Question 1

The purchase of treasury stock is:

Accepted Answer

The purchase of treasury stock is classified as a financing activity because it involves the company buying back its own shares from the marketplace, which directly impacts shareholders' equity and is related to the financing of the company.

Question 2

Which of the following is not classified as an operating activity?

Accepted Answer

Dividends paid on common stock are classified as financing activities, not operating activities. Operating activities involve the primary revenue-generating activities of the business, whereas financing activities involve ways in which a business finances its operations, including payments of dividends.

Question 3

Which of the following would not be a cash inflow from financing activities?

Accepted Answer

Selling stock of a supplier would not result in a cash inflow from financing activities as it is not related to the sale of the company's own stock or other financing instruments. It would be considered a cash inflow from investing activities. A, B, and C are all examples of cash inflows from financing activities as they represent funds raised by the company through the issuance of its own securities.

Question 4

Which of the following causes a change in cash?

Accepted Answer

Payment of a cash dividend declared in the previous fiscal year results in an outflow of cash and therefore causes a change in cash. The other options- Accrual of interest payable, Recording of depreciation expense, and Write-off of an uncollectible account- are non-cash transactions and do not impact cash directly.

Question 5

When treasury stock is sold at an amount less than its cost, the sale is classified as:

Accepted Answer

Treasury stock transactions are considered financing activities because they relate to the company's equity and how it finances its operations and growth, not its core operational activities or investments in long-term assets.

Question 6

During 2018, T Company engaged in the following activities:  In T's statement of cash flows, what were net cash outflows from financing activities for 2018?

Accepted Answer

-$48 - 452 + 60 = -$440

Question 7

Property dividends distributed are reported in connection with a statement of cash flows as:

Accepted Answer

Property dividends represent a significant noncash investing and financing activity.

Question 8

In a statement of cash flows using the indirect method, an increase in the available-for-sale debt securities account due to an increase in the debt's fair value should be reported as:

Accepted Answer

The unrealized gain increased other comprehensive income, not net income, and is not a cash flow.

Question 9

Acquiring land with a long-term note is:

Accepted Answer

Acquiring land with a long-term note is a noncash transaction because no actual cash is exchanged. It involves obtaining land in exchange for a long-term note payable. Therefore, it is reported as a noncash investing and financing activity in the statement of cash flows.

Question 10

In preparing its cash flow statement for the year ended December 31, 2018, Green Co. gathered the following data: $\begin{array}{lll}
\text {Gain on sale of land }&\$12,000\
\text {Proceeds from sale of land }&20,000\
\text {Purchase of Blue, Inc., bonds (facevalue $ \$ 200,000 $ ) }&360,000\
\text { Amortization of bond discount}&4,000\
\text {Cash dividends declared }&90,000\
\text { Cash dividends paid}&76,000\
\text { Proceeds from sales of Red Co. common stock}&150,000\
\end{array}$
 In its December 31, 2018, statement of cash flows, what amount should Green report as net cash from financing activities?

Accepted Answer

$150,000 - 76,000 = $74,000

Question 11

Goodfellow Corporation reported insurance expense of $477 for the current year. The beginning and ending balances in the prepaid insurance account were $50 and $30, respectively. What was the amount of cash paid for insurance?

Accepted Answer

$$\begin{array} { | l | r | r | } 
\hline \text { Irsurance expense } & 477 & \
\hline \text { Prepaid insurance expense } & & 20 \
\hline \text { Cash } & & 457 \
\hline
\end{array}$$

Question 12

Which of the following is reported as a financing activity in the statement of cash flows?

Accepted Answer

The acquisition of stock for the purpose of retiring it is reported as a financing activity in the statement of cash flows. This is because it involves a reduction in the company's equity and typically involves the use of cash or other financing sources to fund the stock buyback.

Option A is reported as an investing activity, as it involves the sale of investments held for the purpose of earning a return.

Option C is reported as an operating activity, as it involves the payment of interest on debt used to finance the company's operations.

