman Corporation's comparative balance sheet appear below: Which of the following is the correct treatment within the operating activities section of the statement of cash flows using the indirect method?

A)The change in Inventory is added to net income;The change in Accounts Payable is added to net income
B)The change in Inventory is added to net income;The change in Accounts Payable is subtracted from net income
C)The change in Inventory is subtracted from net income;The change in Accounts Payable is added to net income
D)The change in Inventory is subtracted from net income;The change in Accounts Payable is subtracted from net income

Question 56

Marbry Corporation's balance sheet and income statement appear below: Cash dividends were $21.The company did not issue any bonds or repurchase any of its own common stock during the year.The net cash provided by (used in)financing activities for the year was:

A)$4
B)($22)
C)($5)
D)($21)

Question 57

Excerpts from Neuwirth Corporation's comparative balance sheet appear below: Which of the following is the correct treatment within the operating activities section of the statement of cash flows using the indirect method?

A)The change in Accounts Receivable is added to net income;The change in Inventory is added to net income
B)The change in Accounts Receivable is added to net income;The change in Inventory is subtracted from net income
C)The change in Accounts Receivable is subtracted from net income;The change in Inventory is subtracted from net income
D)The change in Accounts Receivable is subtracted from net income;The change in Inventory is added to net income

Question 58

Excerpts from Deblois Corporation's comparative balance sheet appear below: Which of the following is the correct treatment within the operating activities section of the statement of cash flows using the indirect method?

A)The change in Accounts Payable is added to net income;The change in Accrued Liabilities is subtracted from net income
B)The change in Accounts Payable is added to net income;The change in Accrued Liabilities is added to net income
C)The change in Accounts Payable is subtracted from net income;The change in Accrued Liabilities is added to net income
D)The change in Accounts Payable is subtracted from net income;The change in Accrued Liabilities is subtracted from net income

Question 59

The following events occurred last year at Dorder Corporation: Based on the above information,the cash provided (used)by investing activities for the year on the statement of cash flows would net to:

A)($21,000)
B)($12,000)
C)($32,000)
D)($69,000)

Question 60

An increase in accounts receivable of $1,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:

A)an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.
B)a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
C)an addition of $1,000 under financing activities.
D)a deduction of $1,000 under financing activities.

Question 61

Majorn Auto Parts Store had net income of $81,000 for the year just ended.Majorn collected the following additional information to prepare its statement of cash flows for the year: Majorn uses the indirect method to prepare its statement of cash flows.What is Majorn's net cash provided (used)by operating activities?

A)$41,000
B)($53,000)
C)$185,000
D)$279,000

Question 62

Kaze Corporation's cash and cash equivalents consist of cash and marketable securities.Last year the company's cash account increased by $25,000 and its marketable securities account decreased by $15,000.Cash provided by operating activities was $38,000.Net cash provided by investing activities was $9,000.Based on this information,the net cash flow from financing activities on the statement of cash flows was:

A)a net $37,000 decrease.
B)a net $37,000 increase.
C)a net $47,000 decrease.
D)a net $47,000 increase.

Question 63

Beacham Corporation's net cash provided by operating activities was $115;its net income was $95;its capital expenditures were $65;and its cash dividends were $17.The company's free cash flow was:

A)$292
B)$13
C)$33
D)$128

Question 64

Degeare Corporation's balance sheet and income statement appear below: Cash dividends were $10.The company sold equipment for $18 that was originally purchased for $10 and that had accumulated depreciation of $5.The net cash provided by (used in)operating activities for the year was:

A)$73
B)$76
C)$43
D)$63

Question 65

Norbury Corporation's net income last year was $34,000.The company did not sell or retire any property,plant,and equipment last year.Changes in selected balance sheet accounts for the year appear below: Based solely on this information,the net cash provided by operating activities under the indirect method on the statement of cash flows would be:

A)$52,000
B)$66,000
C)$53,000
D)$16,000

Question 66

Carriveau Corporation's most recent balance sheet appears below: Net income for the year was $172.Cash dividends were $35.The company did not sell or retire any property,plant,and equipment during the year.The net cash provided by (used in)operating activities for the year was:

A)$183
B)$246
C)($11)
D)$161

Question 67

McCorey Corporation recorded the following events last year: On the statement of cash flows,some of these events are classified as operating activities,some are classified as investing activities,and some are classified as financing activities. Based solely on the information above,the net cash provided by (used in)financing activities on the statement of cash flows would be:

A)($70,000)
B)$70,000
C)($130,000)
D)$130,000

Question 68

Klutz Dance Studio had net income of $167,000 for the year just ended.Klutz collected the following additional information to prepare its statement of cash flows for the year: Klutz uses the indirect method to prepare its statement of cash flows.What is Klutz's net cash provided (used)by operating activities?

A)$95,000
B)$137,000
C)$185,000
D)$207,000

Question 69

McCorey Corporation recorded the following events last year: On the statement of cash flows,some of these events are classified as operating activities,some are classified as investing activities,and some are classified as financing activities. Based solely on the information above,the net cash provided by (used in)investing activities on the statement of cash flows would be:

A)$110,000
B)$55,000
C)$150,000
D)$130,000

Question 70

The following events occurred last year for the Cart Corporation: Based solely on the above information,the net cash provided by financing activities for the year on the statement of cash flows was:

A)$12,000
B)$24,000
C)$20,000
D)$49,000

Question 71

Suggett Corporation's net cash provided by operating activities was $34;its income taxes were $12;its capital expenditures were $24;and its cash dividends were $7.The company's free cash flow was:

A)($19)
B)$77
C)$3
D)$15

Question 72

Illies Corporation's comparative balance sheet appears below: The company did not dispose of any property,plant,and equipment during the year.Its net income for the year was $5,000 and its cash dividends were $4,000.The company did not issue any bonds payable or purchase any of its own common stock during the year.Its net cash provided by operating activities and net cash used in financing activities are:

A)net cash provided by operating activities,$33,000;net cash used in financing activities,$1,000
B)net cash provided by operating activities,$35,000;net cash used in financing activities,$7,000
C)net cash provided by operating activities,$33,000;net cash used in financing activities,$7,000
D)net cash provided by operating activities,$35,000;net cash used in financing activities,$1,000

Question 73

Autry Corporation's balance sheet and income statement appear below: Cash dividends were $40.The company sold equipment for $19 that was originally purchased for $6 and that had accumulated depreciation of $4.The net cash provided by (used in)investing activities for the year was:

A)$19
B)$140
C)($159)
D)($140)

Question 74

The data given below are from the accounting records of the Kuhn Corporation: Based on this information,the net cash provided by operating activities using the indirect method would be:

A)$55,000
B)$58,000
C)$50,000
D)$60,000

Question 75

The following transactions occurred last year at Jogger Corporation: Based solely on the above information,the net cash provided by financing activities for the year on the statement of cash flows would be:

A)$424,000
B)($138,000)
C)($1,000)
D)$7,000

Question 76

Morbeck Corporation's net income last year was $56,000.The company paid a cash dividend of $31,000 and did not sell or retire any property,plant,and equipment last year.Changes in selected balance sheet accounts for the year appear below: Based solely on this information,the net cash provided by operating activities under the indirect method on the statement of cash flows would be:

A)$83,000
B)$102,000
C)$29,000
D)$79,000

Question 77

Furis Corporation's cash and cash equivalents consist of cash and marketable securities.Last year the company's cash account decreased by $12,000 and its marketable securities account increased by $19,000.Cash provided by operating activities was $18,000.Net cash used in financing activities was $12,000.Based on this information,the net cash flow from investing activities on the statement of cash flows was:

A)a net $12,000 decrease.
B)a net $1,000 increase.
C)a net $6,000 decrease.
D)a net $6,000 increase.

Question 78

Birchett Corporation's most recent balance sheet appears below: The company's net income for the year was $91 and it did not sell or retire any property,plant,and equipment during the year.Cash dividends were $22.The net cash provided by (used in)operating activities for the year was:

A)$86
B)$5
C)$96
D)$130

Question 79

Swinger Corporation's comparative balance sheet appears below: The company did not dispose of any property,plant,and equipment during the year.Its net income for the year was $10,000.The net cash provided by operating activities is:

A)$32,000
B)$36,000
C)$34,000
D)$28,000

Question 80

Frankin Corporation's net cash provided by operating activities was $192;its capital expenditures were $154;and its cash dividends were $27.The company's free cash flow was:

A)$38
B)$373
C)$11
D)$165