Deck 12: Statement of Cash Flows

Question 1

The receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities.

Answer 1

False

Question 2

In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.

Answer 2

True

Question 3

A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions.

Answer 3

False

Question 4

The statement of cash flows explains the difference between net income, as shown on the income statement, and the net cash flows generated from operations.

Question 5

Noncash investing and financing transactions, such as the exchange of common stock to purchase assets, represent significant investing and financing activities and are reflected either in a schedule separate from the statement of cash flows or in a separate note to the financial statements.

Question 6

Using the indirect method, an increase in accounts payable during a period is deducted from net income in calculating cash provided by operations.

Question 7

Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

Question 8

The statement of cash flows classifies cash receipts and payments as operating, nonoperating, financial, and extraordinary activities.

Question 9

The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement.

Question 10

Noncash investing and financing activities must be reported in the body of a statement of cash flows.

Question 11

Operating activities include the cash effects of transactions that create revenues and expenses.

Question 12

The payment of interest on bonds payable is classified as a cash outflow from operating activities.

Question 13

A statement of cash flows indicates the sources and uses of cash during a period.

Question 14

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

Question 15

The sale of land for cash would be classified as a cash inflow from an investing activity.

Question 16

The statement of cash flows shows the effects on net income of a company's operating, investing, and financing activities for an accounting period.

Question 17

Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income.

Question 18

The primary purpose of the statement of cash flows is to provide information about a company's cash receipts and cash payments during an accounting period.

Question 19

The activity from the balance sheet to be presented in the financing activities section of the statement of cash flows is based on an analysis of stockholders' equity only.

Question 20

For external reporting, a company must prepare either an income statement or a statement of cash flows, but not both.

Question 21

In preparing a statement of cash flows, an increase in the Common Stock and Treasury Stock accounts during a period would be an investing activity.

Question 22

Cash provided by operations is generally equal to operating income.

Question 23

When using the T-account approach, the change in cash is equal to the change in liabilities less the change in equity plus the change in noncash assets.

Question 24

During the decline phase, cash from investing activities may be negative while cash from financing activities may be positive as the company issues new stock or debt.

Question 25

Using the indirect method, an increase in accounts receivable during a period is deducted from net income in calculating cash provided by operations.

Question 26

Free cash flow is cash from operating activities less dividends.

Question 27

During a period, cost of goods sold plus an increase in inventory plus an increase in accounts payable equals cash paid to suppliers.

Question 28

Under the indirect method, gains and losses from the sale of equipment used in operations would be included in the cash flows from operating activities section on the statement of cash flows.

Question 29

As an adjustment to operating expenses per the income statement, an increase in accrued liabilities would be added to operating expenses to determine cash payments for operating expenses.

Question 30

During the introductory phase, cash from operations and cash from investing activities are expected to be negative.

Question 31

Using the direct method, major classes of investing and financing activities are listed in the operating activities section.

Question 32

During the maturity phase, cash from operations and net income are approximately the same.

Question 33

In computing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis.

Question 34

The measurement of free cash flow provides additional insight regarding a company's cash-generating ability.

Question 35

An increase in inventory would be added to cost of goods sold to determine net purchases for the period.

Question 36

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is not emphasized.

Question 37

The growth phase of the product life cycle occurs when the company is purchasing fixed assets and beginning to produce and sell.

Question 38

During the year, Income Tax Expense amounted to $12,500 and Income Taxes Payable increased by $1,500; therefore, the cash paid for income taxes was $11,000.

Question 39

Cash used in operations will exceed cash generated by operations in the maturity phase of the product lifecycle.

Question 40

A loss on sale of equipment is added to net income in determining cash provided by operations under the indirect method.

Question 41

The statement of cash flows will not report the

A)amount of checks outstanding at the end of the period.
B)sources of cash in the current period.
C)uses of cash in the current period.
D)change in the cash balance for the current period.

Question 42

Investing activities include

A)collecting cash on loans made.
B)obtaining cash from creditors.
C)obtaining capital from owners.
D)repaying money previously borrowed.

Question 43

Restricted cash should be excluded from the beginning and ending balances of cash in preparing a statement of cash flows.

Question 44

The first step in preparing the worksheet is to enter the beginning and ending balances of balance sheet accounts.

Question 45

The issuance of debt to purchase assets would be classified as a(n)

A)operating activity.
B)investing activity.
C)financing activity.
D)none of these answers are correct.

Question 46

In addition to the three basic financial statements, which of the following is also a required financial statement?

A)The Cash Budget.
B)Statement of Cash Flows.
C)Statement of Cash Inflows and Outflows.
D)The Cash Reconciliation.

Question 47

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is

A)cash flows from operating activities.
B)cash flows from investing activities.
C)cash flows from financing activities.
D)usually different from year to year.

Question 48

Financing activities involve

A)lending money.
B)acquiring investments.
C)issuing debt.
D)acquiring long-lived assets.

Question 49

If a company reports a net loss, it

A)may still have a net increase in cash.
B)will not be able to pay cash dividends.
C)will not be able to get a loan.
D)will not be able to make capital expenditures.

Question 50

A worksheet can be prepared in place of the statement of cash flows.

Question 51

The statement of cash flows

A)must be prepared on a daily basis.
B)summarizes the operating, financing, and investing activities of an entity.
C)is another name for the income statement.
D)is a special section of the income statement.

Question 52

The order of presentation of activities on the statement of cash flows is

A)operating, investing, and financing.
B)operating, financing, and investing.
C)financing, operating and investing.
D)financing, investing and operating.

Question 53

The acquisition of land by issuing common stock is

A)a noncash transaction that is not reported in the body of a statement of cash flows.
B)a cash transaction and would be reported in the body of a statement of cash flows.
C)a noncash transaction and would be reported in the body of a statement of cash flows.
D)only reported if the statement of cash flows is prepared using the direct method.

Question 54

Cash flows from operating activities, as reported on the statement of cash flows under the indirect method, would include

A)receipts from the sale of investments.
B)net income.
C)payments for dividends.
D)receipts from the issuance of capital stock.

Question 55

Generally, the most important category on the statement of cash flows is cash flows from

A)operating activities.
B)investing activities.
C)financing activities.
D)significant noncash activities.

Question 56

Which one of the following items is not generally used in preparing a statement of cash flows?

A)Adjusted trial balance.
B)Comparative balance sheets.
C)Current income statement.
D)Additional information.

Question 57

The primary purpose of the statement of cash flows is to

A)provide information about the investing and financing activities during a period.
B)prove that revenues exceed expenses if there is a net income.
C)provide information about the cash receipts and cash payments during a period.
D)facilitate banking relationships.

Question 58

All of the following statements are true regarding cash flow presentations except

A)the balance sheet provides only limited information about a company's cash flows.
B)the balance sheet provides information about how property, plant, and equipment were financed.
C)the income statement does not show how much cash was generated by operating activities.
D)if cash from operations is compared to net income, information about the quality of reported net income is revealed.

Question 59

Cash receipts from interest and dividends are classified as

A)financing activities.
B)investing activities.
C)operating activities.
D)either financing or investing activities.

Question 60

When the T-account approach is used, an analysis of the changes in all of the noncash balance sheet accounts will explain the change in the Cash account.

Question 61

Assume that the Brackney Inc.uses the indirect method to depict cash flows.Indicate where, if at all, land purchased for cash would be classified on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 62

Assume that the Charleston Inc.uses the indirect method to depict cash flows.Indicate where, if at all, an inventory increase would be classified on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 63

Vanguard Company purchased treasury stock with a cost of $55,000 during 2022.During the year, the company paid dividends of $20,000 and issued bonds payable for proceeds of $876,000.Cash flows from financing activities for 2022 total

A)$856,000 net cash inflow.
B)$911,000 net cash inflow.
C)$75,000 net cash outflow.
D)$801,000 net cash inflow.

Question 64

Assume that the Romanus Company uses the indirect method to depict cash flows.Indicate where, if at all, income taxes paid would be reported on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 65

McLaughlin Company issued common stock for proceeds of $558,000 during 2022.The company paid dividends of $99,000 and issued a long-term note payable for $375,000 in exchange for equipment during the year.The company also purchased treasury stock that had a cost of $81,000.The financing section of the statement of cash flows will report net cash inflows of

A)$378,000.
B)$834,000.
C)$459,000.
D)$753,000.

Question 66

Assume that the Quinn Corporation uses the indirect method to depict cash flows.Indicate where, if at all, interest paid on a note would be reported on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 67

Which of the following activities would be classified as an investing activity?

A)Cash received from interest revenue.
B)Cash paid (loaned) to a borrower as a loan.
C)Cash received from dividend revenue.
D)Cash paid to reacquire capital stock.

Question 68

Assume that the Zahler Corporation uses the indirect method to depict cash flows.Indicate where, if at all, treasury stock purchased with cash would be classified on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 69

The payment of a cash dividend would be classified as a(n)

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

Question 70

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows.Indicate where, if at all, a stock dividend declared and issued would be classified on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 71

Assume that the Kelly Company uses the indirect method to depict cash flows.Indicate where, if at all, land and building purchased with a mortgage would be classified on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 72

Assume that the Kaenzig Corporation uses the indirect method to depict cash flows.Indicate where, if at all, common stock issued for cash would be classified.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 73

Assume that the Decker Corporation uses the indirect method to depict cash flows.Indicate where, if at all, dividends received on securities held would be reported on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 74

During 2022, Lowes Company sold equipment with a book value of $120,000 for proceeds of $145,000.The company purchased new equipment for $320,000 by signing a long-term note payable.No other transactions impacted long-term asset accounts during 2022.The investing section of the statement of cash flows will report

A)net cash outflows of $295,000.
B)net cash outflows of $175,000.
C)net cash inflows of $145,000.
D)net cash inflows of $25,000.

Question 75

In Jackson Jones Company, land decreased $270,000 because of a cash sale for $270,000, the equipment account increased $90,000 as a result of a cash purchase, and bonds payable increased $300,000 from issuance for cash at face value.The net cash provided by investing activities is

A)$270,000.
B)$480,000.
C)$180,000.
D)$210,000.

Question 76

Which of the following is the first step in preparing the statement of cash flows?

A)Determine the net cash provided by operating activities.
B)Determine the net income.
C)Determine net cash provided by investing and financing activities.
D)Determine the net increase (decrease) in cash.

Question 77

APS Company issued 20,000 shares of $1 par common stock for $40 per share during 2022.The company paid dividends of $48,000 and issued long-term notes payable of $440,000 during the year.What amount of cash flows from financing activities will be reported on the statement of cash flows?

A)$12,000 net cash inflow.
B)$352,000 net cash inflow.
C)$705,000 net cash outflow.
D)$1,192,000 net cash inflow.

Question 78

Assume that the Ecuyer Company uses the indirect method to depict cash flows.Indicate where, if at all, stock issued for equipment would be classified on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 79

Assume that the Safferstein Corporation uses the indirect method to depict cash flows.Indicate where, if at all, long-term debt retired with cash would be reported on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.

Question 80

Assume that the Park Corporation uses the indirect method to depict cash flows.Indicate where, if at all, an accounts receivable decrease would be classified on the statement of cash flows.

A)Operating activities section.
B)Investing activities section.
C)Financing activities section.
D)Does not represent a cash flow.