Option D is reported as an investing activity if the dividend revenue is received from investments, or as an operating activity if it relates to the company's primary operations.

Question 13

Of the following, which is not an investing activity?

Accepted Answer

Buying treasury stock is considered a financing activity, not an investing activity.

Question 14

Melanie Corporation declared cash dividends of $13,500 during the current year. The beginning and ending balances in dividends payable were $450 and $750, respectively. What was the amount of cash paid for dividends?

Accepted Answer

$$\begin{array} { | l | r | r | } 
\hline \text { Retained earnings } & 13,500 & \
\hline \text { Dividends payable } & & { 3 0 0 } \
\hline \text { Cash } & & 13,200 \
\hline
\end{array}$$

Question 15

Freeman Company's accounting records include the following information: $\begin{array}{lr}
\text { Payments to suppliers } & 50,000 \
\text { Collections on accounts receivable } & 90,000 \
\text { Cash sales } & 20,000\
\text { Income taxes paid }&5,000\
\text { Equipment purchased }&15,000
\end{array}$ What is the amount of net cash provided by operating activities indicated by these transactions?

Accepted Answer

$\begin{array}{lr}
\text { Cash } & 55,000 \
 \text { Accounts payable } & 50,000 \
\text { Income taxes payable } & 5,000\
\text { Accounts receivable } & 90,000 \
\text { Sales revenue } & 20,000
\end{array}$ The purchase of equipment is an investing activity.

Question 16

A purchase of equipment for cash is:

Accepted Answer

A purchase of equipment for cash is considered an investing activity because it involves the acquisition of long-term assets. The statement of cash flows categorizes cash transactions based on their nature, and investing activities are one of the three categories, along with operating and financing activities.

Question 17

In a statement of cash flows using the indirect method, an increase in the available-for-sale debt securities account not due to an increase in fair value should be reported as:

Accepted Answer

The increase would indicate an investment in the securities.

Question 18

Which of the following is reported as a financing activity in the statement of cash flows?

Accepted Answer

The repayment of bonds issued at face value is a financing activity because it involves cash flows related to borrowing and repaying debt.

Question 19

A statement of cash flows and its related disclosure note typically do not report:

Accepted Answer

Stock dividends don't change assets, liabilities, or shareholders' equity.

Question 20

Proceeds from the sale of a plant site are:

Accepted Answer

Proceeds from the sale of a plant site are considered to be investing cash flows and should be reported in the investing activities section of the statement of cash flows. This is because the sale of a plant site is related to the company's long-term assets and not its day-to-day operations or financing activities.

Quiz 21: The Statement of Cash Flows Revisited

The purchase of treasury stock is:

Which of the following is not classified as an operating activity?

Which of the following would not be a cash inflow from financing activities?

Which of the following causes a change in cash?

When treasury stock is sold at an amount less than its cost, the sale is classified as:

During 2018, T Company engaged in the following activities: In T's statement of cash flows, what were net cash outflows from financing activities for 2018?

Property dividends distributed are reported in connection with a statement of cash flows as:

In a statement of cash flows using the indirect method, an increase in the available-for-sale debt securities account due to an increase in the debt's fair value should be reported as:

Acquiring land with a long-term note is:

Goodfellow Corporation reported insurance expense of $477 for the current year. The beginning and ending balances in the prepaid insurance account were $50 and $30, respectively. What was the amount of cash paid for insurance?

Which of the following is reported as a financing activity in the statement of cash flows?

Of the following, which is not an investing activity?

Melanie Corporation declared cash dividends of $13,500 during the current year. The beginning and ending balances in dividends payable were $450 and $750, respectively. What was the amount of cash paid for dividends?

A purchase of equipment for cash is:

In a statement of cash flows using the indirect method, an increase in the available-for-sale debt securities account not due to an increase in fair value should be reported as:

Which of the following is reported as a financing activity in the statement of cash flows?

A statement of cash flows and its related disclosure note typically do not report:

Proceeds from the sale of a plant site are: