Question 1

The three primary categories of cash flows are cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

Accepted Answer

This statement is true. Cash flows from operating activities refer to the cash inflows and outflows related to the day-to-day operations of a business, such as sales revenue and expenses. Cash flows from investing activities relate to the purchase and sale of long-term assets, such as property and equipment or investments. Cash flows from financing activities are related to the issuance and repayment of debt or equity, such as taking out a loan or paying dividends to shareholders.

Question 2

A company's Income Tax Payable account decreased from $14 million to $12 million during the year. If its income tax expense was $80 million, what would be shown as cash paid for income taxes under the direct method?

Accepted Answer

$80 million + $2 million decrease in income tax payable = $82 million.

Question 3

Wireless Technologies reports cost of goods sold of $40 million. Inventory at the beginning and end of the year are $4 million and $3 million, respectively. Accounts payable at the beginning and end of the year are $3 million and $6 million, respectively. What is the amount of cash paid to suppliers?

Accepted Answer

The answer of Wireless Technologies reports cost of goods sold...

Question 4

Operating activities are both inflows and outflows of cash resulting from the external financing of a business.
Financing activities are both inflows and outflows of cash resulting from the external financing of a business.

Accepted Answer

Operating activities are cash flows resulting from the normal operations of a business, while financing activities are cash flows resulting from external financing, such as issuing or repurchasing stocks, borrowing or repaying loans, and paying dividends. Although both operating and financing activities can involve inflows and outflows of cash, the statement provided in the question incorrectly suggests that operating activities are related to external financing.

Question 5

Which of the following items is reported in the statement of cash flows using the direct method?

Accepted Answer

The direct method reports cash inflows and outflows from operating activities, including cash received from customers. Depreciation expense and gain/loss on sale of an asset are reported in the investing section, but only if using the indirect method.

Question 6

Wireless Technologies reports operating expenses of $2 million. Operating expenses include rent expense. Prepaid rent at the beginning and end of the year are $20,000 and $70,000, respectively. All other operating expenses were paid in cash as incurred. What is the amount of cash paid for operating expenses?

Accepted Answer

The answer of Wireless Technologies reports operating expenses of $2...

Question 7

A statement of cash flows provides a summary of cash inflows and cash outflows during the reporting period.

Accepted Answer

A statement of cash flows shows the sources and uses of cash in a company during a specific period of time, including operating, investing, and financing activities.

Question 8

Wireless Technologies reports sales of $50 million. Accounts receivable at the beginning and end of the year are $5 million and $7 million, respectively. What is the amount of cash received from customers?

Accepted Answer

The answer of Wireless Technologies reports sales of $50 million....

Question 9

Data Solutions reports income tax expense of $1,700,000. Income taxes payable at the beginning and end of the year are $250,000 and $370,000, respectively. What is the amount of cash paid for income taxes?

Accepted Answer

The answer of Data Solutions reports income tax expense of...

Question 10

Data Solutions reports cost of goods sold of $75 million. Inventory at the beginning and end of the year are $8 million and $9 million, respectively. Accounts payable at the beginning and end of the year are $5 million and $3 million, respectively. What is the amount of cash paid to suppliers?

Accepted Answer

The answer of Data Solutions reports cost of goods sold...

Question 11

Data Solutions reports operating expenses of $5 million. Operating expenses include rent expense. Prepaid rent at the beginning and end of the year are $120,000 and $80,000, respectively. All other operating expenses were paid in cash as incurred. What is the amount of cash paid for operating expenses?

Accepted Answer

The answer of Data Solutions reports operating expenses of $5...

Question 12

Which of the following items is not reported in the operating section of the statement of cash flows using the direct method?

Accepted Answer

The answer of Which of the following items is not...

Question 13

The balance sheet of Storage Solutions reports total assets of $300,000 and $350,000 at the beginning and end of the year, respectively. The cash return on assets for the year is 10%. What is Storage Solutions' net cash flows from operating activities for the year?

Accepted Answer

The answer of The balance sheet of Storage Solutions reports...

Question 14

Data Solutions reports sales of $100 million. Accounts receivable at the beginning and end of the year are $6 million and $9 million, respectively. What is the amount of cash received from customers?

Accepted Answer

The answer of Data Solutions reports sales of $100 million....

Question 15

We report interest and dividends received from investments with investing activities.
We report interest and dividends received from investments with operating activities rather than investing activities.

Accepted Answer

Interest and dividends received from investments are considered cash inflows for investing activities, not operating activities.

Question 16

Schneider Inc. purchases its inventory from suppliers on account. During the year, its Inventory account increased by $10 million and its accounts payable to suppliers decreased by $3 million. Cost of goods sold was $440 million, its cash outflows to inventory suppliers totaled:

Accepted Answer

The answer of Schneider Inc. purchases its inventory from suppliers...

Question 17

Financing activities include cash receipts and cash payments for transactions relating to revenue and expense activities.
Operating activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

Accepted Answer

The first sentence describes financing activities, while the second sentence describes operating activities. They are not the same thing.

Question 18

Wireless Technologies reports income tax expense of $800,000. Income tax payable at the beginning and end of the year are $50,000 and $70,000, respectively. What is the amount of cash paid for income taxes?

Accepted Answer

The answer of Wireless Technologies reports income tax expense of...

Question 19

In 2012, Hope Company incurred sales on account of $100,000. The company also has the following information: $$\begin{array} { | l | c | c | } 
\hline & \text { December 31, 2011 } & \text { December 31, 2012 } \
\hline \text { Accounts Receivable } & \$ 50,000 & \$ 20,000 \
\hline \text { Accounts Payable } & \$ 65,000 & \$ 40,000 \
\hline
\end{array}$$ What is the amount of cash received from customers for Hope Company in 2012?

Accepted Answer

The cash received from customers is calculated as: Beginning Accounts Receivable + Sales on Account - Ending Accounts Receivable = $50,000 + $100,000 - $20,000 = $130,000.

Question 20

Investing activities include cash transactions involving the purchase and sale of long-term assets and current investments.

Accepted Answer

This statement is correct. Investing activities involve the acquisition and disposal of long-term assets and investments, such as property, plant, and equipment, and stocks, bonds, and other securities. Examples of cash transactions related to investing activities include the purchase of a building, the sale of stock in another company, and the purchase of equipment for manufacturing.

Quiz 11: Statement of Cash Flows