Question 1

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Decrease in accounts payable balance

Accepted Answer

A decrease in accounts payable balance indicates that the company has paid off some of its debts, which would result in a decrease in cash from operating activities when using the indirect method for preparing the statement of cash flows.

Question 2

When using the spreadsheet (work sheet)for the statement of cash flows,under the indirect method,entries made on the spreadsheet are​

Accepted Answer

The entries made on the spreadsheet for the statement of cash flows under the indirect method are not recorded in the journal or posted to the ledger. The purpose of the statement of cash flows is to provide information about the cash inflows and outflows during a particular period, and it does not affect the accounting records. The information for the statement of cash flows is derived from the balance sheet and income statement, and it is used to reconcile the changes in cash and cash equivalents during the period.

Question 3

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported.
-Increase in income taxes payable

Accepted Answer

An increase in income taxes payable would be reported under operating activities in the statement of cash flows, as it represents an amount due to the government as a result of the company’s operations.

Question 4

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported.
-Amortization of patent

Accepted Answer

Amortization of patent would be reported in the operating activities section of the statement of cash flows as it is a non-cash expense related to the company's core operations.

Question 5

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Gain on sale of investments

Accepted Answer

Gains on the sale of investments are added back to net income in the operating activities section of the cash flow statement when using the indirect method because the gain is included in the net income figure but does not involve an actual cash transaction.

Question 6

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Repayment of long-term note payable

Accepted Answer

Repayment of long-term note payable is a financing activity, and repaying the note decreases cash, so it is shown as a decrease in cash from financing activities on the statement of cash flows when using the indirect method.

Question 7

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported.
-Sale of machinery held for use by the company

Accepted Answer

The sale of machinery held for use by the company is an investing activity as it involves the selling of a long-term asset.

Question 8

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Amortization of intangible assets

Accepted Answer

Amortization of intangible assets is a non-cash expense that is added back to net income in the operating activities section of the statement of cash flows when using the indirect method. This adjustment increases the cash from operating activities.

Question 9

The operating cash flow available for company use after purchasing the fixed assets that are necessary to maintain current productive capacity is called the

Accepted Answer

Free cash flow refers to the cash that a company generates after investing in fixed assets necessary to maintain current productive capacity. It is the cash flow that is available for other purposes such as acquisitions, dividends, and share repurchases. Modified cash flow, PPE cash flow, and restricted cash flow are not commonly used terms in finance and accounting.

Question 10

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Payment of dividends

Accepted Answer

Payment of dividends is considered a financing activity, and when dividends are paid out, it results in a decrease in cash from financing activities.

Question 11

Free cash flow is cash flow from operations less cash used for

Accepted Answer

Free cash flow is calculated by subtracting the cash used for investments in PP&E needed to maintain current production from the cash flow from operations. Dividends and cash to redeem bonds payable are not included in the calculation of free cash flow. Investments in PP&E needed to achieve desired future production (option C) would be considered capital expenditures and not included in free cash flow as they are meant to provide future benefits. Option D is incorrect as fixed assets needed to maintain productivity would fall under the category of PP&E needed to maintain current production, which is already accounted for in option A.

Question 12

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Exchange of land for common stock

Accepted Answer

The exchange of land for common stock is a noncash investing and financing activity, meaning it does not directly affect cash flows from operating, investing, or financing activities but should be disclosed in a separate schedule or note to the financial statements as a noncash transaction.

Question 13

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Increase in accounts receivable balance

Accepted Answer

An increase in accounts receivable means that the company has not yet received payment for goods or services that have been sold on credit, which indicates a decrease in cash from operating activities.

Question 14

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Acquisition of treasury stock

Accepted Answer

Acquisition of treasury stock is considered a financing activity, and since it involves the outflow of cash to repurchase the company's own shares, it decreases cash from financing activities.

Question 15

The cost of merchandise sold during the year was $45,000.Merchandise inventories were $13,500 and $10,500 at the beginning and end of the year,respectively.Accounts payable were $7,000 and $5,000 at the beginning and end of the year,respectively.Using the direct method of reporting cash flows from operating activities,cash payments for merchandise total

Accepted Answer

Using the direct method, the calculation for cash payments for merchandise is:
Cost of merchandise sold + Beginning merchandise inventory - Ending merchandise inventory + Ending accounts payable - Beginning accounts payable
$45,000 + $13,500 - $10,500 + $5,000 - $7,000 = $44,000
Therefore, the best choice is B.

Question 16

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Purchase of equipment

Accepted Answer

The purchase of equipment would result in a decrease in cash from investing activities as it is a cash outflow for the purpose of acquiring a long-term asset, which is classified as an investing activity on the statement of cash flows.

Question 17

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question.
-Sale of land

Accepted Answer

Sale of land is an investing activity, so it would increase cash from investing activities in the statement of cash flows using the indirect method.

Question 18

Free cash flow is

Accepted Answer

Free cash flow is the cash generated from operations after deducting capital expenditures required to maintain productive capacity. Therefore, it is calculated as cash flow from operations minus capital expenditures. This excludes cash related to financing activities and the distribution of dividends.

Question 19

Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year,respectively.Cash payments for income tax reported on the statement of cash flows using the direct method is

Accepted Answer

The cash payments for income tax can be calculated by adjusting the income tax payable from the income tax expense. 
Income tax paid = Income tax expense - decrease in income tax payable
Income tax expense = $175,000 
Decrease in income tax payable = $30,000 - $40,000 = -$10,000 
Income tax paid = $175,000 - (-$10,000) = $165,000. 
Therefore, the correct answer is B.

Question 20

When using the spreadsheet (work sheet)method to analyze noncash accounts,it is best to start with

Accepted Answer

The answer of When using the spreadsheet (work sheet)method to...

Quiz 16: Statement of Cash Flows

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Decrease in accounts payable balance

When using the spreadsheet (work sheet) for the statement of cash flows,under the indirect method,entries made on the spreadsheet are

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Increase in income taxes payable

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Amortization of patent

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Gain on sale of investments

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Repayment of long-term note payable

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Sale of machinery held for use by the company

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Amortization of intangible assets

The operating cash flow available for company use after purchasing the fixed assets that are necessary to maintain current productive capacity is called the

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Payment of dividends

Free cash flow is cash flow from operations less cash used for

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Exchange of land for common stock

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Increase in accounts receivable balance

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Acquisition of treasury stock

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Purchase of equipment

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Sale of land

Free cash flow is

Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year,respectively.Cash payments for income tax reported on the statement of cash flows using the direct method is

When using the spreadsheet (work sheet) method to analyze noncash accounts,it is best to start with

Quiz 16: Statement of Cash Flows

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Decrease in accounts payable balance

When using the spreadsheet (work sheet) for the statement of cash flows,under the indirect method,entries made on the spreadsheet are​

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Increase in income taxes payable

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Amortization of patent

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Gain on sale of investments

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Repayment of long-term note payable

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Sale of machinery held for use by the company

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Amortization of intangible assets

The operating cash flow available for company use after purchasing the fixed assets that are necessary to maintain current productive capacity is called the

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Payment of dividends

Free cash flow is cash flow from operations less cash used for

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Exchange of land for common stock

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Increase in accounts receivable balance

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Acquisition of treasury stock

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Purchase of equipment

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Sale of land

Free cash flow is

Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year,respectively.Cash payments for income tax reported on the statement of cash flows using the direct method is

When using the spreadsheet (work sheet) method to analyze noncash accounts,it is best to start with

When using the spreadsheet (work sheet) for the statement of cash flows,under the indirect method,entries made on the spreadsheet are