Question 1

On a reconciliation of net income to cash from operations, depreciation is added back to net income as depreciation

Accepted Answer

A)  is a direct outflow of cash. 
B)  reduces net income but does not involve an outflow of cash. 
C)  reduces net income and involves an outflow of cash. 
D)  is an outflow of cash to a fund established for the replacement of assets. 
A)  is a direct outflow of cash. 
B)  reduces net income but does not involve an outflow of cash. 
C)  reduces net income and involves an outflow of cash. 
D)  is an outflow of cash to a fund established for the replacement of assets.

Question 2

Which of the following is not added to net income as an adjustment to reconcile net income to cash from operating activities on the statement of cash flows?

Accepted Answer

A)  Increase in an accrued liability 
B)  Amortization of discount on bond payable 
C)  Loss on sale of operational asset 
D)  Increase in deferred tax asset 
A)  Increase in an accrued liability 
B)  Amortization of discount on bond payable 
C)  Loss on sale of operational asset 
D)  Increase in deferred tax asset

Question 3

Which of the following is not an inflow of cash?

Accepted Answer

A)  Collection of a short-term receivable 
B)  Sale of an operational asset 
C)  Cash borrowed on a short-term note 
D)  Depletion expense 
A)  Collection of a short-term receivable 
B)  Sale of an operational asset 
C)  Cash borrowed on a short-term note 
D)  Depletion expense

Question 4

When preparing a reconciliation of net income to cash from operations, an increase in the ending inventory over the beginning inventory will result in an adjustment to reported net income because

Accepted Answer

A)  cash is increased because inventory is a current asset. 
B)  inventory is an expense deducted in computing net earnings, but is not a use of cash. 
C)  the net increase in inventory is part of the difference between cost of goods sold and cash paid to suppliers. 
D)  all changes in noncash accounts must be disclosed. 
A)  cash is increased because inventory is a current asset. 
B)  inventory is an expense deducted in computing net earnings, but is not a use of cash. 
C)  the net increase in inventory is part of the difference between cost of goods sold and cash paid to suppliers. 
D)  all changes in noncash accounts must be disclosed.

Question 5

The following information for Clayton Company is available at December 31, 2011, and for the year then ending:
   
The book value of equipment sold was $300. All dividends declared were cash dividends.
Required:
Prepare a statement of cash flows for Clayton Company for the year ending December 31, 2011, using the direct method.

Accepted Answer

The answer of The following information for Clayton Company is...

Question 6

How should the sale of $3,000 worth of cash equivalents costing $2,500 be reflected on the statement of cash flows prepared under the indirect method?

Accepted Answer

A)  $500 operating cash inflow 
B)  No disclosure 
C)  $500 operating cash outflow 
D)  $500 subtraction in the reconciliation of earnings to net operating cash flow 
A)  $500 operating cash inflow 
B)  No disclosure 
C)  $500 operating cash outflow 
D)  $500 subtraction in the reconciliation of earnings to net operating cash flow

Question 7

Which of the following would appear in both the operating activities section of the direct method format and the reconciliation of earnings to net operating cash flow format?

Accepted Answer

A)  Sale of cash equivalents at a gain 
B)  Sale of cash equivalents at cost 
C)  Dividends received on equity method investments 
D)  Collection of an account receivable previously written off 
A)  Sale of cash equivalents at a gain 
B)  Sale of cash equivalents at cost 
C)  Dividends received on equity method investments 
D)  Collection of an account receivable previously written off

Question 8

Daniels Company reported sales of $800,000, bad debt expense of $30,000, and an increase in net accounts receivable of $120,000 during the current year. What is the amount of cash collected from customers for the current year if the company did not record any write-offs during the current year?

Accepted Answer

A)  $650,000 
B)  $680,000 
C)  $710,000 
D)  $800,000 
A)  $650,000 
B)  $680,000 
C)  $710,000 
D)  $800,000

Question 9

Under the direct method, which one of the following would represent cash paid?

Accepted Answer

A)  Losses on sales of plant assets 
B)  Gains on sales of plant assets 
C)  Interest expense, adjusted for changes in interest payable and amortization of bond premium or discount 
D)  Depreciation expense, adjusted for changes in depreciation methods 
A)  Losses on sales of plant assets 
B)  Gains on sales of plant assets 
C)  Interest expense, adjusted for changes in interest payable and amortization of bond premium or discount 
D)  Depreciation expense, adjusted for changes in depreciation methods

Question 10

If a company issues both a balance sheet and an income statement with comparative figures from last year, a statement of cash flows:

Accepted Answer

A)  is no longer necessary; but may be used at the company's option. 
B)  should not be issued. 
C)  should be issued for the current year only. 
D)  should be issued for each period for which an income statement is presented. 
A)  is no longer necessary; but may be used at the company's option. 
B)  should not be issued. 
C)  should be issued for the current year only. 
D)  should be issued for each period for which an income statement is presented.

Question 11

Which of the following is a non-cash 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 12

The statement of cash flows and related disclosures would be of the least assistance in helping a potential investor assess

Accepted Answer

A)  a firm's ability to generate cash. 
B)  a firm's ability to meet its obligations. 
C)  a firm's ability to make good use of cash reserves to earn interest or other return. 
D)  the reasons for differences between income and associated cash flows. 
A)  a firm's ability to generate cash. 
B)  a firm's ability to meet its obligations. 
C)  a firm's ability to make good use of cash reserves to earn interest or other return. 
D)  the reasons for differences between income and associated cash flows.

Question 13

Which of the following would be a cash outflow from operating activities for Carlton Company?

Accepted Answer

A)  Cash paid for dividends on Carlton Co. common stock 
B)  Cash paid for treasury stock 
C)  Cash paid for the purchase of an investment in securities of Raven Company classified as trading securities 
D)  Cash paid for dividends on Carlton Co. preferred stock 
A)  Cash paid for dividends on Carlton Co. common stock 
B)  Cash paid for treasury stock 
C)  Cash paid for the purchase of an investment in securities of Raven Company classified as trading securities 
D)  Cash paid for dividends on Carlton Co. preferred stock

Question 14

A firm purchased $20,000 worth of investments classified as trading securities. At the end of the year, the investments are worth $23,000. What is the correct disclosure of these events in the statement of cash flows prepared under the direct method?

Accepted Answer

A)  Operating cash inflow, $3,000 
B)  Addition of $17,000 in reconciliation of earnings and net operating cash flow 
C)  Operating cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow 
D)  No disclosure is needed. 
A)  Operating cash inflow, $3,000 
B)  Addition of $17,000 in reconciliation of earnings and net operating cash flow 
C)  Operating cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow 
D)  No disclosure is needed.

Question 15

Which of the following investments should be classified as cash equivalents for Able Company in preparing the statement of cash flows?

Accepted Answer

A)  2, 4 
B)  2, 3, 4 
C)  2, 3 
D)  1, 2, 3, 4 
A)  2, 4 
B)  2, 3, 4 
C)  2, 3 
D)  1, 2, 3, 4

Question 16

Which of the following is not required by generally accepted accounting principles?

Accepted Answer

A)  Statement of cash flows 
B)  Earnings per share 
C)  Cash per share 
D)  Disclosure in notes to financial statements of the projected benefit obligation of a defined-benefit pension plan 
A)  Statement of cash flows 
B)  Earnings per share 
C)  Cash per share 
D)  Disclosure in notes to financial statements of the projected benefit obligation of a defined-benefit pension plan

Question 17

Proceeds from the sale of investments in common stock accounted for by the equity method would be classified into which of the following sections of the statement of cash flows?

Accepted Answer

A)  Operating 
B)  Investing 
C)  Financing 
D)  Non-cash item 
A)  Operating 
B)  Investing 
C)  Financing 
D)  Non-cash item

Question 18

At the beginning of the year, a firm leased equipment on a capital lease, capitalizing $60,000 in both its lease liability and leased assets accounts. The contract calls for payments each December 31 of $15,000. The lessee's annual reporting period ends December 31 and the contract reflects 10% interest. The lessee made the first payment as required. Which of the following should be reflected on the statement of cash flows under the indirect method for the first year of the contract (ignoring noncash disclosures)?

Accepted Answer

A)  $15,000 financing cash outflow 
B)  $15,000 operating cash outflow 
C)  $6,000 operating cash outflow; $9,000 financing cash outflow 
D)  $9,000 addition in the reconciliation of earnings and net operating cash flow 
A)  $15,000 financing cash outflow 
B)  $15,000 operating cash outflow 
C)  $6,000 operating cash outflow; $9,000 financing cash outflow 
D)  $9,000 addition in the reconciliation of earnings and net operating cash flow

Question 19

On a statement of cash flows prepared using the direct method, cash paid for income taxes would be income tax expense minus

Accepted Answer

A)  an increase in income taxes payable. 
B)  a decrease in income taxes payable. 
C)  beginning income taxes payable. 
D)  ending income taxes payable. 
A)  an increase in income taxes payable. 
B)  a decrease in income taxes payable. 
C)  beginning income taxes payable. 
D)  ending income taxes payable.

Question 20

Cash outflows from investing activities would include payments for all of the following except

Accepted Answer

A)  operational assets. 
B)  investments in securities-available-for-sale. 
C)  purchase of treasury stock. 
D)  loans to customers. 
A)  operational assets. 
B)  investments in securities-available-for-sale. 
C)  purchase of treasury stock. 
D)  loans to customers.

Exam 21: Statement of Cash Flows Revisited

On a reconciliation of net income to cash from operations, depreciation is added back to net income as depreciation

Which of the following is not added to net income as an adjustment to reconcile net income to cash from operating activities on the statement of cash flows?

Which of the following is not an inflow of cash?

When preparing a reconciliation of net income to cash from operations, an increase in the ending inventory over the beginning inventory will result in an adjustment to reported net income because

How should the sale of $3,000 worth of cash equivalents costing $2,500 be reflected on the statement of cash flows prepared under the indirect method?

Which of the following would appear in both the operating activities section of the direct method format and the reconciliation of earnings to net operating cash flow format?

Daniels Company reported sales of $800,000, bad debt expense of $30,000, and an increase in net accounts receivable of $120,000 during the current year. What is the amount of cash collected from customers for the current year if the company did not record any write-offs during the current year?

Under the direct method, which one of the following would represent cash paid?

If a company issues both a balance sheet and an income statement with comparative figures from last year, a statement of cash flows:

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

The statement of cash flows and related disclosures would be of the least assistance in helping a potential investor assess

Which of the following would be a cash outflow from operating activities for Carlton Company?

A firm purchased $20,000 worth of investments classified as trading securities. At the end of the year, the investments are worth $23,000. What is the correct disclosure of these events in the statement of cash flows prepared under the direct method?

Which of the following investments should be classified as cash equivalents for Able Company in preparing the statement of cash flows?

Which of the following is not required by generally accepted accounting principles?

Proceeds from the sale of investments in common stock accounted for by the equity method would be classified into which of the following sections of the statement of cash flows?

On a statement of cash flows prepared using the direct method, cash paid for income taxes would be income tax expense minus

Cash outflows from investing activities would include payments for all of the following except

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

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

Accounting in a Global Market

Analysis of Financial Statements

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