Question 1

Which of the following is/aretrue regarding the fair value option for marketable securities and derivatives?

Accepted Answer

All of the statements are true regarding the fair value option for marketable securities and derivatives.

Question 2

Which of the following items involving current trade accounts receivable is most likely to appear in a statement of cash flows?

Accepted Answer

The collection of an account previously written off will result in an inflow of cash, which is a cash flow activity and therefore would be included in a statement of cash flows. Choices A, B, and C relate to income statement accounts and would not appear in a statement of cash flows.

Question 3

Which of the following transactions would not be reported in the one of the three main activity sections of the statement of cash flows prepared under the indirect method?

Accepted Answer

A purchase of an operational asset by issuing common stock is a non-cash transaction and is not reported in the main sections of the cash flow statement. Instead, it is disclosed in the notes or a separate schedule.

Question 4

Zanies Corporation reports its income from investments under the equity method and recognized income of $15,000 from its investment in Travis Company during the current year.Travis declared no dividends during the current year.On Daniels' statement of cash flows the $15,000 would

Accepted Answer

The $15,000 recognized as income from the investment in Travis Company under the equity method would be added back to net income in the reconciliation of net income to cash from operations on the statement of cash flows, because it is a non-cash income.

Question 5

A company's income statement disclosed $45,000 of investment revenue on equity method investments.The company did not purchase or dispose of any such investments during the year, yet the equity method investments account increased $30,000 during the year.What is the complete disclosure of these events in the statement of cash flows prepared under the indirect method?

Accepted Answer

The answer of A company's income statement disclosed $45,000 of...

Question 6

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for securities available for sale and cash flow hedges?

Accepted Answer

Under U.S. GAAP, for securities available for sale and cash flow hedges, realized gains and losses are reported in net income, while unrealized gains and losses are reported in Other Comprehensive Income (OCI) and accumulate in the accumulated other comprehensive income (AOCI) section of shareholders' equity until realized.

Question 7

In U.S.GAAP, which of the following accurately describe(s) the effects of transactions involving investments on the statement of cash flows?

Accepted Answer

All the choices accurately describe the effects of transactions involving investments on the statement of cash flows under U.S. GAAP. Choice A and B detail how interest and the acquisition of debt below par are treated. Choice C explains adjustments for realized holding gains and losses in the indirect method. Choice D outlines the treatment of dividends received and the deduction of undistributed earnings of the investee.

Question 8

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

Accepted Answer

Amortization of patents is a non-cash expense. In the statement of cash flows prepared using the indirect method, it is added back to net income in the adjustments section to reconcile net income to net cash provided by operating activities.

Question 9

The amortization of bond discount related to long-term debt should be presented in a statement of cash flows prepared using the indirect method as a(n)

Accepted Answer

Amortization of bond discount is a non-cash expense that reduces net income, so it is added back to net income in the operating activities section of the cash flow statement when using the indirect method.

Question 10

In U.S.GAAP, which of the following accurately describe(s) the effects of transactions involving investments on the statement of cash flows?

Accepted Answer

All of the choices are correct.

Question 11

During Year 7, Seven Corporation wrote down marketable equity securities to their market value.The journal entry made for this write-down is as follows: 
Unrealized Holding Loss on Marketable Equity Securities Available for Sale ....7.000
Marketable Equity Securities Available for Sale ...........7,000
This entry

Accepted Answer

The journal entry made to write down marketable equity securities does not involve any cash transaction and hence does not affect cash. As there is no cash flow impact, it does not appear in the statement of cash flows. Therefore, option D is the correct choice.

Question 12

To avoid understating the amount of cash flow from operations, the accountant

Accepted Answer

To avoid understating the amount of cash flow from operations, the accountant adds back the loss to net income. This is because the loss is a non-cash expense and does not represent an outflow of cash from the company's operations. By adding it back to net income, the accountant is adjusting for the impact of the loss on the company's reported earnings and ensuring that the cash flow from operations accurately reflects the cash generated or used by the company's core business activities.

Question 13

A gain on the sale of a plant assets should be included in which of the following sections of a statement of cash flows prepared using the indirect method?

Accepted Answer

In the indirect method, a gain on the sale of plant assets is deducted from net income in the operating activities section because it is a non-cash item that was included in net income.

Question 14

Which of the following is/are true?

Accepted Answer

All of the given statements are true. After acquiring derivatives, changes in fair value can be reported in Other Comprehensive Income. The changes in fair value of derivatives do not affect any lines of the statement of cash flows. As the derivative transaction settles, there can be a net cash flow involved. Derivatives with cash settlement can involve cash flows even when used as a hedge, but typically offset another cash flow from the other side of the hedge.

Question 15

During Year 5, Taylor Corporation signed a long-term lease for a building.It classified the lease as a capital lease and recorded it in the accounts as follows: Building ........... ..........................3,000
Capitalized Lease Obligation ..........................3,000
The transaction requires

Accepted Answer

The transaction of signing a capital lease should be disclosed in a supplementary schedule or notes to the financial statements. It does not impact the statement of cash flows directly, as it is not a cash transaction. Therefore, option A, B, and C are incorrect. The disclosure in management's discussion and analysis may be required depending on the significance of the lease to the company, but it is not the best answer as it is not the primary location for such disclosures.

Question 16

Which of the following is not true regarding the fair value option for marketable securities and derivatives?

Accepted Answer

The statement "If the change in fair value of the derivative decreases carrying value, then the cash flow from operations sections shows a subtraction for the loss" is not true. Changes in the fair value of derivatives do not affect cash flows from operations, but rather they are reported in either Other Comprehensive Income or the income statement.

Question 17

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for trading securities and fair value hedges?

Accepted Answer

Under U.S. GAAP, for trading securities and fair value hedges, both realized and unrealized gains and losses are reported in net income. This is because the fair value method requires that changes in fair value be recognized in earnings immediately.

Question 18

Which of the following is not true regarding the fair value option for marketable securities and derivatives?

Accepted Answer

The cash flow from operations section does not show an addition for the amount of the gain equal to the amount of the increase in carrying value of a derivative during the current period.

Question 19

Kendrick Company began the current year with the following:  During the current year, the following events occurred:
$\begin{array}{cc}
1,200 & \text { Accounts written off } \
30,000 & \text { Sales on account } \
2,000 & \text { Bad debt expense recognized }
\end{array}$ At the end of the current year, the company showed a balance in gross accounts receivable (before the allowance for doubtful accounts) of $16,800.
What amount would be shown as an operating cash inflow in the statement of cash flows under the indirect method?

Accepted Answer

The answer of Kendrick Company began the current year with...

Question 20

The effect of patent amortization on cash flow is conceptually identical to that of

Accepted Answer

Patent amortization is the process of spreading the cost of purchasing a patent over its useful life. This is similar to depreciation which spreads the cost of assets over their useful lives. Both patent amortization and depreciation reduce taxable income which in turn reduces cash outflows for taxes. Therefore, the effect of patent amortization on cash flow is conceptually identical to that of depreciation.

Quiz 16: Statement of Cash Flows: Another Look

Which of the following is/aretrue regarding the fair value option for marketable securities and derivatives?

Which of the following items involving current trade accounts receivable is most likely to appear in a statement of cash flows?

Which of the following transactions would not be reported in the one of the three main activity sections of the statement of cash flows prepared under the indirect method?

Zanies Corporation reports its income from investments under the equity method and recognized income of $15,000 from its investment in Travis Company during the current year.Travis declared no dividends during the current year.On Daniels' statement of cash flows the $15,000 would

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for securities available for sale and cash flow hedges?

In U.S.GAAP, which of the following accurately describe(s) the effects of transactions involving investments on the statement of cash flows?

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

The amortization of bond discount related to long-term debt should be presented in a statement of cash flows prepared using the indirect method as a(n)

In U.S.GAAP, which of the following accurately describe(s) the effects of transactions involving investments on the statement of cash flows?

To avoid understating the amount of cash flow from operations, the accountant

A gain on the sale of a plant assets should be included in which of the following sections of a statement of cash flows prepared using the indirect method?

Which of the following is/are true?

During Year 5, Taylor Corporation signed a long-term lease for a building.It classified the lease as a capital lease and recorded it in the accounts as follows: Building ........... ..........................3,000 Capitalized Lease Obligation ..........................3,000 The transaction requires

Which of the following is not true regarding the fair value option for marketable securities and derivatives?

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for trading securities and fair value hedges?

Which of the following is not true regarding the fair value option for marketable securities and derivatives?

The effect of patent amortization on cash flow is conceptually identical to that of