Question 1

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Acquisition of land in exchange for common stock.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

The acquisition of land in exchange for common stock is considered a significant noncash investing and financing activity and should be disclosed in the statement of cash flows but not as a part of the cash inflows or outflows.

Question 2

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Redemption of bonds for cash.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

Redemption of bonds is a financing activity because it involves the payment of debt and is not related to the company's core operations. It is a cash outflow because cash is leaving the company to pay off the debt.

Question 3

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Declaration and payment of a cash dividend.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

Declaration and payment of a cash dividend is a cash outflow and falls under financing activity.

Question 4

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Increase in merchandise inventory during a period.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

An increase in merchandise inventory during a period indicates that the company has used cash to purchase or produce inventory, which is deducted from net income to arrive at operating cash flow in the statement of cash flows using the indirect method. It is not considered as an investing or financing activity, and also not a significant noncash activity.

Question 5

Use the following major cash flow activities to classify the activities listed below:
-Purchased land for cash
A)Operating Activity, Source of Cash
B)Operating Activity, Use of Cash
C)Investing Activity, Source of Cash
D)Investing Activity, Use of Cash
E)Financing Activity, Source of Cash
F)Financing Activity, Use of Cash
G)Non-cash Investing & Financing Activity

Accepted Answer

Purchasing land for cash is an example of an investing activity that uses cash.

Question 6

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Decrease in accounts receivable during a period.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

A decrease in accounts receivable indicates that more cash has been collected from customers, which increases the cash flow. Therefore, it is added to net income in the operating activities section when using the indirect method.

Question 7

Use the following major cash flow activities to classify the activities listed below:
-Paid off long-term debt
A)Operating Activity, Source of Cash
B)Operating Activity, Use of Cash
C)Investing Activity, Source of Cash
D)Investing Activity, Use of Cash
E)Financing Activity, Source of Cash
F)Financing Activity, Use of Cash
G)Non-cash Investing & Financing Activity

Accepted Answer

Paying off long-term debt is classified as a financing activity because it relates to the company's capital structure. It is considered a use of cash since cash is going out of the business to pay down the debt.

Question 8

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Purchase of a building for cash.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

The purchase of a building with cash is considered an investing activity, as it involves the acquisition of a long-term asset. Therefore, it should be reported as a cash outflow under the investing section of the statement of cash flows.

Question 9

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Loss on sale of land.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

Loss on sale of land is added back to net income in the operating activities section when preparing the statement of cash flows using the indirect method, because it is a non-cash expense that reduced net income on the income statement.

Question 10

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Decrease in accounts payable during a period.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

A decrease in accounts payable means that less money was paid to suppliers in the period than was owed at the beginning of the period. This decrease should be deducted from net income in the statement of cash flows using the indirect method, as it represents an increase in cash that is not reflected in net income.

Question 11

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Issuance of common stock for cash.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

Issuance of common stock for cash is a cash inflow from financing activities as it represents the company's ability to raise funds by selling equity to investors.

Question 12

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method.
-Proceeds from sale of equipment at book value.
A)Added to net income
B)Deducted from net income
C)Cash outflow--investing activity
D)Cash inflow--investing activity
E)Cash outflow--financing activity
F)Cash inflow--financing activity
G)significant noncash investing and financing activity

Accepted Answer

Proceeds from sale of equipment at book value should be reported as a cash inflow from investing activities.

Question 13

Use the following major cash flow activities to classify the activities listed below:
-Issued Common Stock for cash
A)Operating Activity, Source of Cash
B)Operating Activity, Use of Cash
C)Investing Activity, Source of Cash
D)Investing Activity, Use of Cash
E)Financing Activity, Source of Cash
F)Financing Activity, Use of Cash
G)Non-cash Investing & Financing Activity

Accepted Answer

Issuing Common Stock for cash is a financing activity and a source of cash as it increases the company's cash balance by bringing in new funds from investors.

Quiz 14: Statement of Cash Flows

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Acquisition of land in exchange for common stock.

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Redemption of bonds for cash.

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Declaration and payment of a cash dividend.

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Increase in merchandise inventory during a period.

Use the following major cash flow activities to classify the activities listed below: -Purchased land for cash

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Decrease in accounts receivable during a period.

Use the following major cash flow activities to classify the activities listed below: -Paid off long-term debt

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Purchase of a building for cash.

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Loss on sale of land.

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Decrease in accounts payable during a period.

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Issuance of common stock for cash.

For each of the following items, indicate by using the appropriate code letter, how the item should be reported in the statement of cash flows, using the indirect method. -Proceeds from sale of equipment at book value.

Use the following major cash flow activities to classify the activities listed below: -Issued Common Stock for cash