Question 1

Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' stocks.

Accepted Answer

The answer of Financing activities include receiving cash from issuing...

Question 2

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n):
A)Short-term marketable equity security.
B)Operating activity.
C)Common stock.
D)Cash equivalent.
E)Financing activity.

Accepted Answer

The investment that is described in the question is a cash equivalent, as it is readily convertible to a known amount of cash and its value is not significantly affected by changes in interest rates. The other choices are not applicable in this scenario - short-term marketable equity securities and common stock are not necessarily close to maturity and may be subject to significant fluctuations in value, while operating activities and financing activities refer to broader categories of business activities, rather than specific investments.

Question 3

Financing activities include receiving cash dividends from investments in other companies' stocks.

Accepted Answer

Financing activities involve activities that affect the company's long-term liabilities and equity, such as the issuance of bonds or stock, repayment of loans or dividends paid to shareholders. Receiving cash dividends from investments in other companies' stocks would fall under investing activities.

Question 4

When using a spreadsheet to prepare the statement of cash flows,a decrease in accounts payable is entered in the Analysis of Changes columns with a debit in the statement of cash flows section and a credit in the balance sheet section.

Accepted Answer

A decrease in accounts payable is entered in the Analysis of Changes columns with a credit in the statement of cash flows section and a debit in the balance sheet section. This is because a decrease in accounts payable means that less money is owed to suppliers, resulting in a decrease in liabilities (which is a credit balance). On the cash flow statement, this decrease in accounts payable is added back to the net income since it represents a decrease in cash payments made to suppliers.

Question 5

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Schedule of noncash investing or financing activity.
E)None of these.This is not reported on the statement of cash flows.

Accepted Answer

Cash payments of wages are considered an operating expense and should be included in the operating activities section of the statement of cash flows.

Question 6

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the direct method.

Accepted Answer

The gain or loss from retirement of debt is reported under cash flows from financing activities on the statement of cash flows using the direct or indirect method.

Question 7

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Schedule of noncash investing or financing activity.
E)None of these.This is not reported on the statement of cash flows.

Accepted Answer

The purchase of equipment is considered an investing activity and should be reported in the investing activities section of the statement of cash flows.

Question 8

The statement of cash flows reports:
A)Assets, liabilities, and equity.
B)Revenues, gains, expenses, and losses.
C)Cash inflows and cash outflows for an accounting period.
D)Equity, net income, and dividends.
E)Changes in equity.

Accepted Answer

The statement of cash flows reports cash inflows and cash outflows for an accounting period, categorizing them into operating, investing, and financing activities. It does not report on assets, liabilities, equity, revenues, gains, expenses, losses, net income, or dividends.

Question 9

The payment of cash dividends never changes the balance of retained earnings.

Accepted Answer

The payment of cash dividends reduces the balance of retained earnings.

Question 10

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers,including expenditures related to administering the business,are classified as:
A)Financing activities.
B)Investing activities.
C)Operating activities.
D)Direct activities.
E)Indirect activities.

Accepted Answer

Operating activities involve the day-to-day operations of the business, such as producing and selling goods and services, as well as expenses related to administration and management. Financing activities involve obtaining funding and repaying debt, while investing activities involve buying and selling long-term assets. Direct and indirect activities are not commonly used classifications in accounting.

Question 11

Which of the following items is reported on the statement of cash flows under financing activities?
A)Declaration of a cash dividend.
B)Payment of a cash dividend.
C)Declaration of a stock dividend.
D)Payment of a stock dividend.
E)Stock split.

Accepted Answer

Payment of a cash dividend is reported on the statement of cash flows under financing activities, as it represents a cash outflow to the company. Declaration of a cash dividend, declaration of a stock dividend, payment of a stock dividend, and stock split are not reported as they do not involve any cash inflow or outflow.

Question 12

Investing activities include:
 (a)the purchase and sale of long-term assets,(b)lending and collecting on notes receivable,and (c)the purchase and sale of short-term investments in the securities of other entities,other than cash equivalents and trading securities.

Accepted Answer

Investing activities involve the purchase and sale of long-term assets, lending and collecting on notes receivable, and the purchase and sale of short-term investments in securities of other entities, other than cash equivalents and trading securities.

Question 13

On a spreadsheet used to prepare the operating activities section of the statement of cash flows,depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

Accepted Answer

The answer of On a spreadsheet used to prepare the...

Question 14

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:
A)Operating activities.
B)Financing activities.
C)Investing activities.
D)Schedule of noncash investing or financing activity.
E)None of these.This is not reported on the statement of cash flows.

Accepted Answer

Issuance of common stock for cash is a financing activity as it involves raising capital from investors or shareholders, which is classified under financing activities on the statement of cash flows.

Question 15

A spreadsheet can help organize the information needed to prepare a statement of cash flows.

Accepted Answer

A spreadsheet allows for easy categorization and calculation of the various cash flow items needed for a statement of cash flows.

Question 16

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.This implies that $40,000 cash was received from the sale.

Accepted Answer

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Question 17

A cash equivalent is an investment that:
A)Is readily convertible to a known amount of cash.
B)Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes.
C)Generally is within 3 months of its maturity date.
D)Is highly liquid.
E)All of the choices are correct.

Accepted Answer

A cash equivalent must meet all of the criteria listed in the answer choices, which includes being readily convertible to cash, having a maturity date within three months, being unaffected by interest rate changes due to its short-term nature, and being highly liquid. Therefore, all of the choices are correct when identifying a cash equivalent investment.

Question 18

The statement of cash flows reports:
A)Cash flows from operating activities.
B)Cash flows from financing activities.
C)Cash flows from investing activities.
D)Significant noncash financing and investing activities.
E)All of the choices are reported on a statement of cash flows.

Accepted Answer

The answer of The statement of cash flows reports:
A)Cash flows...

Question 19

Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

Accepted Answer

Depreciation expense is a non-cash expense, and therefore is not included in the operating activities section of the statement of cash flows prepared under the direct method. It may be included in the indirect method, however, as an adjustment to net income.

Question 20

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used (which can be reported in the notes).

Accepted Answer

The answer of The FASB requires a reconciliation of net...

Quiz 16: Reporting the Statement of Cash Flows

Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' stocks.

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n) :

Financing activities include receiving cash dividends from investments in other companies' stocks.

When using a spreadsheet to prepare the statement of cash flows,a decrease in accounts payable is entered in the Analysis of Changes columns with a debit in the statement of cash flows section and a credit in the balance sheet section.

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the direct method.

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

The statement of cash flows reports:

The payment of cash dividends never changes the balance of retained earnings.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers,including expenditures related to administering the business,are classified as:

Which of the following items is reported on the statement of cash flows under financing activities?

Investing activities include: (a)the purchase and sale of long-term assets,(b)lending and collecting on notes receivable,and (c)the purchase and sale of short-term investments in the securities of other entities,other than cash equivalents and trading securities.