Deck 13: The Statement of Cash Flows

Question 1

Given the following events, which ones affect cash flows from investing activities?

A) 1 and 2
B) 3 and 4
C) 2 and 4
D) 1, 2, 3, and 4

Answer 1

B

Question 2

Which of the following is not one of the types of activities that is summarized on the statement of cash flows?

A) Organizing
B) Financing
C) Investing
D) Operating

Answer 2

A

Question 3

Cash paid to stockholders as a dividend is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Answer 3

C

Question 4

Which of the following is not a required external financial statement?

A) Balance sheet
B) Budgeted income statement
C) Statement of cash flows
D) Statement of changes in stockholders' equity

Question 5

Cash paid towards salaries is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Question 6

Nelson Corporation has the following information available for 2011: The financing activity section of Nelson's statement of cash flows would show:

A) net cash provided by financing activities of $10,000.
B) net cash utilized by financing activities of $4,000.
C) net cash utilized by financing activities of $6,000.
D) net cash provided by financing activities of $14,000.

Question 7

BTE Corporation has the following information available for 2011: The financing activity section of BTE's statement of cash flows would show:

A) net cash provided by financing activities of $32,000.
B) net cash utilized by financing activities of $32,000.
C) net cash utilized by financing activities of $8,000.
D) net cash provided by financing activities of $8,000.

Question 8

Which type of transactions are required by generally accepted accounting principles to be disclosed either in a separate schedule at the bottom of the statement of cash flows or in a footnote to the financial statements?

A) Significant cash transactions that are classified as operating activities.
B) Significant cash transactions that are classified as investing activities.
C) Significant cash transactions that are classified as financing activities.
D) Significant noncash transactions.

Question 9

Cash received from customers is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Question 10

Which of the following is not true regarding the statement of cash flows?

A) It reports the impact of a firm's operating, investing, and financing activities on cash flows during the accounting period.
B) It discloses items that affect the balance sheet, but do not show up on the income statement, such as issuance of stock.
C) It is not a required component of a company's external financial statements.
D) It explains how cash changed from the end of the previous year to the end of the current year.

Question 11

Given the following events, which ones affect cash flows from operating activities?

A) 2 and 3
B) 3 and 4
C) 1, 2, and 3
D) 1, 2, 3, and 4

Question 12

Justine Inc. has the following information available for 2011: The operating activity section of Justine's statement of cash flows would show:

A) net cash provided by operating activities of $58,000.
B) net cash utilized by operating activities of $58,000.
C) net cash utilized by operating activities of $98,000.
D) net cash provided by operating activities of $98,000.

Question 13

Cash received from the issuance of capital stock is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Question 14

Cash paid to purchase equipment is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Question 15

Cash received from the borrowing on a note payable is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Question 16

Cash received from the sale of property is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Question 17

Cash received from the sale of long-term investments is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Question 18

The main purpose of the statement of cash flows is to provide information about:

A) a company's revenues and expenses for a period of time.
B) a company's assets, liabilities, and stockholders' equity at a point in time.
C) the changes in stockholders' equity of a company for a period of time.
D) a company's cash inflows and outflows for a period of time.

Question 19

Which of the following items would not be classified as either cash or a cash equivalent for purposes of the statement of cash flows?

A) Money market account funds.
B) Treasury bill that matures in three months.
C) Treasury bill that matures in three years.
D) Checking account funds.

Question 20

Cash received from the sale of property, plant, and equipment is classified in which section of the statement of cash flows?

A) Operating
B) Investing
C) Financing
D) Noncash

Question 21

Culpepper Inc. had the following information related to last year's sales: What amount would be reported as "cash collections from customers" on the statement of cash flows using the direct method?

A) $238,500
B) $431,500
C) $401,500
D) $143,500

Question 22

Generally accepted accounting principles allows which of the following methods of preparing the statement of cash flows?

A) The operating, investing, and financing methods.
B) The accrual basis and cash basis of accounting methods.
C) The direct and indirect methods.
D) The cash flows and noncash flows methods.

Question 23

Burke Inc.'s accounts receivable balance increased during the year from $300,000 to $360,000. Based on this information, which of the following statements is true?

A) Cash received from customers was greater than sales revenue recorded during the year.
B) Cash received from customers was less than sales revenue recorded during the year.
C) Cash received from customers was exactly equal to sales revenue recorded during the year.
D) Cash received from customers was higher than cash paid to suppliers during the year.

Question 24

When using the indirect method of preparing a statement of cash flows, which of the following items would need to be added to net income in order to reconcile to cash provided by operating activities?

A) Increase in accounts receivable
B) Decrease in liabilities
C) Depreciation expense
D) Increase in long-term loan

Question 25

When using the indirect method of preparing a statement of cash flows, which of the following items would need to be deducted from net income in order to reconcile to cash provided by operating activities?

A) Increase in accounts payable
B) Increase in accounts receivable
C) Depreciation expense
D) Increase in property, plant, and equipment

Question 26

Lineberger Corporation had the following information available from its 2011 balance sheet and income statement: What amount would be reported as cash outflows for interest on the statement of cash flows for 2011 using the direct method?

A) $71,500
B) $80,500
C) $64,500
D) $55,500

Question 27

McClintock Inc. had the following information available from its 2011 balance sheet and income statement: What amount would be reported as cash outflows for insurance on the statement of cash flows for 2011 using the direct method?

A) $70,000
B) $10,000
C) $20,000
D) $25,000

Question 28

Jazzy Inc. reported sales revenue of $550,000 on their income statement for 2011. From the beginning until the end of 2011, accounts receivables increased by a net amount of $35,000. How much "cash collections from customers" should Jazzy report for 2011 on their statement of cash flows?

A) $550,000
B) $585,000
C) $515,000
D) $ 35,000

Question 29

Pomander Inc. had the following information related to last year's sales: What amount would be reported as "cash collections from customers" on the statement of cash flows using the direct method?

A) $254,000
B) $381,500
C) $111,500
D) $353,500

Question 30

Chatham Corp. reported sales revenue of $98,000 on their income statement for 2011. From the beginning until the end of 2011, accounts receivables decreased by a net amount of $9,000. How much "cash collections from customers" should Chatham report for 2011 on their statement of cash flows?

A) $ 98,000
B) $ 89,000
C) $ 9,000
D) $107,000

Question 31

Simmon Incorporation's cost of goods purchased amounted to $20,000. From the beginning until the end of 2011, accounts payable increased by a net amount of $7,000. How much "cash outflows for purchases" should Simmons report for 2011 on their statement of cash flows?

A) $ 7,000
B) $13,000
C) $20,000
D) $27,000

Question 32

Given the following events, which ones affect cash flows from financing activities?

A) 1 and 2
B) 3 and 4
C) 2 and 4
D) 1, 2, 3, and 4

Question 33

The collection of interest revenue will be depicted on the statement of cash flows as a:

A) cash inflow from an operating activity.
B) cash inflow from an investing activity.
C) cash outflow for a financing activity.
D) cash inflow from a financing activity.

Question 34

Peter Piper Inc. had the following information available from its 2011 balance sheet and income statement: What amount would be reported as cash outflows for insurance on the statement of cash flows for 2011 using the direct method?

A) $68,000
B) $58,000
C) $42,000
D) $52,000

Question 35

The difference between the direct method and the indirect methods of preparing the statement of cash flows is primarily visible in which of the following sections?

A) Operating activities section only
B) Investing activities section only
C) Both operating and investing activities
D) Both investing and financing activities

Question 36

When using the indirect method of preparing a statement of cash flows, which of the following items would need to be deducted from net income in order to reconcile to cash provided by operating activities?

A) Gain on sale of property, plant, and equipment
B) Decrease in prepaid insurance
C) Depreciation expense
D) Increase in salaries payable

Question 37

Tuffet Corporation had the following information available from its 2011 balance sheet and income statement: What amount would be reported as cash outflows for interest on the statement of cash flows for 2011 using the direct method?

A) $27,000
B) $29,000
C) $21,000
D) $23,000

Question 38

Which of the following statements is true about the indirect method of preparing the operating activities section on a statement of cash flows?

A) It adjusts cash basis net income to accrual basis net income.
B) It adjusts accrual basis net income to cash provided by operating activities.
C) It adjusts accrual basis net income to budgeted net income.
D) It adjusts cash basis net income to budgeted net income.

Question 39

Paxton Inc. had the following information related to last year's sales: What amount would be reported as "cash collections from customers" on the statement of cash flows using the direct method?

A) $404,000
B) $176,000
C) $516,000
D) $306,000

Question 40

The payment of interest expense will be depicted on the statement of cash flows as a:

A) cash inflow from an operating activity.
B) cash outflow for an investing activity.
C) cash inflow from a financing activity.
D) cash outflow for an operating activity.

Question 41

Caldwell Corp.'s cost of goods purchased amounts to $900,000 for 2011. From the beginning until the end of 2011, their accounts payable decreased by a net amount of $95,000. How much "cash outflows for purchases" should Caldwell report for 2011 on their statement of cash flows?

A) $ 95,000
B) $900,000
C) $995,000
D) $805,000

Question 42

Crenshaw Inc. had the following information related to last year's purchases: What amount would be reported as "cash outflows for purchases" on the statement of cash flows using the direct method?

A) $527,000
B) $493,000
C) $475,000
D) $457,000

Question 43

Felton Inc. had the following information related to last year's purchases: What amount would be reported as "cash outflows for purchases" on the statement of cash flows using the direct method?

A) $307,500
B) $292,500
C) $312,500
D) $280,000

Question 44

What is the purpose of a statement of cash flows?

Question 45

Gregson Company had the following noncash current asset and current liabilities balances at the end of 2010 and 2011: Net income for 2011 was $750,000 and depreciation expense was $40,000. All sales and all purchases are on account. Gregson uses the indirect method for preparing the statement of cash flows.
Net cash flows from operating activities for 2011 would be:

A) $814,000
B) $774,000
C) $786,000
D) $766,000

Question 46

Clyde's Clothing Inc. comparative balance sheets and income statements showed the following information for 2010 and 2011: Clyde's accounts payable balances are composed solely of amounts due to suppliers for purchases of inventory. What is the amount of cash payments for inventory that Clyde should report on its 2011 statement of cash flows assuming that the direct method is used?

A) $387,000
B) $413,000
C) $497,000
D) $303,000

Question 47

For each of the following asset and liability balance changes from the beginning to the end of the year, indicate whether the change should be added to (+) or subtracted from (-) net income for purposes of preparing the operating activity section of the statement of cash flows using the indirect method.

Question 48

Burrows Inc. had an outstanding loan at the beginning of 2011 totaling $50,000. During 2011, $16,800 was paid out related to this loan broken down as follows: $15,000 towards principal and $1,800 in interest. Which of the following statements is correct regarding how the $16,800 payment should be depicted on the statement of cash flows?

A) The entire $16,800 should be shown as a cash outflow for financing activities.
B) The entire $16,800 should be shown as a cash outflow for investing activities.
C) The $15,000 principal portion should be shown as a cash outflow for financing activities, and the $1,800 in interest should be shown as a cash outflow for operating activities.
D) The $15,000 principal portion should be shown as a cash outflow for investing activities, and the $1,800 in interest should be shown as a cash outflow for operating activities.

Question 49

Why are noncash transactions included on the statement of cash flows? Provide an example of a noncash transaction that would be reported on the statement of cash flows.

Question 50

How do the direct and indirect methods of preparing the statement of cash flows differ?

Question 51

The statement of cash flows divides all transactions that affect a company's cash into three types of activities. List and briefly describe each of these activities.

Question 52

For each of the following asset and liability balance changes from the beginning to the end of the year, indicate whether the change should be added to (+) or subtracted from (-) net income for purposes of preparing the operating activity section of the statement of cash flows using the indirect method.

Question 53

For each of the following activities, indicate whether they would be classified as operating (O), investing (I), or financing (F) activities for purposes of the statement of cash flows:

Question 54

Atlantic Inc. had the following noncash current asset and current liabilities balances at the end of 2010 and 2011: Net income for 2011 was $940,000 and depreciation expense was $25,000. All sales and all purchases are on account. Atlantic uses the indirect method for preparing the statement of cash flows.
Net cash flows from operating activities for 2011 would be:

A) $ 918,000
B) $1,012,000
C) $1,002,000
D) $ 987,000

Question 55

What is a cash equivalent? Provide one example of a cash equivalent.

Question 56

Haley Inc. had the following information related to last year's purchases: What amount would be reported as "cash outflows for purchases" on the statement of cash flows using the direct method?

A) $93,000
B) $87,000
C) $77,000
D) $83,000

Question 57

For each of the following activities, indicate whether they would be classified as operating (O), investing (I), or financing (F) activities for purposes of the statement of cash flows:

Question 58

The payment of a cash dividend will be depicted on the statement of cash flows as a:

A) cash inflow from an operating activity.
B) cash outflow for an investing activity.
C) cash outflow for a financing activity.
D) cash outflow for an operating activity.

Question 59

Skipper's Souvenir Shop had comparative balance sheets and income statements that showed the following information for 2010 and 2011: Skipper's accounts payable balances are composed solely of amounts due to suppliers for purchases of inventory. What is the amount of cash payments for inventory that Skipper should report on its 2011 statement of cash flows assuming that the direct method is used?

A) $690,000
B) $710,000
C) $850,000
D) $550,000

Question 60

Why can't a decision-maker use sales revenue and expense information provided on the income statement as a measure of cash inflows and outflows from operating activities?

Question 61

The following account balances are for the noncash current assets and current liabilities of Sam's Surfboard Shop for 2010 and 2011:
In addition, the income statement for 2011 is as follows:
Required: Prepare the operating activities section of the statement of cash flows using the indirect method.

Question 62

MTM Inc. had the following information available from its 2011 balance sheet and income statement:
Required: Compute the amount that would be reported as "cash paid for insurance" on the statement of cash flows using the direct method.

Question 63

The following account balances are for the noncash current assets and current liabilities of Eloise's Furniture Shop for 2010 and 2011:
In addition, the income statement for 2011 is as follows:
Required: Prepare the operating activities section of the statement of cash flows using the indirect method.

Question 64

You are given the following transaction information for the TAL Corporation for 2011:
Required: Prepare a statement of cash flows using the direct method for TAL Corporation for 2011.

Question 65

Vargas Inc. had the following information related to last year's sales:
Required: Compute the amount that would be reported as "cash collections from customers" on the statement of cash flows using the direct method.

Question 66

The following information relates O'Hara Products Inc.:
O'Hara's accounts payable balances are composed solely of amounts due to suppliers for inventory purchases.
Required: Compute the amount that would be reported as "cash paid for purchases" on the statement of cash flows using the direct method.

Question 67

The following information relates to Finnegan Inc.:
Finnegan's accounts payable balances are composed solely of amounts due to suppliers for inventory purchases.
Required: Compute the amount that would be reported as "cash paid for purchases" on the statement of cash flows using the direct method.

Question 68

Poindexter Inc. had the following information related to last year's sales:
Required: Compute the amount that would be reported as "cash collections from customers" on the statement of cash flows using the direct method.