Deck 9: Preparing and Analyzing the Statement of Cash Flows

Question 1

A statement NOT required by FASB to comply with GAAP is ________.

A)a balance sheet
B)an income statement
C)a statement of cash flows
D)a cash budget

Answer 1

D

Question 2

Cash budgets are required by ________.

A)U)S.GAAP
B)IFRS
C)both U.S.GAAP and IFRS
D)neither U.S.GAAP nor IFRS

Answer 2

D

Question 3

The statement of cash flows ________.

A)reports all of the cash a company has received and all of the cash a company has disbursed during an accounting period
B)reports all of the income,expenses,and profit or losses a company has earned or incurred during an accounting period
C)reports the amount of assets,liabilities,and shareholders' equity of a business
D)reports all of the income,dividends,and retained earnings of a business

Answer 3

A

Question 4

The statement of cash flows reports the ________.

A)sources and uses of cash
B)financial position of a company
C)changes in shareholders' equity
D)profitability of a company

Question 5

The cash budget ________.

A)is one of the financial statements required by the SEC and FASB
B)is used by management to anticipate any cash flow shortages
C)has three sections: operating,investing,and financing
D)all of these

Question 6

Cash paid to vendors is characterized as an ________ activity.

A)inflow from investing
B)outflow for investing
C)inflow from operating
D)outflow for operating

Question 7

Repayment of a loan is a(n)________ activity on the statement of cash flows.

A)operating
B)investing
C)financing
D)indirect

Question 8

Cash from operating activities includes ________.

A)all cash receipts and all cash disbursements for long-term business assets
B)all cash receipts and all cash disbursements for loans,contributions from owners,and distributions to owners
C)all cash receipts and cash disbursements for routine sales and payments made in the course of doing business
D)detailed estimates of the sources of cash and uses of cash

Question 9

A cash budget ________.

A)reports cash inflows and outflows from operating,investing,and financing activities
B)is a detailed plan of a company's estimated cash receipts and disbursements
C)is prepared using the indirect method
D)is prepared using the direct method

Question 10

The preparation of cash budgets includes ________.

A)estimating in detail the amount and the timing of cash receipts and disbursements
B)categorizing cash inflows and outflows by operating,financing,and investing activities
C)securing a line of credit from a bank
D)all of these

Question 11

The statement of cash flows reports ________.

A)all of the cash a company has received and all of the cash a company has disbursed during an accounting period
B)all of the income,expenses,profit or losses a company has earned or incurred during an accounting period
C)the change in total assets during an accounting period
D)all of the sources and uses of shareholders' equity

Question 12

Preparation of the cash budget starts ________.

A)with net income and makes adjustments for all the items that are not cash
B)by converting every number on the income statement to its cash amount
C)by estimating the sources of cash and the uses of cash
D)with cash collected from customers

Question 13

Cash dividends paid to shareholders is a(n)________ activity on the statement of cash flows.

A)operating
B)investing
C)financing
D)indirect

Question 14

The statement of cash flows is required by ________.

A)U)S.GAAP only
B)IFRS only
C)both U.S.GAAP and IFRS
D)neither U.S.GAAP nor IFRS

Question 15

The statement of cash flows shows all of ________ the period.

A)the cash a company has collected and paid during
B)the revenues earned and expenses incurred during
C)assets,liabilities and shareholders' equity at the end of
D)the changes in shareholders' equity during

Question 16

Cash budgets allow companies to plan for any cash shortage by ________.

A)securing a line of credit from a local bank
B)borrowing money
C)altering the timing of receipts or disbursements
D)all of these

Question 17

Cash proceeds from a new stock issue is a(n)________ activity on the statement of cash flows.

A)operating
B)investing
C)financing
D)indirect

Question 18

The statement of cash flows does NOT report cash flows from ________.

A)operating activities
B)investing activities
C)financing activities
D)budgeting activities

Question 19

Cash proceeds from the sale of land is a(n)________ activity on the statement of cash flows.

A)operating
B)investing
C)financing
D)indirect

Question 20

Cash collections from customers is a(n)________ activity on the statement of cash flows.

A)operating
B)investing
C)financing
D)indirect

Question 21

Delgado,Inc.wants to apply for a bank loan.Delgado gave an income statement and balance sheet to the bank.However,the bank wants a statement of cash flows as well.Explain why the bank wants a statement of cash flows and how the statement is organized.

Question 22

Each cash flow reported in the statement of cash flows relates to operating,investing,or financing activities.

Question 23

The statement of cash flows explains the details of the change in the cash balance during an accounting period.

Question 24

What should all companies prepare in order to anticipate liquidity problems?

Question 25

How would managers use the information reported in the statement of cash flows?

Question 26

Cash from operating activities includes cash ________.

A)collected from customers
B)paid for land
C)received from loans
D)paid for dividends

Question 27

The statement of cash flows shows all of the cash a company has received and all the cash a company has paid from operating,investing,and manufacturing during the accounting period.

Question 28

The statement of cash flows shows all of the income a company earned during a period and the dividends it has declared.

Question 29

Cash from operating activities includes all cash receipts and cash disbursements for routine sales and purchases made in the course of doing business.

Question 30

The preparation of the statement of cash flows includes the calculation of all of the following EXCEPT the ________.

A)net cash inflows (or outflows)from financing activities
B)net cash inflows (or outflows)from free cash flows
C)net cash inflows (or outflows)from operating activities
D)net cash inflows (or outflows)from investing activities

Question 31

Cash transactions related to loans and cash contributions from and distributions to owners are investing activities.

Question 32

The statement of cash flows is one of the four financial statements a company must prepare as part of GAAP.

Question 33

The statement of cash flows is one of the four financial statements a company must prepare as part of International Financial Reporting Standards (IFRS).

Question 34

Managers use a cash budget to anticipate any future cash shortages.

Question 35

Cash transactions related to buying and selling assets that the firm plans to use for longer than one year are investing activities.

Question 36

Only companies seeking loans from a bank need to prepare a cash budget.

Question 37

The preparation of the statement of cash flows includes the calculation of all of the following EXCEPT the ________.

A)net increase (or decrease)in total cash
B)net cash inflows (or outflows)from operating activities
C)net cash inflows (or outflows)from investing activities
D)net increase (or decrease)in retained earnings

Question 38

A cash budget is a detailed plan of a company's estimated cash receipts and estimated cash disbursements.

Question 39

A statement of cash flows is a detailed plan of a company's estimated cash receipts and estimated cash payments.

Question 40

The statement of cash flows shows all the cash a company has received and all the cash a company has paid during the accounting period.

Question 41

On January 1,2011,Company X had accounts receivable of $20,000.During the year,Company X sold $100,000 of merchandise to credit customers.At December 31,2011,Company X had accounts receivable of $50,000.How much cash did the company collect from credit customers during the year?

A)$130,000
B)$120,000
C)$100,000
D)$70,000

Question 42

The only difference between the direct and indirect methods used for the preparation of the statement of cash flows is the way cash from operating activities is calculated.

Question 43

A company that uses the direct method will show more cash from operating activities than a company that uses the indirect method.

Question 44

Regardless of whether the statement of cash flows was prepared using the direct method or the indirect method,Proceeds from the sale of land is reported as a line item under investing activities.

Question 45

On January 1,2011,Company Z had accounts receivable of $5,000.During the year,Company Z sold $100,000 of merchandise to credit customers.At December 31,2011,Company Z had accounts receivable of $4,000.How much cash did the company collect from credit customers during the year?

A)$105,000
B)$101,000
C)$99,000
D)$95,000

Question 46

The direct method for the preparation of the statement of cash flows ________.

A)is required by the FASB
B)is in conformity with GAAP
C)is the preferred method used by most businesses
D)is required by the IASB

Question 47

The direct method of preparing the operating activities section of the statement of cash flows ________.

A)lists each important item of cash inflows from operating activities
B)lists each important item of cash outflows from investing activities
C)adjusts accrual-basis income
D)adjusts cash-basis income

Question 48

During its first year of business,Gnu,Inc.sold $200,000 of merchandise to customers on account.At the end of the year Gnu,Inc.had accounts receivable of $40,000.How much cash did the company collect from credit customers during the year?

A)$200,000
B)$240,000
C)$160,000
D)$40,000

Question 49

Regardless of whether the statement of cash flows was prepared using the direct method or the indirect method,Cash collected from customers is reported as a line item under operating activities.

Question 50

The direct method of preparing the statement of cash flows ________.

A)is preferred by business over the indirect method
B)provides greater clarity for users than the indirect method
C)reports a greater amount of cash than the indirect method
D)reports a smaller amount of cash than the indirect method

Question 51

Wilson Wong is reviewing his financial statements for May.His dry cleaning business had net income of $13,000 for May,but his business checking account shows a decrease of $4,500.Explain to Wilson why the net income for the business and the ending balance in cash are not the same amounts.

Question 52

Delgado,Inc.wants to apply for a bank loan.It has put together a cash budget,an income statement and a balance sheet.However,the bank wants it to present a statement of cash flows in addition to the cash budget.Explain the differences between the cash budget and statement of cash flows.

Question 53

The difference between the direct and indirect methods applies only to the ________ activities section(s)of the statement of cash flows.

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

Question 54

Which method of preparing the statement of cash flows would show increases in accounts receivable being subtracted from net income?

A)the direct method
B)the indirect method
C)accrual basis method
D)No method shows increases in accounts receivable being subtracted from net income.

Question 55

What are the four basic financial statements,and what do they report?

Question 56

There are two acceptable ways to report cash from operating activities: the investment method and the finance method.

Question 57

There are two acceptable ways to report cash from operating activities: the direct method and the indirect method.

Question 58

The following information is from Z,Inc.'s December 31,2011 annual report: Note: Z,Inc.does not sell to its customers on account; it collects cash from its customers in advance.
Cash collected from customers on Z,Inc.'s statement of cash flows equals ________.

A)$800,000
B)$802,000
C)$798,000
D)$810,000

Question 59

On January 1,2011,Company Z had accounts receivable of $4,000.During the year,Company Z sold $100,000 of merchandise to credit customers.At December 31,2011,Company Z had accounts receivable of $5,000.How much cash did the company collect from credit customers during the year?

A)$105,000
B)$101,000
C)$99,000
D)$95,000

Question 60

Cash from investing activities includes all cash receipts and cash disbursements for routine sales and purchases made in the course of doing business.

Question 61

The following information is from Sharp,Inc.'s December 31,2011 annual report: Cash collected from customers on Sharp,Inc.'s statement of cash flows equals ________.

A)$90,000
B)$98,000
C)$88,000
D)$92,000

Question 62

Cash collected from customers will be less than the revenue for the same period if the accounts receivable balance increases.

Question 63

The following information is from Sharp,Inc.'s December 31,2011 annual report: Cash paid for salaries on Sharp,Inc.'s statement of cash flows equals ________.

A)$30,000
B)$29,000
C)$33,000
D)$31,000

Question 64

The following information is from Cashew,Inc.'s December 31,2011 annual report: Cash paid for salaries on Cashew,Inc.'s statement of cash flows equals ________.

A)$30,000
B)$29,000
C)$33,000
D)$31,000

Question 65

Team Shirts,Inc.recognized $48,000 in salaries and wages expense for the quarter.At the beginning of the quarter,the balance in Salaries payable was $6,000.At the end of the quarter,the balance was $10,000.How is the accounting information for these items reported on the statement of cash flows using the direct method?

Question 66

During Clean Dirt,Inc.'s first year of business,salary expense was $60,000.At the end of its first year of business,Clean Dirt's first balance sheet showed $5,000 of salaries payable.How much did Clean Dirt pay in cash for salaries during its first year of business?

A)$60,000
B)$55,000
C)$65,000
D)$5,000

Question 67

The following information is from ABC,Inc.'s December 31,2011 annual report: Note: ABC,Inc.does not sell to its customers on account; it collects cash from its customers in advance.
Cash collected from customers on ABC,Inc.'s statement of cash flows equals ________.

A)$800,000
B)$802,000
C)$798,000
D)$810,000

Question 68

Clean Dirt,Inc.had $8,000 of salaries payable at December 31,2010.During 2011,Clean Dirt's salary expense was $60,000.At December 31,2011,Clean Dirt's balance sheet showed $5,000 of salaries payable.How much did Clean Dirt pay in cash for salaries during 2011?

A)$60,000
B)$65,000
C)$63,000
D)$57,000

Question 69

The following information is from X,Inc.'s December 31,2011 annual report: Note: X,Inc.does not sell to its customers on account; it collects cash from its customers in advance.
Cash paid for insurance on X,Inc.'s statement of cash flows equals ________.

A)$30,000
B)$29,000
C)$33,000
D)$31,000

Question 70

Cash paid for salaries will be greater than the salary expense for the same period if the salary payable balance increases.

Question 71

Cash collected from customers will be greater than the revenue for the same period if the accounts receivable balance increases.

Question 72

The following information is from Avatar,Inc.'s December 31,2011 annual report: Note: Avatar always collects cash from its customers in advance.
Cash collected from customers on Avatar,Inc.'s statement of cash flows equals ________.

A)$80,000
B)$89,000
C)$84,000
D)$76,000

Question 73

The following information is from Z,Inc.'s December 31,2011 annual report: Note: Z,Inc.does not sell to its customers on account; it collects cash from its customers in advance.
Cash paid for interest on Z,Inc.'s statement of cash flows equals ________.

A)$30,000
B)$28,000
C)$33,000
D)$32,000

Question 74

Cash paid for salaries will be less than the salary expense for the same period if the salary payable balance increases.

Question 75

The following information is from X,Inc.'s December 31,2011 annual report: Note: X,Inc.does not sell to its customers on account; it collects cash from its customers in advance.
Cash collected from customers on X,Inc.'s statement of cash flows equals ________.

A)$90,000
B)$98,000
C)$88,000
D)$92,000

Question 76

The following information is from Cashew,Inc.'s December 31,2011 annual report: Cash collected from customers on Cashew,Inc.'s statement of cash flows equals ________.

A)$90,000
B)$98,000
C)$88,000
D)$92,000

Question 77

The following information is from Avatar,Inc.'s December 31,2011 annual report: Note: Avatar always collects cash from its customers in advance.
Cash paid for insurance on Avatar,Inc.'s statement of cash flows equals ________.

A)$23,000
B)$22,000
C)$21,000
D)$19,000

Question 78

Jill,Inc.earned $950,000 on account during 2011.Customers owed Jill,Inc.$40,000 at December 31,2010 and $50,000 at December 31,2011.For each item,first select the column of the 2011 financial statement where the line item appears,and then fill in the correct dollar amount:

Question 79

Clean Dirt,Inc.had $10,000 of accounts receivable at December 31,2010.During 2011,Clean Dirt's sales were $100,000.At December 31,2011,Clean Dirt's statement of cash flows showed cash collected from customers of $102,000.How much was Clean Dirt's accounts receivable balance on its December 31,2011 balance sheet?

A)$12,000
B)$10,000
C)$8,000
D)$2,000

Question 80

The following information is from Daffy Duct,Inc.'s December 31,2011 annual report: Net cash from operating activities on Daffy Duct's statement of cash flows equals ________.

A)$30,000
B)$29,000
C)$33,000
D)$31,000