Question 1

When preparing a statement of cash flows using the direct method, amortization of a patent is

Accepted Answer

A)  shown as an increase in cash flows from operating activities. 
B)  shown as a reduction in cash flows from operating activities. 
C)  included with supplemental disclosures of noncash transactions. 
D)  not reported in the statement of cash flows or related disclosures. 
A)  shown as an increase in cash flows from operating activities. 
B)  shown as a reduction in cash flows from operating activities. 
C)  included with supplemental disclosures of noncash transactions. 
D)  not reported in the statement of cash flows or related disclosures.

Question 2

Which of the following would be an addition to net income when using the indirect method to derive net cash flows from operating activities?

Accepted Answer

A)  Payment of cash dividends 
B)  Decrease in accounts payable 
C)  Increase in merchandise inventory 
D)  Loss on sale of machinery and equipment 
A)  Payment of cash dividends 
B)  Decrease in accounts payable 
C)  Increase in merchandise inventory 
D)  Loss on sale of machinery and equipment

Question 3

Chow Company's 2011 income statement reported cost of goods sold as $135,000. Additional information is as follows:
 
If Chow uses the direct method, what amount should Chow report as cash paid to suppliers in its 2011 statement of cash flows?

Accepted Answer

A)  $121,000 
B)  $134,000 
C)  $136,000 
D)  $149,000 
A)  $121,000 
B)  $134,000 
C)  $136,000 
D)  $149,000

Question 4

Patriot Corporation purchased a 3-month U.S. Treasury bill. In preparing Patriot's statement of cash flows, this purchase would

Accepted Answer

A)  have no effect. 
B)  be treated as an outflow from operating activities. 
C)  be treated as an outflow from investing activities. 
D)  be treated as an outflow from financing activities. 
A)  have no effect. 
B)  be treated as an outflow from operating activities. 
C)  be treated as an outflow from investing activities. 
D)  be treated as an outflow from financing activities.

Question 5

Noncash investing and financing activities, if material, are

Accepted Answer

A)  reported in the statement of cash flows under the "all-financial-resources concept." 
B)  reported in the statement of cash flows only if the indirect method is used. 
C)  disclosed in a note or separate schedule accompanying the statement of cash flows. 
D)  not reported or disclosed because they have no impact on cash. 
A)  reported in the statement of cash flows under the "all-financial-resources concept." 
B)  reported in the statement of cash flows only if the indirect method is used. 
C)  disclosed in a note or separate schedule accompanying the statement of cash flows. 
D)  not reported or disclosed because they have no impact on cash.

Question 6

In a statement of cash flows (indirect method), depreciation is treated as an adjustment to reported net income because depreciation

Accepted Answer

A)  reduces the reported net income but does not involve an outflow of cash. 
B)  reduces the reported net income and involves an inflow of cash. 
C)  is an inflow of cash to a reserve account for asset replacement. 
D)  usually represents a significant portion of operating expenses. 
A)  reduces the reported net income but does not involve an outflow of cash. 
B)  reduces the reported net income and involves an inflow of cash. 
C)  is an inflow of cash to a reserve account for asset replacement. 
D)  usually represents a significant portion of operating expenses.

Question 7

In a statement of cash flows, which of the following would increase reported cash flows from operating activities using the direct method?

Accepted Answer

A)  Collection of a note receivable 
B)  Dividends received from investments 
C)  Gain on purchase of treasury stock 
D)  Gain on sale of equipment 
A)  Collection of a note receivable 
B)  Dividends received from investments 
C)  Gain on purchase of treasury stock 
D)  Gain on sale of equipment

Question 8

The following data were taken from the books of Young Company.
   
Cash dividends of $169,000 were declared and paid during 2011. Also, $56,000 of preferred stock was issued during the period.
Compute the net cash flow provided by (used in) operating activities during 2011 for Young Company.

Accepted Answer

The answer of The following data were taken from the...

Question 9

Adlake Corporation provides the following account balances for 2011 and 2010:

Accepted Answer

The answer of Adlake Corporation provides the following account balances...

Question 10

Which of the following is not a source of cash?

Accepted Answer

A)  Sale of equipment below book value at a loss 
B)  Issuance of bonds payable below par value at a discount 
C)  Declaration of a cash dividend to be paid in the next accounting period 
D)  Collection of a long-term note receivable from a customer 
A)  Sale of equipment below book value at a loss 
B)  Issuance of bonds payable below par value at a discount 
C)  Declaration of a cash dividend to be paid in the next accounting period 
D)  Collection of a long-term note receivable from a customer

Question 11

Using the indirect method, cash flows from operating activities would be increased by which of the following?

Accepted Answer

A)  Gain on sale of investments 
B)  Increase in prepaid expenses 
C)  Decrease in accounts payable 
D)  Decrease in accounts receivable 
A)  Gain on sale of investments 
B)  Increase in prepaid expenses 
C)  Decrease in accounts payable 
D)  Decrease in accounts receivable

Question 12

In a statement of cash flows, receipts from sales of property, plant, and equipment would be classified as cash inflows from

Accepted Answer

A)  liquidating activities. 
B)  operating activities. 
C)  investing activities. 
D)  financing activities. 
A)  liquidating activities. 
B)  operating activities. 
C)  investing activities. 
D)  financing activities.

Question 13

Cash flows from financing activities would be reduced by which of the following?

Accepted Answer

A)  Purchase of inventory 
B)  Repayment of long-term debt 
C)  Purchase of machinery 
D)  Payment of interest 
A)  Purchase of inventory 
B)  Repayment of long-term debt 
C)  Purchase of machinery 
D)  Payment of interest

Question 14

A loss on the sale of machinery in the ordinary course of business should be presented in a statement of cash flows (indirect method) as

Accepted Answer

A)  a deduction from net income. 
B)  an addition to net income. 
C)  an inflow and outflow of cash. 
D)  an outflow of cash. 
A)  a deduction from net income. 
B)  an addition to net income. 
C)  an inflow and outflow of cash. 
D)  an outflow of cash.

Question 15

Which of the following is a noncash transaction that should be disclosed in a schedule accompanying the statement of cash flows?

Accepted Answer

A)  Sale of an investment for cash 
B)  Purchase of a machine for cash 
C)  Issuance of common stock in exchange for land 
D)  Declaration and payment of a cash dividend on common stock 
A)  Sale of an investment for cash 
B)  Purchase of a machine for cash 
C)  Issuance of common stock in exchange for land 
D)  Declaration and payment of a cash dividend on common stock

Question 16

Which of the following statements regarding cash equivalents is correct?

Accepted Answer

A)  A one-year Treasury note could not qualify as a cash equivalent. 
B)  All investments meeting the FASB's criteria for cash equivalents must be reported as such. 
C)  The date a security is purchased determines its "original maturity" for cash equivalent classification purposes. 
D)  Once established, management's policy for classifying items as cash equivalents cannot be changed. 
A)  A one-year Treasury note could not qualify as a cash equivalent. 
B)  All investments meeting the FASB's criteria for cash equivalents must be reported as such. 
C)  The date a security is purchased determines its "original maturity" for cash equivalent classification purposes. 
D)  Once established, management's policy for classifying items as cash equivalents cannot be changed.

Question 17

Samson, Inc., presents the following comparative balance sheets and income statement (all amounts in thousands of dollars):
   
1Includes interest paid in cash of $23.
See information regarding Samson, Inc. above. The following additional information is provided:
   
Required:
Compute the following:

Accepted Answer

Question 18

In a statement of cash flows, payments to acquire debt instruments of other entities would typically be classified as cash outflows for

Accepted Answer

A)  financing activities. 
B)  investing activities. 
C)  operating activities. 
D)  equity activities. 
A)  financing activities. 
B)  investing activities. 
C)  operating activities. 
D)  equity activities.

Question 19

Stevenson Company reported a net loss of $23,000 during the year. Comparing beginning and ending balances, you determine the following: (1) accounts receivable increased by $8,000; and (2) accrued expenses payable increased by $5,000. What was the amount of cash used in operating activities during the year?

Accepted Answer

A)  $10,000 
B)  $36,000 
C)  $20,000 
D)  $26,000 
A)  $10,000 
B)  $36,000 
C)  $20,000 
D)  $26,000

Question 20

A gain on the sale of a plant asset should be included in which of the following sections of a statement of cash flows prepared using the direct method?

Accepted Answer

A)  Investing activities 
B)  Operating activities 
C)  Financing activities 
D)  Any of these, if applied consistently from year to year 
A)  Investing activities 
B)  Operating activities 
C)  Financing activities 
D)  Any of these, if applied consistently from year to year

Exam 5: Statement of Cash Flows and Articulation

When preparing a statement of cash flows using the direct method, amortization of a patent is

Which of the following would be an addition to net income when using the indirect method to derive net cash flows from operating activities?

Chow Company's 2011 income statement reported cost of goods sold as $135,000. Additional information is as follows: If Chow uses the direct method, what amount should Chow report as cash paid to suppliers in its 2011 statement of cash flows?

Patriot Corporation purchased a 3-month U.S. Treasury bill. In preparing Patriot's statement of cash flows, this purchase would

Noncash investing and financing activities, if material, are

In a statement of cash flows (indirect method), depreciation is treated as an adjustment to reported net income because depreciation

In a statement of cash flows, which of the following would increase reported cash flows from operating activities using the direct method?

The following data were taken from the books of Young Company. Cash dividends of $169,000 were declared and paid during 2011. Also, $56,000 of preferred stock was issued during the period. Compute the net cash flow provided by (used in) operating activities during 2011 for Young Company.

Adlake Corporation provides the following account balances for 2011 and 2010:

Which of the following is not a source of cash?

Using the indirect method, cash flows from operating activities would be increased by which of the following?

In a statement of cash flows, receipts from sales of property, plant, and equipment would be classified as cash inflows from

Cash flows from financing activities would be reduced by which of the following?

A loss on the sale of machinery in the ordinary course of business should be presented in a statement of cash flows (indirect method) as

Which of the following is a noncash transaction that should be disclosed in a schedule accompanying the statement of cash flows?

Which of the following statements regarding cash equivalents is correct?

Samson, Inc., presents the following comparative balance sheets and income statement (all amounts in thousands of dollars): 1Includes interest paid in cash of $23. See information regarding Samson, Inc. above. The following additional information is provided: Required: Compute the following:

In a statement of cash flows, payments to acquire debt instruments of other entities would typically be classified as cash outflows for

A gain on the sale of a plant asset should be included in which of the following sections of a statement of cash flows prepared using the direct method?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll, Pensions, Other Comp Issues

Earnings Per Share

Derivatives, Contingencies, Business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Analysis of Financial Statements

Filters

Samson, Inc., presents the following comparative balance sheets and income statement (all amounts in thousands of dollars): ¹Includes interest paid in cash of $23. See information regarding Samson, Inc. above. The following additional information is provided: Required: Compute the following: