Question 1

An increase in current assets other than cash would appear on the cash flow statement using the indirect approach as a(n):
A) addition under financing activities
B) addition under investing activities
C) addition to net income in the operating activities section
D) deduction from net income in the operating activities section

Accepted Answer

An increase in current assets other than cash is considered a use of cash, thus it would be deducted from net income in the operating activities section to reconcile net income to net cash provided by operating activities.

Question 2

A reconciliation of net income to net cash flow from operating activities for the indirect method does NOT include:
A) balance sheet accounts
B) revenue and expense accounts
C) contra accounts
D) asset accounts

Accepted Answer

The indirect method for calculating cash flow from operating activities starts with net income and then adjusts for changes in balance sheet accounts that affect cash. It does not directly adjust for revenue and expense accounts since these have already been accounted for in the calculation of net income.

Question 3

Table 17-3
Cando Company uses the indirect method to prepare its statement of cash flows. Refer to the following information:
  Additional information provided:
 
- Refer to Table 17-3.What amount of net cash flow would be shown in the financing section of the statement of cash flows?
A) $15,000 positive
B) $6,000 positive
C) $5,000 positive
D) $7,000 negative

Accepted Answer

A) Calculations: $40,000 - $25,000 = $15,000

Question 4

Harrison Company uses the indirect method to prepare its statement of cash flows.Please refer to the following information for the year 2017:  What was the amount of dividends paid during the year,assuming that there is no balance in the dividends payable account?
A) $5,000
B) $2,000
C) Zero
D) $3,000

Accepted Answer

C) Calculations: $125,000 - $117,000 - $8,000 = 0

Question 5

The operating activities section from the cash flow statement of Folly Corporation is listed below.
 Folly Corporation
Cash Flow Statement
For the Year Ended December 31, 2017 Cash flows from operating activities:
  Add (subtract_items that affect net income and cash flows differently:
  Evaluate Folly Company's sources and uses of cash from operating activities.

Accepted Answer

The answer of The operating activities section from the cash...

Question 6

Diamond In the Dust Ltd.uses the indirect method for the cash flow statement.In 2017,they sold equipment for $8,400 cash.The net book value of the asset prior to sale was $9,000.Which of the following statements is true?
A) The loss on sale of $600 would be added back to net income in the operating activities section.
B) The book value of the assets sold would be shown as a negative cash flow in the investing activities section.
C) The book value of the assets sold would be shown as a negative cash flow in the operating activities section.
D) The loss on sale of $600 would be shown as a positive cash flow in the financing activities section.

Accepted Answer

The loss on sale of equipment is a non-cash expense that reduced net income on the income statement. When using the indirect method for the cash flow statement, non-cash expenses are added back to net income in the operating activities section to adjust for the cash flow impact of these transactions.

Question 7

The application of the indirect method requires an analysis of:
A) balance sheet accounts and the gains/losses on dispositions
B) income statement accounts
C) all accounts in the general ledger
D) only current asset and current liability accounts

Accepted Answer

The indirect method for cash flow statement preparation involves adjustments to net income to convert it from the accrual basis to the cash basis of accounting. This requires analyzing changes in balance sheet accounts, including the effects of gains and losses on dispositions, to determine their cash impact.

Question 8

An increase in current liabilities other than cash would appear on the cash flow statement using the indirect approach as a(n):
A) addition under financing activities
B) addition under investing activities
C) addition to net income in the operating activities section
D) deduction from net income in the operating activities section

Accepted Answer

Current liabilities other than cash are typically related to operating activities, such as accounts payable or accrued expenses. Therefore, they would appear as an addition to net income in the operating activities section when using the indirect approach on the cash flow statement.

Question 9

The main difference between the direct method and the indirect method cash flow statements is
A) the presentation of cash flow from operations
B) the balance of the income from operations
C) the treatment of dividends received and paid
D) the inclusion of investment gains and losses

Accepted Answer

The main difference between the direct and indirect method cash flow statements is the presentation of cash flow from operations. The direct method reports actual cash inflows and outflows while the indirect method adjusts net income to arrive at cash flow from operations.

Question 10

The presentation of financing and investing activities on the cash flow statement is the same for both the direct and indirect methods.

Accepted Answer

Both the direct and indirect methods present the cash flows from financing and investing activities in the same manner on the cash flow statement. The difference between the two methods is in how cash flows from operating activities are presented.

Question 11

A gain from sale of equipment would appear on the cash flow statement using the indirect approach as a(n):
A) addition under financing activities
B) addition under investing activities
C) addition to net income in the operating activities section
D) deduction from net income in the operating activities section

Accepted Answer

In the indirect method, gains from the sale of equipment are deducted from net income in the operating activities section because they are non-cash items that were included in net income.

Question 12

Under the indirect method,a loss resulting from the sale of equipment would:
A) be subtracted from net income in the operating activities section
B) be added to net income in the operating activities section
C) appear in the financing activities section
D) appear in the schedule of noncash investing and financing activities

Accepted Answer

Under the indirect method, a loss from the sale of equipment is added back to net income in the operating activities section because it is a non-cash expense that reduced net income on the income statement, but did not involve an outflow of cash in the operating activities.

Question 13

A loss from sale of equipment would appear on the cash flow statement using the indirect approach as a(n):
A) addition under financing activities
B) addition under investing activities
C) addition to net income in the operating activities section
D) deduction from net income in the operating activities section

Accepted Answer

A loss from the sale of equipment is added back to net income in the operating activities section when using the indirect method for the cash flow statement. This is because the loss is a non-cash expense that reduced net income on the income statement, but it did not affect the company's cash flow.

Question 14

Starfire Company uses the indirect method to prepare the cash flow statement. Please refer to the following:  Other information provided:
Current assets other than cash decrease by $ \$ 4,000 $. 
Current liabilities increase by $ \$ 1,000 $. How much is the net cash flow provided by operations?
A) $11,000 positive
B) $11,000 negative
C) $23,000 positive
D) $1,000 negative

Accepted Answer

The answer of Starfire Company uses the indirect method to...

Question 15

Using the following data,prepare the operating activities section of a cash flow statement for Richie Corporation for the year ended December 31,2017,using the indirect method.

Accepted Answer

The answer of Using the following data,prepare the operating activities...

Question 16

Under the indirect method,amortization expense would be:
A) added to net income in the operating activities section
B) subtracted from net income in the operating activities section
C) added to net income in the financing activities section
D) added to net income in the investing activities section

Accepted Answer

Amortization expense is a non-cash expense. Under the indirect method of preparing the cash flow statement, non-cash expenses are added back to net income in the operating activities section to adjust for the cash flow.

Question 17

Table 17-3
Cando Company uses the indirect method to prepare its statement of cash flows. Refer to the following information:
  Additional information provided:
 
-Refer to Table 17-3.What was the net amount of cash from investing activities?
A) $30,000 negative
B) $60,000 positive
C) $52,000 negative
D) $38,000 negative

Accepted Answer

D) Calculations: ($70,000) + $32,000 = ($38,000)

Question 18

The Sonesta Company uses the indirect method for the cash flow statement.In 2017,they sold equipment for $4,800 cash.The net book value of the asset prior to sale was $4,000.Which of the following statements is true?
A) The gain on sale of $800 would be added back to net income in the operating activities section.
B) The book value of the assets sold would be shown as a negative cash flow in the investing activities section.
C) The cash receipt of $4,800 would be shown as a positive cash flow in the investing activities section.
D) The gain on sale of $800 would be shown as a positive cash flow in the financing activities section.

Accepted Answer

The cash receipt from the sale of equipment, which is an investing activity, would be shown as a positive cash flow in the investing activities section of the cash flow statement.

Question 19

The following selected data for Skyway Corporation for the year ended December 31,2017,is available to you for preparing the cash flow statement:
  Gain on sale of property,
  The cash account began the year with a balance of $15,000 and ended the year with a balance of $195,800.
  Prepare the cash flow statement for Skyway Corporation for the year ended December 31,2017,using the indirect method,and include a schedule of noncash investing and financing activities if necessary.

Accepted Answer

The answer of The following selected data for Skyway Corporation...

Question 20

Table 17-3
Cando Company uses the indirect method to prepare its statement of cash flows. Refer to the following information:
  Additional information provided:
 
-Refer to Table 17-3.What is the net cash flow provided by operations if the reported net loss is $24,000?
A) $ (24,000)
B) $ (28,000)
C) $ (4,000)
D) $ (16,000)

Accepted Answer

B)
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Quiz 6: The Cash Flow Statement

An increase in current assets other than cash would appear on the cash flow statement using the indirect approach as a(n) :

A reconciliation of net income to net cash flow from operating activities for the indirect method does NOT include:

Table 17-3 Cando Company uses the indirect method to prepare its statement of cash flows. Refer to the following information: Additional information provided: - Refer to Table 17-3.What amount of net cash flow would be shown in the financing section of the statement of cash flows?

Harrison Company uses the indirect method to prepare its statement of cash flows.Please refer to the following information for the year 2017: What was the amount of dividends paid during the year,assuming that there is no balance in the dividends payable account?

Diamond In the Dust Ltd.uses the indirect method for the cash flow statement.In 2017,they sold equipment for $8,400 cash.The net book value of the asset prior to sale was $9,000.Which of the following statements is true?

The application of the indirect method requires an analysis of:

An increase in current liabilities other than cash would appear on the cash flow statement using the indirect approach as a(n) :

The main difference between the direct method and the indirect method cash flow statements is

The presentation of financing and investing activities on the cash flow statement is the same for both the direct and indirect methods.

A gain from sale of equipment would appear on the cash flow statement using the indirect approach as a(n) :

Under the indirect method,a loss resulting from the sale of equipment would:

A loss from sale of equipment would appear on the cash flow statement using the indirect approach as a(n) :

Using the following data,prepare the operating activities section of a cash flow statement for Richie Corporation for the year ended December 31,2017,using the indirect method.

Under the indirect method,amortization expense would be:

Table 17-3 Cando Company uses the indirect method to prepare its statement of cash flows. Refer to the following information: Additional information provided: -Refer to Table 17-3.What was the net amount of cash from investing activities?

The Sonesta Company uses the indirect method for the cash flow statement.In 2017,they sold equipment for $4,800 cash.The net book value of the asset prior to sale was $4,000.Which of the following statements is true?

Table 17-3 Cando Company uses the indirect method to prepare its statement of cash flows. Refer to the following information: Additional information provided: -Refer to Table 17-3.What is the net cash flow provided by operations if the reported net loss is $24,000?