Question 1

The ______________ computes operating cash flow by adjusting net income for items that do not affect cash flows.

Accepted Answer

The answer of The ______________ computes operating cash flow by...

Question 2

All firms that are registered with the ______________________ must issue a statement of cash flows.

Accepted Answer

The answer of All firms that are registered with the...

Question 3

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.
-Purchase of a building for cash.

Accepted Answer

Purchase of a building for cash is a cash outflow for investing activity and should be reported as such in the statement of cash flows using the indirect method. It is not added to or deducted from net income and is not a financing activity. There is no significant noncash investing and financing activity involved.

Question 4

The _____________________ provides information regarding the sources and uses of a firm's cash.

Accepted Answer

The answer of The _____________________ provides information regarding the sources...

Question 5

The format that should be followed in preparing the statement of cash flows is known as the ______________.

Accepted Answer

The answer of The format that should be followed in...

Question 6

Income statements are prepared on a (n) ______________.

Accepted Answer

The answer of Income statements are prepared on a (n)...

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 indirect method.
-Increase in merchandise inventory during a period.

Accepted Answer

An increase in merchandise inventory indicates that a company has purchased more inventory than it has sold during the period, which means cash has been paid out to purchase the inventory. Therefore, it should be deducted from net income in the operating activities section of the statement of cash flows using the indirect method.

Question 8

The __________________ computes operating cash flows by adjusting each line on the income statement to reflect cash flows.

Accepted Answer

The answer of The __________________ computes operating cash flows by...

Question 9

When an investing or financing activity takes place without affecting cash it is referred to as _________________________.

Accepted Answer

The answer of When an investing or financing activity takes...

Question 10

Issuing shares of common stock, paying dividends and paying off debt are all examples of _______________.

Accepted Answer

The answer of Issuing shares of common stock, paying dividends...

Question 11

________________ are the ongoing, day-to-day, revenue-generating activities of an organization.

Accepted Answer

The answer of ________________ are the ongoing, day-to-day, revenue-generating activities...

Question 12

Acquiring new equipment, selling long-term investments, and purchasing land are all examples of _______________.

Accepted Answer

The answer of Acquiring new equipment, selling long-term investments, and...

Question 13

Activities that increase cash are sources of cash and are referred to as ___________.

Accepted Answer

The answer of Activities that increase cash are sources of...

Question 14

The two approaches to calculating operating cash flows are the _______________ and the _____________.

Accepted Answer

The answer of The two approaches to calculating operating cash...

Question 15

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.
-Issuance of common stock for cash.

Accepted Answer

Issuance of common stock for cash is a cash inflow and falls under the category of financing activities in the statement of cash flows. Therefore, choice F (Cash inflow -- financing activity) is the best option.

Question 16

The indirect method and the direct method differ only on how the cash flows from ________________ are calculated.

Accepted Answer

The answer of The indirect method and the direct method...

Question 17

Highly liquid investments such as Treasury bills, money market funds, and commercial paper are examples of ___________________.

Accepted Answer

The answer of Highly liquid investments such as Treasury bills,...

Question 18

Activities that decrease cash are uses of cash and are referred to as ___________.

Accepted Answer

The answer of Activities that decrease cash are uses of...

Question 19

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.
-Proceeds from sale of equipment at book value.

Accepted Answer

Proceeds from the sale of equipment at book value represents a cash inflow from investing activities as it is a sale of a long-term asset.

Question 20

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.
-Acquisition of land in exchange for common stock.

Accepted Answer

The acquisition of land in exchange for common stock is a noncash transaction that does not affect cash flows directly. Therefore, it is reported in a separate schedule of noncash investing and financing activities in the statement of cash flows.

Quiz 15: Statement of Cash Flows