Question 1

Which of the following would be reported as a cash outflow from investing activities?
A)Donating an old piece of equipment to charity.
B)Repaying the principal of a bond.
C)Buying another company's bonds with cash.
D)Paying for an investment asset by issuing company stock.

Accepted Answer

Buying another company's bonds with cash would be reported as a cash outflow from investing activities, as it involves using cash to acquire an investment asset.

Alternatively, option D could also be considered since issuing company stock to pay for an investment asset involves a reduction in cash as well, although it would be classified as a financing activity rather than an investing activity.

Options A and B would not be reported as cash outflows from investing activities. Donating an old piece of equipment to charity does not involve the use of cash, and repaying the principal of a bond represents a reduction in the company's liabilities rather than an investment activity.

Question 2

The retained earnings account has a beginning balance of $321,975 and an ending balance of $356,413.Net income is $40,251.Which of the following statements is true?
A)$5,813 would be subtracted when determining cash flows from financing activities.
B)$40,251 would be added when determining cash flows from financing activities.
C)$34,438 would be added when determining cash flows from financing activities.
D)$321,975 would be added when determining cash flows from operating activities.

Accepted Answer

The change in retained earnings is due to net income and dividends. The difference between the beginning and ending balance ($356,413 - $321,975 = $34,438) represents dividends paid, which would be subtracted in the cash flows from financing activities.

Question 3

The advantages of the direct method include all of the following except:
A)It allows for more detailed analysis of operating cash flows.
B)It provides more information than the indirect method to relate cash inflows and outflows.
C)It allows for more reliable prediction of future cash flows.
D)Comparisons between companies are facilitated since most U.S.companies use the direct method.

Accepted Answer

The direct method does not facilitate comparisons between companies since most U.S. companies use the indirect method, not the direct method.

Question 4

Cash flows from operating activities include all of the following except:
A)a purchase of land.
B)collections from customers on account.
C)payments to employees for hours worked.
D)receipt of dividends.

Accepted Answer

Cash flows from operating activities involve transactions related to the day-to-day operations of a company, such as sales, expenses, and collections from customers. The purchase of land is not considered an operating activity, but rather an investing activity. Therefore, option A is the correct answer. The other options listed are all examples of cash flows from operating activities.

Question 5

A toy store with a calendar year-end is likely to have:
A)unpredictable fluctuations in cash flow from quarter to quarter.
B)the largest cash inflow from operations in the second and third quarters (April - September).
C)a fairly stable cash flow across all four quarters.
D)the largest cash inflow from operations in the fourth and first quarters (October - March).

Accepted Answer

A toy store with a year-end in December will likely experience the largest cash inflow from operations in the fourth quarter (October-December) due to holiday shopping, followed by the first quarter (January-March) as customers redeem gift cards and make returns. Therefore, option D is the most likely scenario for a toy store with a calendar year-end.

Question 6

An outdoor water park in the Midwestern states with a calendar year-end is likely to have:
A)unpredictable fluctuations in cash flow from quarter to quarter.
B)the largest cash inflow from operations in the second and third quarters (April - September).
C)a fairly stable cash flow across all four quarters.
D)the largest cash inflow from operations in the fourth and first quarters (October - March).

Accepted Answer

An outdoor water park in the Midwestern states with a calendar year-end is likely to have the largest cash inflow from operations in the second and third quarters (April - September) because this is when the weather is typically warmest and most conducive to outdoor water activities. The park's cash flow is likely to be less in the first and fourth quarters (October - March) when the weather is colder and the park is less likely to be open to the public. While there may be some fluctuations in cash flow quarter to quarter, the overall trend is likely to follow this seasonal pattern.

Question 7

Which of the following are used to determine cash flows from financing activities?
A)Short-term debt,accrued liabilities,contributed capital,and notes payable.
B)Long-term debt,contributed capital,and retained earnings.
C)Short-term debt,accrued liabilities,retained earnings,and bonds payable.
D)Long-term debt,notes payable,interest expense,and bonds payable.

Accepted Answer

Cash flows from financing activities are cash inflows and outflows related to the company's financing activities such as borrowing and repaying loans, issuing and repurchasing stock, and paying dividends. Long-term debt, contributed capital, and retained earnings are all items that would be used to determine cash flows from financing activities. The other options, short-term debt, accrued liabilities, notes payable, and bonds payable, may be used to determine cash flows from operating activities or investing activities.

Question 8

Which of the following statements is true regarding cash flows from financing activities?
A)When companies borrow,cash outflows for financing activities have occurred.
B)When companies receive dividends,cash inflows from financing activities have occurred.
C)When companies repurchase their own stock,cash outflows for financing activities have occurred.
D)When companies pay dividends,cash inflows from financing activities have occurred.

Accepted Answer

When companies repurchase their own stock, it results in cash outflows for financing activities because the company is using cash to buy back shares from investors.

Question 9

Cash transactions relating to the purchase and sale of which types of assets affect a company's cash flows from investing activities?
A)All of a company's assets.
B)All of a company's assets except inventory.
C)All of a company's non-current assets.
D)Only property,plant and equipment.

Accepted Answer

Cash flows from investing activities include transactions involving the purchase and sale of non-current assets, such as property, plant, and equipment, and investment securities, but not inventory, which is considered a current asset and affects operating cash flows.

Question 10

Which of the following represent cash outflows from financing activities?
A)Distributing a stock dividend.
B)Paying a bond's face value at maturity.
C)Issuing long-term bonds at a discount.
D)Paying interest on promissory notes.

Accepted Answer

The answer of Which of the following represent cash outflows...

Question 11

Use the information above to answer the following question.The company would report net cash provided by (used in)financing activities of:
A)$(2,500)
B)$2,000
C)$5,000
D)$6,000

Accepted Answer

The net cash provided by financing activities can be calculated as the sum of the cash inflows and outflows from financing activities. Based on the information given, the cash inflows from financing activities are $5,000 from the issuance of common stock, and the cash outflows from financing activities are $3,000 from the repayment of long-term debt. Therefore, the net cash provided by financing activities is ($3,000 + $5,000) = $2,000. Therefore, the correct answer is B.

Question 12

Free cash flow is a positive cash flow:
A)beyond what is needed to replace current property,plant,and equipment and pay dividends.
B)across all three activity components of the statement of cash flows.
C)beyond what has been allotted for future property,plant,and equipment replacement and expansion.
D)across both financing and investing activities.

Accepted Answer

Free cash flow is the cash flow remaining after a company has paid all its expenses, including capital expenditures and dividends, with cash left over. Therefore, it is the positive cash flow beyond what is needed to replace current property, plant, and equipment and pay dividends.

Question 13

The net cash flow from operating activities is an inflow of $37,042,the net cash flow from investing activities is an outflow of $16,831,and the net cash flow from financing activities is an outflow of $26,397.If the beginning cash account balance is $11,283,what is the ending cash account balance?
A)$5,097
B)($6,186)
C)$38,759
D)$27,476

Accepted Answer

The answer of The net cash flow from operating activities...

Question 14

Which of the following represent cash provided by financing activities?
A)Issuing stock in exchange for another company's stock.
B)Paying a bond's face value at maturity.
C)Issuing long-term bonds at a discount.
D)Receiving interest on promissory notes.

Accepted Answer

The answer of Which of the following represent cash provided...

Question 15

Use the information above to answer the following question.The company would report net cash provided by (used in)investing activities of:
A)$(1,000)
B)$(2,000)
C)$5,000
D)$7,000

Accepted Answer

The answer of Use the information above to answer the...

Question 16

A company issues $1 million of new stock and pays $200,000 in cash dividends during the year.In addition,the company took advantage of falling interest rates to borrow $1.5 million in a new bond issue and paid off existing bonds with a face value of $2 million.The company bought 500 of another company's $1,000 bonds at a $100,000 premium.The net cash flow from financing activities is:
A)An inflow of $500,000.
B)An outflow of $200,000.
C)An outflow of $100,000.
D)An inflow of $300,000.

Accepted Answer

The net cash flow from financing activities is the sum of all inflows and outflows resulting from transactions involving the company’s sources of capital (e.g. issuing stock, borrowing money, paying dividends, buying or selling bonds).

In this case, the company issued $1 million of new stock, resulting in an inflow of cash. They also borrowed $1.5 million through a new bond issue, which is another inflow of cash. However, they used part of this money ($2 million) to pay off existing bonds, resulting in an outflow of cash.

The company also paid $200,000 in cash dividends, which is an outflow of cash. Finally, they bought 500 bonds at a premium, which is another outflow of cash.

To calculate the net cash flow from financing activities, we add up all the inflows and subtract all the outflows:

$1 million (stock issue) + $1.5 million (new bond issue) - $2 million (bond repayment) - $200,000 (dividend payment) - $100,000 (bond purchase premium) = $300,000

Therefore, the answer is D: an inflow of $300,000.

Question 17

Cash flows from financing activities include all of the following except
A)payment of long-term debt.
B)interest expense.
C)proceeds from stock issuance.
D)dividends paid to stockholders.

Accepted Answer

Cash flows from financing activities include payment of long-term debt, proceeds from stock issuance, and dividends paid to stockholders. Interest expense is classified as a cash flow from operating activities, not financing activities.

Question 18

A company purchases a $300,000 building,paying $200,000 in cash and signing a $100,000 promissory note.What will be reported on the statement of cash flows as a result of this transaction?
A)A $300,000 cash outflow from investing activities.
B)A $200,000 cash outflow from investing activities and a $100,000 cash inflow from financing activities.
C)A $200,000 cash outflow from investing activities and a $100,000 noncash transaction.
D)A $300,000 cash outflow from investing activities and a $100,000 cash inflow from financing activities.

Accepted Answer

The answer of A company purchases a $300,000 building,paying $200,000...

Question 19

Cash flows from investing activities include all of the following except:
A)a purchase of an automobile.
B)a sale of a trademark.
C)a purchase of stock of another company.
D)an issuance of bonds.

Accepted Answer

Cash flows from investing activities include purchases and sales of long-term assets such as property, plant, and equipment, investments in other companies, and the acquisition or sale of intangible assets such as patents or trademarks. An issuance of bonds is a financing activity, not an investing activity.

Question 20

Company X paid Company Y $1.35 million for a new plant.During the same accounting period,Company X experienced the following changes in its balance sheet: Cash decreased by $350,000,Accounts Receivable increased by $321,300,Inventory increased by $275,800,Property,Plant,and Equipment increased by $752,900,and Bonds Payable increased by $1 million.The net cash flow from financing activities is:
A)An inflow of $1.35 million.
B)An outflow of $350,000.
C)An inflow of $1 million.
D)An inflow of $752,900.

Accepted Answer

The net cash flow from financing activities is an inflow of $1 million due to the increase in Bonds Payable, which indicates that the company raised funds through debt.

Quiz 12: Statement of Cash Flows

Which of the following would be reported as a cash outflow from investing activities?

The retained earnings account has a beginning balance of $321,975 and an ending balance of $356,413.Net income is $40,251.Which of the following statements is true?

The advantages of the direct method include all of the following except:

Cash flows from operating activities include all of the following except:

A toy store with a calendar year-end is likely to have:

An outdoor water park in the Midwestern states with a calendar year-end is likely to have:

Which of the following are used to determine cash flows from financing activities?

Which of the following statements is true regarding cash flows from financing activities?

Cash transactions relating to the purchase and sale of which types of assets affect a company's cash flows from investing activities?

Which of the following represent cash outflows from financing activities?

Use the information above to answer the following question.The company would report net cash provided by (used in) financing activities of:

Free cash flow is a positive cash flow:

The net cash flow from operating activities is an inflow of $37,042,the net cash flow from investing activities is an outflow of $16,831,and the net cash flow from financing activities is an outflow of $26,397.If the beginning cash account balance is $11,283,what is the ending cash account balance?

Which of the following represent cash provided by financing activities?

Use the information above to answer the following question.The company would report net cash provided by (used in) investing activities of:

Cash flows from financing activities include all of the following except

A company purchases a $300,000 building,paying $200,000 in cash and signing a $100,000 promissory note.What will be reported on the statement of cash flows as a result of this transaction?

Cash flows from investing activities include all of the following except: