Question 1

The statement of cash flows assumes that the ____________________ basis of accounting is used when recording transactions and preparing the balance sheet and income statement.

Accepted Answer

The answer of The statement of cash flows assumes that...

Question 2

Cash flows from ____________________ activities are the result of routine business transactions such as buying and selling merchandise.

Accepted Answer

The answer of Cash flows from ____________________ activities are the...

Question 3

If a corporation issued stock for $70,000 in cash, received $10,000 in cash from a long-term loan, and paid cash dividends totaling $20,000, the net cash provided by its financing activities would be ___________________.

Accepted Answer

The answer of If a corporation issued stock for $70,000...

Question 4

In the ____________________ activities section of the statement of cash flows, net income is adjusted for the amortization of the premium on bonds payable.

Accepted Answer

The answer of In the ____________________ activities section of the...

Question 5

A gain on the sale of equipment is reported in the ____________________ activities section of the statement of cash flows.

Accepted Answer

The answer of A gain on the sale of equipment...

Question 6

Investing activities include

Accepted Answer

Investing activities refer to the purchase or sale of long-term assets, such as plant and equipment, investments, and property. Option A is incorrect because purchases of merchandise are part of operating activities. Option C is incorrect because prepaid expenses are also part of operating activities. Option D is incorrect because an increase in accounts receivable is part of operating activities.

Question 7

On the statement of cash flows, it is necessary to reconcile the ____________________ with the net cash provided by operating activities.

Accepted Answer

The answer of On the statement of cash flows, it...

Question 8

Cash and cash equivalents, as used on the statement of cash flows, consist of

Accepted Answer

Cash and cash equivalents typically refer to short-term, highly liquid investments that can be easily converted into cash. Therefore, the best choice is D, which includes currency, bank accounts, and short-term, highly liquid investments. Choices A and B are too limited, and choice C includes investments that may not be readily convertible into cash.

Question 9

Purchases and sales of land, buildings, and equipment for cash are shown as ____________________ activities on the statement of cash flows.

Accepted Answer

The answer of Purchases and sales of land, buildings, and...

Question 10

Interest expense is treated as an outflow of cash that results from a(n) ____________________ activity.

Accepted Answer

The answer of Interest expense is treated as an outflow...

Question 11

The purpose of the statement of ____________________ is to report the cash balance at the beginning and end of the fiscal period and to show the sources and uses of cash during the period.

Accepted Answer

The answer of The purpose of the statement of ____________________...

Question 12

An example of a financing activity is

Accepted Answer

The issuance of stock for cash is an example of a financing activity as it involves raising funds from investors in exchange for ownership in the company. Choices A, C, and D are examples of operating and investing activities.

Question 13

The purchase of treasury stock is treated as a cash outflow in the ____________________ activities section of the statement of cash flows.

Accepted Answer

The answer of The purchase of treasury stock is treated...

Question 14

The net cash provided by operating activities is affected by

Accepted Answer

The net cash provided by operating activities is affected by a change in merchandise inventory because it reflects the cash flows related to the buying and selling of merchandise. Any increase or decrease in inventory affects the cash inflows and outflows of operating activities.

The other choices listed (B, C, and D) are not directly related to the net cash provided by operating activities. A purchase of land for cash represents an investing activity, the issue of bonds payable for cash represents a financing activity, and proceeds of cash investments by stockholders represent a combination of investing and financing activities.

Question 15

Issuing stock for cash and paying dividends in cash would be classified as ____________________ activities on the statement of cash flows.

Accepted Answer

The answer of Issuing stock for cash and paying dividends...

Question 16

The payment of maturing bonds would be treated as a cash outflow in the ____________________ activities section of the statement of cash flows.

Accepted Answer

The answer of The payment of maturing bonds would be...

Question 17

Net income must be adjusted for changes in ____________________ assets and liabilities, such as accounts receivable and accounts payable, when determining the net cash provided by operating activities.

Accepted Answer

The answer of Net income must be adjusted for changes...

Question 18

When the ____________________ method of preparing the statement of cash flows is used, the interest and income taxes paid during the period are disclosed in notes accompanying the statement.

Accepted Answer

The answer of When the ____________________ method of preparing the...

Question 19

On the statement of cash flows, cash and cash ____________________ consist of currency, bank accounts, and short-term, highly liquid investments.

Accepted Answer

The answer of On the statement of cash flows, cash...

Question 20

When the net cash provided by operating activities is determined, a gain on a sale of equipment should

Accepted Answer

A gain on the sale of equipment should be subtracted from net income because it represents a non-cash item that increases net income but does not represent cash received from operating activities. Thus, it would be added back to net income in the calculation of net cash provided by operating activities.

Quiz 24: The Statement of Cash Flows