Question 1

The financing section of the statement of cash flows involves transactions relating to the equity accounts and the long-term liability accounts.

Accepted Answer

The financing section of the statement of cash flows includes transactions related to the issuance or retirement of stock, dividend payments, and long-term borrowing or repayment of debt. These all involve equity and long-term liability accounts.

Question 2

Issuing preferred stock to stockholders in exchange for cash is shown under the financing activities section of the statement of cash flows.

Accepted Answer

Issuing preferred stock to stockholders in exchange for cash is a financing activity, which shows up in the financing activities section of the statement of cash flows.

Question 3

Cash borrowed on a mortgage note is a(n)________ activity on the statement of cash flows.

Accepted Answer

Borrowing cash on a mortgage note is a financing activity as it involves obtaining funds from external sources to finance the business's operations or investment activities. The cash received from the mortgage note is considered a liability, which must be repaid, making it a financing activity.

Question 4

Martin Ceramics Company sold equipment for cash.The income statement shows a gain on the sale of $1,020.The net book value of the asset was $3,810.Which of the following statements describes the cash effect of the transaction?

Accepted Answer

C)
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Question 5

Sonesta Farm Equipment Company sold equipment for cash.The income statement shows a loss on the sale of $7,000.The net book value of the asset was $28,900.Which of the following statements describes the cash effect of the transaction?

Accepted Answer

D)
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Question 6

Kevin Woodworking Company is preparing its statement of cash flows using the indirect method.During the year,Kevin sold equipment for $5,990 cash.The net book value of the asset was $4,970.Which of the following statements is true?

Accepted Answer

The cash receipt of $5,990 should be shown as a positive cash flow in the investing activities section since it is a result of the sale of equipment, which is considered an investing activity. The net book value of the asset is not relevant for the statement of cash flows. The gain on sale of $1,020 should be deducted from the net income in the operating activities section, not added back. The gain on sale of equipment is not related to financing activities, so it should not be shown in the financing activities section.

Question 7

Which of the following sections from the statement of cash flows includes borrowing cash and paying off loans?

Accepted Answer

The financing activities section of the statement of cash flows includes borrowing cash and paying off loans. This section also includes activities such as issuing stocks or repurchasing them and paying dividends.

Question 8

Christopher Corp.is preparing its statement of cash flows using the indirect method.It provides the following information about transactions for the year: Plant assets,net-beginning balance: $111,000
Plant assets,net-ending balance: $148,000
Equipment was purchased for $65,000.
Equipment with a net asset value of $12,000 was sold for $18,000.
Depreciation Expense of $16,000 was recorded during the year.
What was the amount of net cash provided by (used for)investing activities?

Accepted Answer

A)
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Question 9

Which of the following sections of the statement of cash flows includes activities that increase and decrease long-term liabilities and stockholders' equity?

Accepted Answer

The financing activities section includes activities that increase or decrease long-term liabilities and stockholders' equity, such as issuing or repaying long-term debt, issuing or repurchasing stock, and paying dividends. The operating activities section includes activities related to the company's primary operations, and the investing activities section includes activities related to the acquisition or sale of long-term assets. The non-cash investing and financing section includes transactions that do not involve cash but still affect investing and financing activities, such as exchanging stock for assets or issuing debt to settle liabilities.

Question 10

Which of the following is a cash outflow for a financing activity on the statement of cash flows?

Accepted Answer

Payment of dividends is a cash outflow for a financing activity because it represents a distribution of profits to the company's shareholders, which is typically funded by the company's borrowing or issuing of stock.

Question 11

Buying property,plant,and equipment for cash is considered a cash outflow for the financing activities section of the statement of cash flows.

Accepted Answer

Buying property, plant, and equipment for cash falls under the investing activities section of the statement of cash flows, not the financing activities section. Financing activities involve borrowing or repaying debt, issuing or buying back stock, and paying dividends.

Question 12

Caleb Auto Parts Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet:
 
$\begin{array}{llr}
  \text {Caleb Company  } &\
 \text {Comparative Balance Sheet  } &\
 \text {December 31,2017 and 2016  } &
\end{array}$
 $\begin{array}{llll}
& 2017 & 2016 & \text { Increase/(Decrease) } \ 
\text { Cash } & \$ 42,000 & \$ 36,000 & \$ 6,000 \
\text { Accounts Receivable } & 62,000 & 70,000 & (8,000) \
\text { Merchandise Inventory } & 106,000 & 50,000 & 56,000 \
\text { PP\&E, net } & \underline{240,000} & \underline{180,000} & \underline{60,000} \
\text { Total Assets } & \$ 450,000 & \$ 336,000 & \$ 114,000
\end{array}$
 Additional information provided by the company includes the following:
Equipment costing $104,000 was purchased for cash.
Equipment with a net book value of $20,000 was sold for $28,000.
Depreciation expense of $24,000 was recorded during the year.
Prepare the investing activities section of the statement of cash flows.

Accepted Answer

The answer of Caleb Auto Parts Company uses the indirect...

Question 13

Allen Moving Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet:
 $\begin{array}{c}
\text { Allen Company}\
\text { Comparative Balance Sheet}\
\text { December 31,2017 and 2016}\\begin{array}{|l|r|r|r|}
\hline&2017 & 2016 & \text { Increase/(Decrease) }\
\hline \text { Common Stock } & \$ 34,000 & \$ 10,000 & \$ 24,000 \
\hline \text { Retained Earnings } & 115,000 & 90,000 & 25,000 \
\hline \text { Treasury Stock } & \underline{13,000} & \underline{(8,000} & \underline{(5,000} \
\hline \text { Total Stockholders' Equity } & 136,000 & 92,000 & 44,000\
\hline 
\end{array}\end{array}$ If the net income for the year was $67,000,the company must have declared $42,000 as dividends during the year.

Accepted Answer

The change in retained earnings is $25,000, and since net income is $67,000, the dividends declared must be $67,000 - $25,000 = $42,000.

Question 14

Hector Production Company uses the indirect method to prepare its statement of cash flows.The Treasury Stock account had a debit balance of $8,000 at the beginning of the year and a debit balance of $16,000 at the end of the year.No Treasury Stock was sold during the year.The financing section of the statement of cash flows will show a positive cash flow of $8,000 for the buy back of Treasury Stock.

Accepted Answer

The treasury stock account had a debit balance at the beginning and end of the year, indicating that the company did not buy back any treasury stock during the year. Therefore, the financing section of the statement of cash flows would not show a cash flow related to the buy back of treasury stock.

Question 15

Which of the following sections of the statement of cash flows includes the issuance of stock and the payment of cash dividends?

Accepted Answer

The issuance of stock and the payment of cash dividends both relate to the financing of the company and therefore would be included in the financing activities section of the statement of cash flows.

Question 16

To Go Company is preparing its statement of cash flows using the indirect method.During the year,they purchased equipment for $15,000 cash.Which of the following statements is true?

Accepted Answer

The purchase of equipment is considered an investing activity and therefore the $15,000 cash outflow would be reported as a negative cash flow in the investing activities section of the statement of cash flows. Option A is incorrect because operating activities involve cash flows related to a company's primary business activities, such as sales and expenses. Option C is incorrect because a cash outflow is always presented as negative, regardless of the activity category. Option D is incorrect because financing activities involve cash flows related to borrowing, repaying debt, and issuing or repurchasing shares, which are unrelated to the purchase of equipment.

Question 17

Financing activities on the statement of cash flows affect the long-term liability and equity accounts.

Accepted Answer

Financing activities, such as issuing bonds or selling stock, can impact the long-term liability and equity accounts on the balance sheet, and therefore will also affect the statement of cash flows under the financing activities section.

Question 18

Lewis,Inc.uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet:
 $\begin{array}{llr}
  \text {Lewis, Inc.  } &\
 \text { Comparative Balance Sheet } &\
 \text {December 31,2017 and 2016  } &
\end{array}$
 $\begin{array}{llll}
& 2017 & 2016 & \text { Increase/(Decrease) } \ 
\text { Cash } & \$ 42,000 & \$ 36,000 & \$ 6,000 \
\text { Accounts Receivable } & 62,000 & 70,000 & (8,000) \
\text { Merchandise Inventory } & 106,000 & 50,000 & 56,000 \
\text { PP\&E, net } & \underline{240,000} & \underline{180,000} & \underline{60,000} \
\text { Total Assets } & \$ 450,000 & \$ 336,000 & \$ 114,000
\end{array}$ Additional information provided by the company includes the following:
Equipment costing $104,000 was purchased for cash.
Equipment with a net book value of $20,000 was sold for $28,000.
Depreciation Expense of $24,000 was recorded during the year.
Use the T-account format and evaluate the transactions affecting Property,Plant,and Equipment,net.

Accepted Answer

The answer of Lewis,Inc.uses the indirect method to prepare its...

Question 19

Which of the following sections from the statement of cash flows includes the cash paid for the purchase of Treasury Stock?

Accepted Answer

The purchase of treasury stock is considered a financing activity, therefore it would be included in the financing activities section of the statement of cash flows.

Question 20

Which of the following is a cash outflow for a financing activity on the statement of cash flows?

Accepted Answer

Purchase of treasury stock is a cash outflow for a financing activity, as it involves using cash to buy back the company's own shares. Option A is a cash outflow for an investing activity, as it involves purchasing long-term investments. Option B is a cash outflow for an operating activity, as it involves lending money to another party. Option D is a cash outflow for an investing activity, as it involves purchasing a long-term asset (land).

Quiz 14: The Statement of Cash Flows

The financing section of the statement of cash flows involves transactions relating to the equity accounts and the long-term liability accounts.

Issuing preferred stock to stockholders in exchange for cash is shown under the financing activities section of the statement of cash flows.

Cash borrowed on a mortgage note is a(n) ________ activity on the statement of cash flows.

Martin Ceramics Company sold equipment for cash.The income statement shows a gain on the sale of $1,020.The net book value of the asset was $3,810.Which of the following statements describes the cash effect of the transaction?

Sonesta Farm Equipment Company sold equipment for cash.The income statement shows a loss on the sale of $7,000.The net book value of the asset was $28,900.Which of the following statements describes the cash effect of the transaction?

Kevin Woodworking Company is preparing its statement of cash flows using the indirect method.During the year,Kevin sold equipment for $5,990 cash.The net book value of the asset was $4,970.Which of the following statements is true?

Which of the following sections from the statement of cash flows includes borrowing cash and paying off loans?

Which of the following sections of the statement of cash flows includes activities that increase and decrease long-term liabilities and stockholders' equity?

Which of the following is a cash outflow for a financing activity on the statement of cash flows?

Buying property,plant,and equipment for cash is considered a cash outflow for the financing activities section of the statement of cash flows.

Which of the following sections of the statement of cash flows includes the issuance of stock and the payment of cash dividends?

To Go Company is preparing its statement of cash flows using the indirect method.During the year,they purchased equipment for $15,000 cash.Which of the following statements is true?

Financing activities on the statement of cash flows affect the long-term liability and equity accounts.

Which of the following sections from the statement of cash flows includes the cash paid for the purchase of Treasury Stock?

Which of the following is a cash outflow for a financing activity on the statement of cash flows?