Question 1

IFRS requires that non-cash items
A) be treated in a fashion similar to cash equivalents.
B) do not need to be reported.
C) be disclose in the notes to the financial statements.
D) be reported in the section to which they relate, that is, a non-cash investing activity would be reported in the investing section.

Accepted Answer

IFRS requires that non-cash items be disclosed in the notes to the financial statements.

Question 2

In computing cash payments for income taxes, a decrease in income taxes payable is ______________ to (from) income tax expense.

Accepted Answer

The answer of In computing cash payments for income taxes,...

Question 3

Cash flows from operating activities can be calculated using the indirect or direct method. Briefly describe how the two methods differ yet arrive at the same information about the net cash flows from operating activities.

Accepted Answer

The answer of Cash flows from operating activities can be...

Question 4

Why is the statement of cash flows useful?

Accepted Answer

The answer of Why is the statement of cash flows...

Question 5

In the future, it appears likely that
A) the IASB will not allow companies to use the direct approach to the statement of cash flows.
B) the income statement and statement of financial position (balance sheet) will have headings of operating, investing, and financing, much like the statement of cash flows.
C) cash and cash equivalents will be combined in a single line item.
D) None of these answer choices are correct.

Accepted Answer

The trend in financial reporting is towards increased transparency and consistency. Using the same categorization (operating, investing, financing) in all financial statements will enhance comparability across financial reports. The other answer choices are unlikely to occur based on current reporting standards and trends.

Question 6

Under GAAP interest paid can be reported as
A) only an operating element.
B) a financing element or an operating element.
C) a financing element or an investing element.
D) only a financing element.

Accepted Answer

The answer of Under GAAP interest paid can be reported...

Question 7

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the direct method.

Accepted Answer

The answer of For each of the following items, indicate...

Question 8

Under GAAP
A) dividends paid can be either an operating or investing item.
B) dividends received can be either an operating or investing item.
C) the income statement uses the headings operating, investing, and financing.
D) taxes are always treated as an operating item.

Accepted Answer

The answer of Under GAAP
A) dividends paid can be either...

Question 9

How is it possible for a company to suffer a net loss for a given year, yet produce a positive net cash flow from operating activities?

Accepted Answer

The answer of How is it possible for a company...

Question 10

You are the accountant for a small manufacturing firm. Your company is privately held, so there is no current requirement to issue financial statements using IFRS. You were hired four years ago, and at that time you instituted a cash budgeting system. Presently, you present a schedule of predicted cash sources and cash needs at the end of each week for the following week.
Ken Harmon, the company's president, has asked whether a statement of cash flows would also be useful.
Required:
Prepare a short memorandum to the president indicating whether you believe such an addition to the financial statements to be useful. Include in your memo the benefits that might be expected from a statement of cash flows and whether those are different from the benefits of a cash sources and cash needs listing.

Accepted Answer

The answer of You are the accountant for a small...

Question 11

Distinguish among the three types of activities reported in the statement of cash flows
The three activities are:

Accepted Answer

The answer of Distinguish among the three types of activities...

Question 12

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.

Accepted Answer

The answer of For each of the following items, indicate...

Question 13

Flint Hills Company's most recent financial statements showed dismal performance. There was a net loss of $10,000 and the statement of cash flows showed a net cash decrease in all categories. The company president called all the managers together and asked them to do all they could to make sure the next quarter's performance was better.
Ed Gray, manager of the manufacturing division, sold off old manufacturing equipment. He also reclassified several workers to part time (30 hours per week) and hired additional temporary workers to take up the slack. This saved the company money, since part-time workers do not have the same insurance and other benefits as full-time workers.
Mike Cane, financial manager, immediately suspended payments on all accounts except those on which interest would accrue. He also instituted aggressive collection procedures.
Required:
1. Were Ed Gray's actions ethical? Explain.
2. Were Mike Cane's actions ethical? Explain.
3. Were the company president's actions ethical? Explain.

Accepted Answer

The answer of Flint Hills Company's most recent financial statements...

Question 14

The statement of cash flows is the only required financial statement that is not prepared from an adjusted trial balance. What are the sources of information for preparing a statement of cash flows? Explain how the accrual basis of accounting affects the statement of cash flows.

Accepted Answer

The answer of The statement of cash flows is the...

Question 15

In computing cash payments for operating expenses, a decrease in prepaid expenses is ______________ and an increase in accrued expenses payable is ______________ to (from) operating expenses, exclusive of depreciation.

Accepted Answer

The answer of In computing cash payments for operating expenses,...

Question 16

Match between columns
                        Premises: Decrease in accounts payable during a period.
Declaration and payment of a cash dividend.
Decrease in accounts receivable during a period.
Depreciation expense.
Conversion of bonds payable into ordinary shares.
Decrease in inventory during a period.
Sale of equipment for cash at book value.
Issuance of preference shares for cash.
Purchase of land for cash.
Loss on disposal of a plant asset.

Accepted Answer

The Answer of Added in determining cash receipts from customers is...

Question 17

Match between columns
                        Premises: Decrease in accounts payable during a period
Declaration and payment of a cash dividend.
Loss on disposal of land.
Decrease in accounts receivable during a period.
Redemption of bonds for cash.
Proceeds from sale of equipment at book value.
Issuance of ordinary shares for cash.
Purchase of a building for cash.
Acquisition of land in exchange for ordinary shares.
Increase in inventory during a period.

Accepted Answer

The Answer of Added to net income and Deducted from is...

Quiz 13: Statement of Cash Flows

IFRS requires that non-cash items

In computing cash payments for income taxes, a decrease in income taxes payable is ______________ to (from) income tax expense.

Cash flows from operating activities can be calculated using the indirect or direct method. Briefly describe how the two methods differ yet arrive at the same information about the net cash flows from operating activities.

Why is the statement of cash flows useful?

In the future, it appears likely that

Under GAAP interest paid can be reported as

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the direct method.

Under GAAP

How is it possible for a company to suffer a net loss for a given year, yet produce a positive net cash flow from operating activities?

Distinguish among the three types of activities reported in the statement of cash flows The three activities are:

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.

The statement of cash flows is the only required financial statement that is not prepared from an adjusted trial balance. What are the sources of information for preparing a statement of cash flows? Explain how the accrual basis of accounting affects the statement of cash flows.

In computing cash payments for operating expenses, a decrease in prepaid expenses is and an increase in accrued expenses payable is to (from) operating expenses, exclusive of depreciation.

Match the statements below with the appropriate item based on how the item should be reported in the statement of cash flows, using the direct method.

Match the statements below with the appropriate item based on how the item should be reported in the statement of cash flows, using the indirect method.