Question 1

Refer to Metz Vets. Which of the following activities results in a cash outflow?

Accepted Answer

The answer of Refer to Metz Vets. Which of the...

Question 2

Each of the following transactions would be classified as an investing activity except:

Accepted Answer

Receiving dividends on an investment in the stock of another company is considered an operating activity because it relates to the income received from investments, not the purchase or sale of long-term assets or investments.

Question 3

Occasionally, companies engage in important investing and financing activities which do not affect cash. If the amount of the transaction is significant, how should it be disclosed when financial statements are prepared?

Accepted Answer

When significant investing and financing activities do not affect cash, it should be disclosed in a note to the financial statements or in a supplemental schedule. This will provide investors and other stakeholders with important information about the company's financial activities that may impact its overall financial health, even if they do not involve cash transactions. Disclosing the information in a separate section in the cash flow statement with a corresponding zero balance (option A) may be confusing and misleading, as it may suggest that the activity had no impact on the company's financial position. Disclosure in investing activities (option B) or financing activities (option D) may also be misleading, as it would not accurately reflect the nature of the transaction.

Question 4

Refer to Metz Vets. Which of the following activities results in a cash inflow?

Accepted Answer

Increases in common stock (CS) indicate that the company is issuing more shares, which results in a cash inflow as investors buy these shares.

Question 5

A company acquired land by issuing its common stock. How should this transaction be disclosed when a statement of cash flows is prepared?

Accepted Answer

Transactions that do not involve cash, such as acquiring land through the issuance of stock, are not reported in the main body of the statement of cash flows. Instead, they are disclosed in a supplemental schedule of noncash investing and financing activities or in a note to the financial statements.

Question 6

A company reported the following information:  How much cash was paid for salaries during 2014?

Accepted Answer

The answer of A company reported the following information: ...

Question 7

When using the indirect method to determine operating cash flows, where is the gain from selling a long-term investment recognized? (The proceeds from selling the investment are considered separately.)

Accepted Answer

Gains from selling long-term investments are recognized in the operating section of the cash flow statement when using the indirect method. This is because the gain is subtracted from net income to adjust for the fact that it did not provide cash from operating activities.

Question 8

Which of the following transactions is not a significant noncash investing and financing activity?

Accepted Answer

Cash equivalents are purchased with cash, which is a cash transaction, and not a noncash investing or financing activity. Choices A, B, and D involve significant noncash investing and financing activities as land, buildings, and bonds are acquired through issuance of mortgage notes payable, bonds, and common stock respectively.

Question 9

A company reported the following information:  How much cash was collected from customers during 2014?

Accepted Answer

The answer of A company reported the following information: ...

Question 10

During 2014, the accounts payable balance decreased.

Accepted Answer

A decrease in accounts payable indicates that the company paid off more of its liabilities than it incurred, meaning payments on account exceeded credit purchases.

Question 11

A company reported the following information:  An analysis of records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should the changes in these accounts be reported on a statement of cash flows?

Accepted Answer

The answer of A company reported the following information: ...

Question 12

During 2013, the accounts receivable balance increased.

Accepted Answer

An increase in the accounts receivable balance implies that credit sales were made during the period but not yet collected, indicating that credit sales exceeded collections on account during the period.

Question 13

A company reported the following information:  How much cash was paid for interest during 2014?

Accepted Answer

The answer of A company reported the following information: ...

Question 14

A company reported the following information:  How much cash was paid for insurance during 2014?

Accepted Answer

The answer of A company reported the following information: ...

Question 15

Which of the following financing activities results in a cash inflow?

Accepted Answer

Issuing bonds results in a cash inflow as a company receives money from investors who purchase the bonds. Buying treasury stock, repaying a bank loan, and paying cash dividends all result in a cash outflow.

Question 16

A used car dealer reported the following information:  Assuming there was no change in inventory during the period, how much cash was paid for merchandise purchases during 2014?

Accepted Answer

The answer of A used car dealer reported the following...

Question 17

Which of the following activities is most likely to have a cash flow effect?

Accepted Answer

The answer of Which of the following activities is most...

Question 18

The following information was taken from the financial records of Mr. Transmission:  How would the change in accounts payable be reported in the operating activities section of the statement of cash flows under the indirect method?

Accepted Answer

The answer of The following information was taken from the...

Question 19

When using the direct method to determine operating cash flows, how is the sale of long-term investments for cash reported on the Statement of Cash Flows?

Accepted Answer

The sale of long-term investments for cash is reported as an investing activity on the Statement of Cash Flows. This is because it involves the disposal of an asset that is not part of the company's normal operations.

Question 20

Which of the following operating activities results in a cash outflow?

Accepted Answer

Paying creditors for merchandise involves giving out cash, resulting in a cash outflow. The other options can result in a cash inflow or have no impact on cash. Collecting accounts receivable brings in cash, making cash sales generates cash, and receiving deposits recorded as unearned revenue is a liability until the services or goods are delivered, so there is no cash impact at the time of the deposit.

Quiz 11: The Statement of Cash Flows

Refer to Metz Vets. Which of the following activities results in a cash outflow?

Each of the following transactions would be classified as an investing activity except:

Occasionally, companies engage in important investing and financing activities which do not affect cash. If the amount of the transaction is significant, how should it be disclosed when financial statements are prepared?

Refer to Metz Vets. Which of the following activities results in a cash inflow?

A company acquired land by issuing its common stock. How should this transaction be disclosed when a statement of cash flows is prepared?

A company reported the following information: How much cash was paid for salaries during 2014?

When using the indirect method to determine operating cash flows, where is the gain from selling a long-term investment recognized? (The proceeds from selling the investment are considered separately.)

Which of the following transactions is not a significant noncash investing and financing activity?

A company reported the following information: How much cash was collected from customers during 2014?

During 2014, the accounts payable balance decreased.

A company reported the following information: An analysis of records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should the changes in these accounts be reported on a statement of cash flows?

During 2013, the accounts receivable balance increased.

A company reported the following information: How much cash was paid for interest during 2014?

A company reported the following information: How much cash was paid for insurance during 2014?

Which of the following financing activities results in a cash inflow?

A used car dealer reported the following information: Assuming there was no change in inventory during the period, how much cash was paid for merchandise purchases during 2014?

Which of the following activities is most likely to have a cash flow effect?

The following information was taken from the financial records of Mr. Transmission: How would the change in accounts payable be reported in the operating activities section of the statement of cash flows under the indirect method?

When using the direct method to determine operating cash flows, how is the sale of long-term investments for cash reported on the Statement of Cash Flows?

Which of the following operating activities results in a cash outflow?