Question 1

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 for the purposes of the statement of cash flows.

Question 2

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

Accepted Answer

The answer of Which of the following statements is incorrect...

Question 3

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

The transaction of abandoning fully depreciated equipment does not involve any cash flow, and therefore does not belong to any section of the statement of cash flows.

Question 4

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 is an operating cash outflow and would appear in the operating activities section of the statement of cash flows.

Question 5

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...

Question 6

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 an adjustment to expenses on the income statement and liabilities on the balance sheet, but it does not affect the cash balance until the wages are paid.

Question 7

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 received from investments, which is part of the company's ongoing primary operations' cash flows.

Question 8

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 9

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

Issuing common stock for cash is a financing activity, as it involves obtaining funds from external sources to finance the company's operations. Therefore, it would appear in the financing activities section of the statement of cash flows.

Question 10

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

In the indirect method of preparing a statement of cash flows, non-cash expenses are added back to net income and non-cash revenues are deducted to arrive at the amount of cash generated or used by operations during the period. Changes in current assets and liabilities, such as accounts receivable, are also taken into account. Therefore, a decrease in accounts receivable would be added to net income to arrive at net cash flows from operating activities. Choices A, B, and D do not directly affect net income and would not be added back to arrive at net cash flows from operating activities.

Question 11

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 relates to operating activities as it represents the receipt of cash from a tenant, which is considered revenue earned from the normal course of business operations.

Question 12

Which of the following statements is correctregarding the statement of cash flows?

Accepted Answer

A survey of large companies showed that 98% of them use the indirect method, which indicates that companies prefer it over the direct method. While analysts may prefer the direct method, it is not the preferred method for companies. Additionally, there is no evidence to suggest that companies prefer the direct method because it is easier and less expensive to prepare.

Question 13

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 yields the same net cash flow from operating activities as the direct method, making all the provided options correct.

Question 14

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

This transaction represents a noncash financing activity and would be included in the schedule of noncash investing and financing transactions. It does not represent a cash flow as there is no inflow or outflow of cash involved in the conversion of loans payable to stock.

Question 15

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

Both amortization expense and depreciation expense are added back to net income in the indirect method to arrive at net cash flows from operating activities. Additionally, any loss on the sale of assets is also added back to net income. Therefore, the correct choice is D, which includes all of these options.

Question 16

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

This transaction would appear in the operating activities section of the statement of cash flows as it relates to the cash flows from the company's normal operations (i.e. renting a warehouse for their business). The prepaid rent would be considered as a decrease to cash flow from operating activities, as cash is leaving the company in order to fulfill the lease agreement.

Question 17

Lincoln Company engaged in this transaction: Acquired 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 a long-term investment through the issuance of long-term debt, which does not involve cash flow. Therefore, it is reported in the schedule of noncash investing and financing transactions, not in the cash flows from operating, investing, or financing sections.

Question 18

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 19

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

Purchasing treasury stock represents a financing activity, since it involves the use of cash to reduce the amount of equity on the company's books. Therefore, the transaction would appear in the financing activities section of the statement of cash flows.

Question 20

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 collected from customers than was previously recorded as revenue, resulting in a reduction in net income. Therefore, the decrease in accounts receivable must be added back to net income to arrive at net cash flows from operating activities.

Quiz 15: The Statement of Cash Flows

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.

Which of the following statements is incorrect regarding 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.

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.

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.

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: 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: 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.

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: 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.

Which of the following statements is correctregarding the statement of cash flows?

The indirect method of preparing 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?

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.

Lincoln Company engaged in this transaction: Acquired 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: 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: 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.

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: