Question 1

Which of the following changes in retained earnings during a period will be reported in the financing activities section of the statement of cash flows?
1) Declaration of a cash dividend paid during the period.
2) Net income for the period.

Accepted Answer

The declaration of a cash dividend paid during the period represents a use of retained earnings and is reported in the financing activities section of the statement of cash flows. Net income for the period represents an increase in retained earnings but is not reported in the financing activities section. Instead, it is reported in the operating activities section.

Question 2

The indirect and direct methods of preparing the statement of cash flows are identical except for the

Accepted Answer

The indirect and direct methods of preparing the statement of cash flows differ only in the operating activities section. The indirect method adjusts net income for changes in non-cash working capital items and non-operating gains and losses, while the direct method lists all cash receipts and payments from operating activities.

Question 3

On the statement of cash flows using the indirect method, patent amortization expense will

Accepted Answer

Patent amortization expense is a non-cash expense that is added back to net income in the operating section of the cash flow statement when using the indirect method. This adjustment is made because the expense reduces net income on the income statement, but it does not involve an actual outflow of cash.

Question 4

Which of the following transactions would not be classified as a financing activity?

Accepted Answer

The purchase of a long-term investment in bonds is classified as an investing activity, not a financing activity. A financing activity involves obtaining or repaying funds to finance the company's operations or investments, such as issuing or repurchasing stocks or bonds or paying dividends to shareholders.

Question 5

The statement of cash flows

Accepted Answer

The statement of cash flows is used to assess an entity's ability to pay dividends and meet obligations, specifically by showing the cash inflows and outflows during a period of time. It is not prepared instead of an income statement, and it is not prepared from comparative income statements. It also does not reflect earnings per share figures.

Question 6

To determine the net cash provided (used) by operating activities, it is necessary to analyze

Accepted Answer

In order to determine the net cash provided (used) by operating activities, all three elements - the current year's income statement, a comparative balance sheet, and any additional information - must be analyzed. The income statement provides information about revenues and expenses, while the comparative balance sheet shows changes in assets, liabilities, and equity over time. Additional information such as non-cash expenses or gains/losses on asset sales may also impact the calculation of net cash provided/used by operating activities.

Question 7

The following data are available for Springer Corporation.
Net cash provided by operating activities is:

Accepted Answer

The answer of The following data are available for Springer...

Question 8

The following data are available for Cole Company.  Net cash provided by financing activities is:

Accepted Answer

The answer of The following data are available for Cole...

Question 9

In Wallace Company, net income is $260,000. If accounts receivable increased $140,000 and accounts payable decreased $40,000, net cash provided by operating activities using the indirect method is:

Accepted Answer

To calculate net cash provided by operating activities using the indirect method, start with net income and adjust for changes in working capital. Net income is $260,000. An increase in accounts receivable of $140,000 is subtracted, and a decrease in accounts payable of $40,000 is also subtracted. Therefore, $260,000 - $140,000 - $40,000 = $80,000.

Question 10

In Rooney Company, Treasury Stock increased $30,000 from a cash purchase, and Retained Earnings increased $80,000 as a result of net income of $124,000 and cash dividends paid of $44,000. Net cash used by financing activities is:

Accepted Answer

Treasury Stock increased by $30,000, indicating cash was used to purchase the stock, which is a financing activity. Retained Earnings increased by $80,000, which includes net income of $124,000 and dividends paid of $44,000. Dividends paid are a financing activity, so the net cash used by financing activities is $44,000 (dividends paid) minus $30,000 (treasury stock purchased), which equals $14,000. Therefore, the net cash used by financing activities is $14,000 added to the $30,000 used to purchase treasury stock, which equals $74,000.

Question 11

Free cash flow equals cash provided by

Accepted Answer

The answer of Free cash flow equals cash provided by
...

Question 12

A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is

Accepted Answer

Free cash flow (FCF) is the cash remaining from operations after adjustment for capital expenditures and dividends, and it gives insight into a company's ability to generate cash for growth opportunities or to return value to shareholders. Option A (adjusted cash from operations) and option D (net cash provided by operating activities) may not account for capital expenditures and dividends, while option B (cash provided by operations) may only show the cash generated from operations before considering these important payments.

Question 13

When equipment is sold for cash, the amount received is reflected as a cash

Accepted Answer

When equipment is sold for cash, it is considered a cash inflow in the investing section of the statement of cash flows, as it represents a source of cash from a sale of a long-term asset.

Question 14

If $250,000 of bonds are issued during the year but $100,000 of old bonds are retired during the year, the statement of cash flows will show a(n)

Accepted Answer

Issuing $250,000 of bonds results in an increase in cash flow, while retiring $100,000 of old bonds results in a decrease in cash flow. Therefore, the statement of cash flows will show a net increase in cash flow of $150,000 ($250,000 - $100,000 = $150,000).

Question 15

Which of the following would not be needed to determine net cash provided by operating activities?

Accepted Answer

Payment of cash dividends relates to financing activities on the statement of cash flows, not operating activities. The other choices affect operating activities.

Question 16

In Shannon Company, there was an increase in the land account during the year of $48,000. Analysis reveals that the change resulted form a cash sale of land at cost $110,000, and a cash purchase of land for $158,000. In the statement of cash flows, the change in the land account should be reported in the investment section:

Accepted Answer

The change in the land account resulted from both a cash sale of land and a cash purchase of land, therefore it should be reported in the investment section as a purchase of land for $158,000 and a sale of land for $110,000, resulting in a net increase of $48,000.

Question 17

The following data are available for Nichols Corporation.  Net cash provided by investing activities is:

Accepted Answer

The answer of The following data are available for Nichols...

Question 18

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of

Accepted Answer

A comparative balance sheet, which shows the balances of assets, liabilities, and equity at the beginning and end of the period, is used to determine the changes in cash balance over the period.

Question 19

The statement of cash flows will not provide insight into

Accepted Answer

The statement of cash flows provides information on the inflow and outflow of cash for a given period, but it cannot predict the exact amount of future bond issues.

Question 20

Land acquired from the issuance of common stock is reported

Accepted Answer

Land acquired from the issuance of common stock is a non-cash investing and financing activity, which is reported in a separate schedule at the bottom of the statement of cash flows.

Quiz 17: Statement of Cash Flows

Which of the following changes in retained earnings during a period will be reported in the financing activities section of the statement of cash flows? 1) Declaration of a cash dividend paid during the period. 2) Net income for the period.