Deck 11: The Statement of Cash Flows

Question 1

Current assets on the Balance Sheet would be affected by and be part of operating activities.

Answer 1

True

Question 2

The direct method of formatting a Statement of Cash Flows starts with net income.

Answer 2

False

Question 3

A Statement of Cash Flows shows the company's sources of cash,but does not detail how the cash was used by the company.

Answer 3

False

Question 4

A comparative Balance Sheet reports at least two consecutive years of information that can be used to compile a Statement of Cash Flows.

Question 5

For a business to remain successful,investing activities must be the main source of its cash over the long run.

Question 6

Operating activities reflect such things as purchasing fixed assets.

Question 7

The Statement of Cash Flows reports the sources and uses of cash from all of the following EXCEPT:

A)managerial activities.
B)financing activities.
C)operating activities.
D)investing activities.

Question 8

Cash received from issuing stock would be included in financing activities.

Question 9

The three types of business activities on a Statement of Cash Flows are operating,investing,and management activities.

Question 10

The ________ is the financial statement associated with the operating,investing and financing activities of a corporation.

A)Income Statement
B)Statement of Stockholders' Equity
C)Statement of Cash Flows
D)Balance Sheet

Question 11

The accuracy of the Statement of Cash Flows can be verified by computing the change in the balance of the:

A)cash and cash equivalent accounts.
B)equity account.
C)revenue accounts.
D)asset and liability accounts.

Question 12

The difference between the direct and indirect methods is the format of the financing section.

Question 13

The Balance Sheet reports the ending cash,but does not include cash equivalents.

Question 14

The Cash Flows from operations arrived at using the indirect method is different than that arrived at using the direct method.

Question 15

A comparative Balance Sheet details why the ending cash balance increased or decreased.

Question 16

The cash flow statement and Balance Sheet use accrual accounting.

Question 17

The Statement of Cash Flows is prepared to show why the cash amount changed from the beginning of the period to the end of the period.

Question 18

The purpose of the Statement of Cash Flows is to show:

A)the revenue earned.
B)the profits that were earned.
C)the expenses that were paid.
D)how cash was received and used during the period.

Question 19

The cash flow statement is the communicating link between the:

A)Statement of Stockholders' Equity and the cash reported on the Balance Sheet.
B)Income Statement and the Statement of Stockholders' Equity.
C)cash reported on the Balance Sheet and the accrual based Income Statement.
D)cash reported on the Balance Sheet and the Statement of Stockholders' Equity.

Question 20

The investing and financing sections of the Statement of Cash Flows is the same for the indirect and direct method.

Question 21

Investing Cash Flows affect:

A)current assets and current liabilities.
B)long-term asset accounts.
C)equity accounts.
D)long-term liability accounts.

Question 22

Which of the following is NOT a use of cash for a business?

A)Operating the business
B)Buying long-term assets with cash
C)Paying cash dividends
D)All of the above are uses of cash.

Question 23

Operating Cash Flows under the indirect method starts with the net income for the period from the Income Statement.

Question 24

Which of the following is NOT a part of operating activities?

A)Paying dividends
B)Paying payables
C)Earnings revenue
D)Paying utilities

Question 25

Bach Company sold an asset with a book value of $56,000 for $100,000 cash.Which of the following is a TRUE statement?

A)Gain on sale equals $100,000 and Cash inflow equals $100,000.
B)Gain on sale equals $56,000 and Cash inflow equals $56,000.
C)Gain on sale equals $44,000 and Cash inflow equals $100,000.
D)Gain on sale equals $100,000 and Cash inflow equals $46,000.

Question 26

In order to prepare a Statement of Cash Flows using the indirect method,you need the Income Statement only.

Question 27

The operating section of a Statement of Cash Flows using the indirect method is prepared differently from the operating section of a Statement of Cash Flows using the direct method.

Question 28

Aspen Corp.sold an asset with a book value of $56,000 for $35,000 cash.Which of the following is a TRUE statement?

A)Loss on sale equals $35,000 and Cash inflow equals $35,000.
B)Loss on sale equals $56,000 and Cash inflow equals $56,000.
C)Loss on sale equals $21,000 and Cash inflow equals $35,000.
D)Loss on sale equals $35,000 and Cash inflow equals $21,000.

Question 29

Which of the following is NOT a part of investing activities?

A)Buying a building
B)Collecting on a loan receivable
C)Borrowing money
D)Selling off equipment

Question 30

Are all increases to cash from financing activities the result of a favorable situation?

A)Yes,an increase to cash is always good.
B)No,cash could increase in this category as a result of replacing long-term assets.
C)Yes,this increase would reflect the results of the company's daily activities.
D)No,although some increases in this category could be positive,some,such as an increase in long-term debt might be the result of an unfavorable situation.

Question 31

Which of the following activities is computed differently using the two methods of formatting a Statement of Cash Flows?

