Question 1

The statement of cash flows separates cash flows into operating, nonoperating, and investing categories.

Accepted Answer

The statement of cash flows includes operating activities, investing activities, and financing activities.

Question 2

Cash received from the sale of one of a company's warehouses is classified as a cash flow from investing activities in a statement of cash flows.

Accepted Answer

If a company sold a warehouse and received cash, this would be classified as an inflow of cash from investing activities.

Question 3

Cash paid as dividends to stockholders is classified as a cash flow from investing activities in a statement of cash flows.

Accepted Answer

Dividends paid to stockholders are classified as a cash outflow from financing activities.

Question 4

Cash received from customers for services rendered is classified as a cash flow from operating activities in a statement of cash flows.

Accepted Answer

Cash received from customers for services is an operating activity inflow of cash.

Question 5

Information about noncash investing and financing activities must be disclosed in a schedule that is separate from the statement of cash flows.

Accepted Answer

Noncash investing and financing activities are disclosed in a separate schedule to the statement of cash flows.

Question 6

The direct method of presenting the net cash flow from operating activities shows the major categories of operating cash receipts and payments.

Accepted Answer

When the direct method is used to present net cash flows, it shows the major categories of operating cash receipts and payments.

Question 7

If accounts payable increase during an accounting period, then the cash paid for merchandise purchased is less than the merchandise purchases for the period.

Accepted Answer

Cash paid for merchandise purchased is less than the merchandise purchases for the period when accounts payable have increased during the period.

Question 8

If prepaid insurance decreases during an accounting period, then the cash paid for insurance is less than the period's insurance expense.

Accepted Answer

It is true that cash paid for insurance is less than the period's insurance expense when prepaid insurance decreases during a period.

Question 9

If accounts receivable increase during an accounting period, then the cash received from customers is more than the sales revenue for the period.

Accepted Answer

If accounts receivable is increasing, this means that the amount of sales on credit is greater than the cash received.

Question 10

The operating cash flow to capital expenditures ratio in excess of 1.0 means that the firms' current operating activities are providing cash in excess of the amount needed to provide the desired level of plant capacity.

Accepted Answer

Since the operating cash flow to capital expenditures ratio is defined as operating cash flows divided by capital expenditures, firms with ratios greater than 1.0 have operating cash flows that exceed capital needs to acquire long-term assets.

Question 11

A typical example of a cash equivalent is an investment in:

Accepted Answer

Cash equivalents must be easily convertible into a known cash amount and close to maturity so that their value is not affected by interest rate changes.

Question 12

A firm's net cash flow from operating activities includes:

Accepted Answer

Operating activities are cash in- and outflows from selling goods or rendering services. Selling equipment is an investing activity. Issuing stock and paying loans are financing activities.

Question 13

A firm's cash flows from investing activities include:

Accepted Answer

Investing activities are those involving the acquisition and disposal of property, plant, and equipment and intangible assets, and the purchase and sale of investments in government securities and other companies.

Question 14

Which of the following is disclosed separately in a statement of cash flows using the indirect method?

Accepted Answer

The operating cash flows section begins with net income using the indirect method. Answers B and C are separate items under the direct method.

Question 15

Nichole Company has an accrual basis net income of $260,000 and the following related items:
 How much is Nichole's net cash flow from operating activities?

Accepted Answer

$260,000 + 76,000 - 24,000 + 28,000 - 16,000 = $324,000

Question 16

Quechua Inc. has an accrual basis net loss of $56,000 and the following related items:
 How much is Quechua Inc.'s net cash flow from operating activities?

Accepted Answer

($56,000) + $44,000 + $32,000 - $24,000 + $12,000 + $20,000 = $28,000

Question 17

Rachel's Modeling School has an accrual basis net income of $128,000 and the following related items:
 What is Rachel's Modeling School's net cash flow from operating activities?

Accepted Answer

$128,000 + $52,000 + $28,000 + $20,000 + $24,000 = $252,000

Question 18

A company reported annual sales revenue of $1,800,000. During the year, accounts receivable decreased from a $56,000 beginning balance to a $48,000 ending balance. Accounts payable decreased from a $44,000 beginning balance to a $32,000 ending balance.
How much is cash received from customers for the year?

Accepted Answer

$1,800,000 + $56,000 - $48,000 = $1,808,000

Question 19

A company reported annual sales revenue of $2,580,000. During the year accounts receivable increased from a $56,000 beginning balance to a $76,000 ending balance. Accounts payable decreased from a $52,000 beginning balance to a $24,000 ending balance.
How much is cash received from customers for the year?

Accepted Answer

$2,580,000 - $76,000 + $56,000 = $2,560,000

Question 20

A company reported cost of goods sold of $1,760,000 for the year. During the year, inventory increased from a $92,000 beginning balance to a $140,000 ending balance, and accounts payable increased from a $48,000 beginning balance to a $56,000 ending balance.
How much is the cash paid for merchandise purchased during the year?

Accepted Answer

$1,760,000 + $140,000 - $92,000 + $48,000 - $56,000 = $1,800,000

Quiz 4: Reporting and Analyzing Cash Flows