Question 1

Lincoln Company engaged in this transaction: Abandoned fully depreciated equipment.Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

As the transaction of abandoning fully depreciated equipment does not involve any cash inflow or outflow, it does not represent any cash flow from any of the three sections of the statement of cash flows. Therefore, the correct answer is C.

Question 2

Lincoln Company engaged in this transaction: Paid income taxes.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

Payment of income taxes falls under operating activities section of the statement of cash flows as it pertains to the company's day-to-day business operations.

Question 3

Which of the following statements is correct regarding the statement of cash flows?

Accepted Answer

According to a survey of large companies, 98% of them use the indirect method for preparing the statement of cash flows, so statement C is the correct statement. Statements A and B are incorrect because analysts may prefer the direct method, but this does not mean that companies also prefer it, and the direct method can actually be more complex and expensive to prepare. Therefore, D is also incorrect.

Question 4

Lincoln Company engaged in this transaction: Received dividends on marketable securities held as a long-term investment.Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

Receiving dividends on marketable securities held as a long-term investment is considered an operating activity because it relates to the income generated from the company's investments.

Question 5

Lincoln Company engaged in this transaction: As required by the landlord,prepaid one year's rent on its leased warehouse.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

The transaction represents an operating activity because it involves the prepayment of rent for a leased warehouse, which is a normal, recurring expense for the company. Therefore, it would appear in the operating activities section of the statement of cash flows.

Question 6

The indirect method of preparing a statement of cash flows

Accepted Answer

The indirect method is preferred by most companies, starts with net income for operating activities, and results in the same net cash flow from operating activities as the direct method.

Question 7

Lincoln Company engaged in this transaction: Purchased 30-day U.S.Treasury bill.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

The answer of Lincoln Company engaged in this transaction: Purchased...

Question 8

Lincoln Company engaged in this transaction: Purchased treasury stock with cash.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

The purchase of treasury stock is considered a financing activity because it involves using cash to buy back the company's own shares, which reduces the amount of equity outstanding. Therefore, this transaction would appear in the financing activities section of the statement of cash flows.

Question 9

Lincoln Company engaged in this transaction: Received 6-month's rent in advance from a tenant in its office building.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

The transaction of receiving rent in advance is related to the operating activities of the company as it is a cash inflow resulting from the primary business operations of the company.

Question 10

Lincoln Company engaged in this transaction: Acquired a long-term investment by issuance of long-term debt.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

This transaction involves acquiring an investment through the issuance of long-term debt, which does not involve cash flows. Therefore, it is reported in the schedule of noncash investing and financing transactions, not in the cash flows from operating, investing, or financing activities sections.

Question 11

Lincoln Company engaged in this transaction: Converted loans payable to stock.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

The transaction involves the conversion of loans payable to stock, which does not involve any cash inflow or outflow. Therefore, it would be reported as a noncash investing and financing transaction in the schedule of noncash investing and financing transactions.

Question 12

If the indirect method is used to prepare a statement of cash flows,which of the following would be added to net income to arrive at net cash flows from operating activities?

Accepted Answer

All of these choices are correct because they represent non-cash expenses or losses that are subtracted from net income on the income statement but do not affect cash flow. Therefore, they need to be added back to net income to calculate net cash flows from operating activities using the indirect method.

Question 13

Which of the following statements is incorrect regarding the statement of cash flows?

Accepted Answer

The indirect method is generally considered easier to implement in practice because it starts with net income and adjusts for non-cash transactions, changes in working capital, and other items, which is a process that aligns closely with the information companies already gather for their accrual-based financial statements.

Question 14

Lincoln Company engaged in this transaction: Issued stock for land.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

The answer of Lincoln Company engaged in this transaction: Issued...

Question 15

Lincoln Company engaged in this transaction: Issued common stock for cash.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

The transaction involves financing through the issuance of common stock for cash, which would appear in the financing activities section of the statement of cash flows.

Question 16

Lincoln Company engaged in this transaction: Accrued employee wages earned but not yet paid at year-end.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

Accruing employee wages that have been earned but not yet paid does not represent a cash flow because no cash has actually been exchanged. This transaction is merely recognizing an expense that has been incurred but not yet paid, affecting the income statement and balance sheet (liabilities) but not the cash flow statement until the cash is actually disbursed.

Question 17

Assume the indirect method is used to compute net cash flows from operating activities.
-For this item extracted from the financial statements-Decrease in Accounts Receivable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Accepted Answer

A decrease in accounts receivable means that less money was owed to the company, which would have been included in net income. Therefore, it needs to be added back to net income to arrive at net cash flows from operating activities.

Question 18

Lincoln Company engaged in this transaction: Transferred cash to money market account.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

Transferring cash to a money market account is essentially moving cash from one form to another within the company and does not represent a cash inflow or outflow in the context of a statement of cash flows.

Question 19

If the indirect method is used to prepare a statement of cash flows,which of the following would be added to net income to arrive at net cash flows from operating activities?

Accepted Answer

When using the indirect method to prepare a statement of cash flows, a decrease in accounts receivable is added back to net income. This adjustment is made because it indicates that more cash has been collected from customers than recognized as revenue, improving the cash flow from operating activities.

Question 20

Lincoln Company engaged in this transaction: Purchased 60-day commercial paper.
Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Accepted Answer

The answer of Lincoln Company engaged in this transaction: Purchased...

Quiz 13: The Statement of Cash Flows

Lincoln Company engaged in this transaction: Abandoned fully depreciated equipment.Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Paid income taxes. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Which of the following statements is correct regarding the statement of cash flows?

Lincoln Company engaged in this transaction: Received dividends on marketable securities held as a long-term investment.Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: As required by the landlord,prepaid one year's rent on its leased warehouse. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

The indirect method of preparing a statement of cash flows

Lincoln Company engaged in this transaction: Purchased 30-day U.S.Treasury bill. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Purchased treasury stock with cash. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Received 6-month's rent in advance from a tenant in its office building. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Acquired a long-term investment by issuance of long-term debt. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Converted loans payable to stock. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

If the indirect method is used to prepare a statement of cash flows,which of the following would be added to net income to arrive at net cash flows from operating activities?

Which of the following statements is incorrect regarding the statement of cash flows?

Lincoln Company engaged in this transaction: Issued stock for land. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Issued common stock for cash. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Accrued employee wages earned but not yet paid at year-end. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Assume the indirect method is used to compute net cash flows from operating activities. -For this item extracted from the financial statements-Decrease in Accounts Receivable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Lincoln Company engaged in this transaction: Transferred cash to money market account. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

If the indirect method is used to prepare a statement of cash flows,which of the following would be added to net income to arrive at net cash flows from operating activities?

Lincoln Company engaged in this transaction: Purchased 60-day commercial paper. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.