A)Operating activities
B)Financing activities
C)Investing activities
D)Both operating activities and investing activities

Question 32

As you approach graduation,you are evaluating your job offers from the following companies.Assuming that all other factors are equal (pay,benefits,location,job duties,industry,company size,company age etc. ),for which of the following companies would you chose to work and why?

A)Company A,the company is generating cash from its daily operations,investing in long-term assets and generating cash from its' owners or borrowing a relatively small amount.
B)Company B,the company only generates cash from its daily operations and is not spending the cash for any other reason.
C)Company C,the company only generates cash from the owners.
D)All three companies offer the same opportunity for the future.

Question 33

Operating activities are transactions and events associated with selling a product or providing a service related to the:

A)revenues and expenses reported on the Income Statement.
B)assets and liabilities reported on the Balance Sheet.
C)net income reported on the Statement of Retained Earnings.
D)Retained Earnings reported on the Balance Sheet.

Question 34

Most businesses prefer to use the indirect method of formatting a Statement of Cash Flows.

Question 35

Which of the following is NOT a source of cash for a business?

A)Operating the business
B)Long-term borrowing of cash
C)Buying long-term assets with cash
D)Stockholders' cash investment

Question 36

Which of the following is NOT a part of financing activities?

A)Paying dividends
B)Issuing stock
C)Paying off loans
D)Buying land

Question 37

Operating Cash Flows affect:

A)current assets and current liabilities.
B)long-term asset accounts.
C)equity accounts.
D)long-term liability accounts.

Question 38

When comparing net cash provided by operations using the direct method versus indirect method,we find that:

A)net cash is higher using the indirect method.
B)net cash is lower using the indirect method.
C)there is no difference in the net cash between the two methods.
D)Depreciation Expense is used in the direct method.

Question 39

Financing activities affect:

A)current and long-term assets.
B)current and long-term liabilities.
C)current assets and current liabilities.
D)long-term liabilities and equity accounts.

Question 40

Are all decreases to cash the result of an unfavorable situation?

A)Yes,decreases to cash are always bad.
B)No,cash could decrease as a result of acquiring long-term assets which the company needs to expand or stay competitive.
C)Yes,cash could decrease as a result of paying off long-term debt which is an unfavorable action to take.
D)No,cash could decrease because the company issued more stock.

Question 41

Losses on the sale of long-term assets are:

A)added to operating activities.
B)subtracted from operating activities.
C)added to investing activities.
D)subtracted from investing activities.

Question 42

The purchase of treasury stock is shown as a cash outflow in the investing section of the cash flow statement.

Question 43

Robbins Company distributed a 5% common stock dividend,this will be reported in the financing activity section of the cash flow statement.

Question 44

The cost of purchasing long-term assets,such as buildings and land,are:

A)added to operating activities.
B)subtracted from operating activities.
C)added to investing activities.
D)subtracted from investing activities.

Question 45

A decrease in a current liability causes an increase in cash.

Question 46

A transaction acquiring land by issuing a note for the full purchase price would not appear on the cash flow statement because no cash was involved,but it may be disclosed in a separate section.

Question 47

Changes in the long-term assets and long-term liabilities accounts must be analyzed to determine how they are presented in the operating section of a cash flow statement.

Question 48

Changes in long-term liabilities belong in the financing section of a cash flow statement using the indirect method.

Question 49

Acquisitions and sales of long-term assets belong in the financing section of a cash flow statement using the indirect method.

Question 50

Which would be added back to net income in the operating section of an indirect cash flow statement?

A)A decrease in Accounts Payable
B)Depreciation
C)An increase in Accounts Receivable
D)An increase in inventory

Question 51

Even though depreciation,depletion and amortization are expenses,they are considered non-cash transactions and must be subtracted from net income in the operating activities section of an indirect method cash flow statement.

Question 52

A transaction that exchanged a building for shares of stock would be an investing activity and would appear on the cash flow statement.

Question 53

The sum of the net increases/decreases in the operating,investing and financing sections of the cash flow statement is equal to the change in cash over the period.

Question 54

Business transactions that do NOT involve the payment or receipt of cash are considered to be non-cash transactions.

Question 55

Cash receipts from the sale of long-term assets,such as equipment and vehicles,are:

A)added to operating activities.
B)subtracted from operating activities.
C)added to investing activities.
D)subtracted from investing activities.

Question 56

Changes in all current assets EXCEPT ________ are adjustments to net income in the operating section of an indirect cash flow statement.

A)prepaid expenses
B)inventory
C)cash
D)notes receivable

Question 57

Which would be subtracted from net income in the operating section of an indirect cash flow statement?

A)A decrease in Notes Payable
B)A decrease in prepaid expenses
C)An increase in sales tax payable
D)An increase in inventory

Question 58

Gains and losses do not represent Cash Flows.

Question 59

Gains on the sale of long-term assets are:

A)added to investing activities.
B)added to financing activities.
C)added to operating activities.
D)subtracted from operating activities.

Question 60

Which would NOT be subtracted from net income in the operating section of an indirect cash flow statement?

A)An increase in prepaid expenses
B)An increase in Accounts Payable
C)A decrease in Accounts Payable
D)An increase in notes receivable

Question 61

An increase in long-term Mortgage Payable would mean a(n):

A)increase in cash flow from investing activities.
B)decrease in cash flow from investing activities.
C)increase in cash flow from financing activities.
D)decrease in cash flow from financing activities.

Question 62

When preparing the Statement of Cash Flows by the indirect method,if current liabilities increase,the difference is:

A)added to net income.
B)added to investing activities.
C)deducted from net income.
D)deducted from investing activities.

Question 63

Under the indirect method of cash flow,which of the following adjustments would NOT be made to net income when computing cash from operating activities?

A)Add an increase in Accounts Payable
B)Add Depreciation Expense
C)Add a decrease in Accounts Payable
D)Subtract the gain on sale of land

Question 64

Transactions involving the purchase and sale of long-term assets,lending money and collecting the principal on loans are called:

A)investing activities.
B)operating activities.
C)financing activities.
D)buying and selling activities.

Question 65

An example of a cash outflow from investing activities is:

A)issuance of a note payable.
B)making a loan to another company.
C)paying cash dividends.
D)the purchase of treasury stock.

Question 66

Of the following,which is NOT classified as an investing activity on the Statement of Cash Flows?

A)Sale of equipment for cash
B)Purchasing land
C)Collecting the principal on loans
D)Selling goods and services

Question 67

An example of a cash outflow from financing activities is:

A)paying dividends in cash.
B)buying additional inventory.
C)selling land.
D)collecting notes receivable.

Question 68

Which of the following is NOT a cash inflow or outflow from an investing activity?

A)A loan made to another party
B)A payment made to acquire property
C)The purchase of treasury stock
D)The sale of the common stock of another company which had been owned by our company.

Question 69

An example of a cash inflow from financing activities is:

A)collecting money owed by customers.
B)issuing preferred stock.
C)selling a piece of equipment.
D)paying off a bond.

Question 70

The Accounts Receivable balance has decreased during the year.How would this affect the Statement of Cash Flows operations section under the indirect method?

A)It is already included in the net income.
B)It would be added back to net income.
C)It would be subtracted from net income.
D)It does not affect the cash flow from operations.

Question 71

Under the indirect method,which of the following is NOT a proper adjustment to net income under operating activities?

A)Adding a decrease in inventory
B)Subtracting an increase in salaries payable
C)Deducting an increase in prepaid expenses
D)Subtracting a gain on the sale of equipment

Question 72

The Accounts Payable balance has decreased during the year.How would this affect the Statement of Cash Flows operations section under the indirect method?

A)It is already included in the net income.
B)It would be added back to net income.
C)It would be subtracted from net income.
D)It does not affect the cash flow from operations.

Question 73

Goldman Company's Accounts Receivable decreased by $25,000 and its Accounts Payable increased by $12,000.What is the net effect on cash from operations under the indirect method?

A)+$37,000
B)-$13,000
C)-$37,000
D)+$13,000

Question 74

Activities that increase and decrease as a result of selling a company's stock are:

A)marketing activities.
B)operating activities.
C)investing activities.
D)financing activities.

Question 75

Caesario Company's Accounts Receivable increased by $35,000 and their Accounts Payable decreased by $18,000.What is the net effect on cash from operations under the indirect method?

A)+$53,000
B)-$17,000
C)-$53,000
D)+$17,000

Question 76

A Statement of Cash Flows would NOT disclose:

A)stock dividends declared.
B)bonds payable issued.
C)purchase of treasury stock.
D)capital stock issued.

Question 77

In the indirect method of Cash Flows,which of the following would be added to net income?

A)A decrease in inventory
B)An increase in Prepaid Insurance
C)A decrease in Accounts Payable
D)An increase in Accounts Receivable

Question 78

Of the following,which would be added back to net income in the operating section of a cash flow statement using the indirect method?

A)Increase in inventory
B)Decrease in Accounts Payable
C)Increase in Accounts Receivable
D)Decrease in Prepaid Insurance

Question 79

A transaction involving the exchange of stock for equipment would be recorded as a(n):

A)operating activity.
B)investing activity.
C)financing activity.
D)noncash investing and financing activity.

Question 80

The Supplies balance has decreased during the year.How would this affect the Statement of Cash Flows operations section under the indirect method?

A)It is already included in the net income.
B)It would be added back to net income.
C)It would be subtracted from net income.
D)It does not affect the cash flow from operations.