Question 1

How is the statement of cash flows linked to the other financial statements?

Accepted Answer

The net increase or decrease on the statement of cash flows is linked to the change in the cash balance from one year to the next on the company's comparative balance sheets. The statement of cash flows adds the beginning cash balance to the change in cash during the period (detailed by activity on the statement of cash flows) to determine the ending cash balance. The beginning and ending cash balances appear on the balance sheet as the current year and previous year's cash balances. Under the indirect method, net income from the income statement is the starting point for the determination of net cash inflows (outflows) for operating activities on the statement of cash flows. The amount of net income also appears on the statement of retained earnings, which computes the ending retained earnings balance on the balance sheet. The investing section of the statement of cash flows is closely related to the balance sheet in that it analyses changes in non-current assets. The financing section of the statement of cash flows is closely related to the liabilities and equity sections of the balance sheet because it analyses changes in non-current liabilities and equity accounts.

Question 2

Parton Inc.. reported accounting service revenue of $450,000 for 2017. On January 1, 2017, Parton Inc. had $38,000 of accounts receivable and $0 of cash deposits received from customers. On December 31, 2017, accounts receivable and deposits received were $49,000 and $6,000, respectively. Calculate the amount of cash collected from clients during 2017.

Accepted Answer

$450,000 - ($49,000 - $38,000) + $6,000 = $445,000

Question 3

Equipment that cost $10,000 that had a book value of $6,000 was sold for $7,000. Data from the comparative balance sheets are:
$\begin{array}{lrr}
&12/31/17&12/31/16\
\hline \text { Equipment } & \$ 420,000 & \$ 310,000 \
\text { Accumulated Depreciation } & 59,000 & 36,000
\end{array}$

Equipment purchased during 2017 cost

Accepted Answer

A) $120,000. 
B) $110,000. 
C) $145,000. 
D) $10,000. 
A) $120,000. 
B) $110,000. 
C) $145,000. 
D) $10,000. A

Question 4

How does the direct method of preparing the statement of cash flows differ from the indirect method?

Accepted Answer

The direct method is so called because t

Question 5

How will a company classify the sale of treasury stock at an amount equal to its cost on its statement of cash flows?

Accepted Answer

A) Operating activity 
B) Investing activity 
C) Extraordinary activity 
D) Financing activity 
A) Operating activity 
B) Investing activity 
C) Extraordinary activity 
D) Financing activity

Question 6

Which one of the following is consistent with a company recording a large operating loss but still having healthy cash flows from operations?

Accepted Answer

A) A large amount of depreciation and/or amortization expense 
B) An increase in accounts receivable and inventory 
C) A decrease in accounts payable 
D) All sales are on a cash basis. 
A) A large amount of depreciation and/or amortization expense 
B) An increase in accounts receivable and inventory 
C) A decrease in accounts payable 
D) All sales are on a cash basis.

Question 7

During 2017, equipment was sold for $57,000. This equipment cost $90,000 and had a book value of $47,000. Accumulated depreciation for equipment was $184,000 at 12/31/17 and $147,000 at 12/31/16. Show how the results of the three items will appear on the statement of cash flows using the indirect method from this information.

Accepted Answer

None

Question 8

During 2017, Bacon Co. reported a net operating loss of $19,000. The only asset or liability changes during 2017 were a decrease in accounts receivable of $11,000 and an increase in accumulated depreciation of $42,000. Calculate cash flows from operations during 2017 (indicate outflow or inflow).

Accepted Answer

($19,000) + $11,000

Question 9

In determining cash flow from operating activities, which of the following adjustments will be made as a result of an increase in accounts receivable during a period?

Accepted Answer

A) An addition to net income when the direct method is used 
B) An addition to net income when the indirect method is used 
C) A deduction from net income when the direct method is used 
D) A deduction from net income when the indirect method is used 
A) An addition to net income when the direct method is used 
B) An addition to net income when the indirect method is used 
C) A deduction from net income when the direct method is used 
D) A deduction from net income when the indirect method is used

Question 10

Payments for purchases of property, plant, and equipment and other productive assets are classified as cash outflows from

Accepted Answer

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

Question 11

What is reported on the statement of cash flows?

Accepted Answer

A) Operating, investing, and financing activities of an entity for a period of time 
B) All revenues and expense listed by operating, financing, and operating activity 
C) Operating, investing, and financing activities of an entity at the balance sheet date 
D) A detail of all incoming and outgoing cash flows of a business 
A) Operating, investing, and financing activities of an entity for a period of time 
B) All revenues and expense listed by operating, financing, and operating activity 
C) Operating, investing, and financing activities of an entity at the balance sheet date 
D) A detail of all incoming and outgoing cash flows of a business

Question 12

The following are relevant account balances from Winthrop Company's comparative balance sheet and 2017 income statement.
 $$\begin{array} { | l | c | r | } 
\hline & \text { December } 31,2017 & \text { January } 1,2017 \
\hline \text { Accounts receivable } & \$ 15,000 & \$ 19,000 \
\text { Prepaidinsurance } & 5,000 &  3 , 0 0 0 \
\text { Unearned revenue } &  8 , 0 0 0  & 11,000 \
\text { Salaries payable } & 9 , 0 0 0 &6 , 0 0 0 
\end{array}$$ 
Winthrop's 2017 income statement includes the following:
 $$\begin{array} { l r } 
\text { Sales revenue } & \$ 89,000 \
\text { Insurance expense } & 4,000 \
\text { Salaries expense } & 31,000
\end{array}$$ 
Determine the amount of cash collected from customers during 2017.

Accepted Answer

$89,000 - ($11,000 -

Question 13

Which statement is true with respect to the preparation of the cash flows from operating activities' section?

Accepted Answer

A) It can be calculated by using the direct or indirect methods. 
B) Cash flows are calculated as the difference between revenues and expenses. 
C) It is always equal to accrual accounting income. 
D) Cash payments for depreciation and dividends are reported in the operating activates sections. 
A) It can be calculated by using the direct or indirect methods. 
B) Cash flows are calculated as the difference between revenues and expenses. 
C) It is always equal to accrual accounting income. 
D) Cash payments for depreciation and dividends are reported in the operating activates sections.

Question 14

International financial reporting standards require a statement of cash flows. Why is this and what are some of the unique issues that multinational companies must understand when interpreting these statements?

Accepted Answer

The importance of debt capital to many f

Question 15

The May 1 and May 31 balances in accounts receivable are $35,000 and $36,000, respectively. During May, the company reported sales totaling $235,000 from its customers. The company incurred $211,000 of expenses, although $12,000 was not paid as of May 31. How much is cash flows from operations for May?

Accepted Answer

A) $24,000 
B) $37,000 
C) $11,000 
D) $35,000 
A) $24,000 
B) $37,000 
C) $11,000 
D) $35,000

Question 16

Which one of the following is consistent with a company recording a large operating income but having a net cash outflow from operations?

Accepted Answer

A) A great amount of depreciation expense 
B) An increase in accounts receivable and inventory 
C) An increase in accounts payable 
D) Acquisition of new plant assets for cash 
A) A great amount of depreciation expense 
B) An increase in accounts receivable and inventory 
C) An increase in accounts payable 
D) Acquisition of new plant assets for cash

Question 17

The following are relevant account balances from Winthrop Company's comparative balance sheet and 2017 income statement.
 $$\begin{array} { | l | c | r | } 
\hline & \text { December } 31,2017 & \text { January } 1,2017 \
\hline \text { Accounts receivable } & \$ 15,000 & \$ 19,000 \
\text { Prepaidinsurance } & 5,000 & 3 , 0 0 0  \
\text { Unearned revenue } & 8 , 0 0 0 & 11,000 \
\text { Salaries payable } & 9 , 0 0 0 & 5 , 0 0 0 
\end{array}$$ 
Winthrop's 2017 income statement includes the following:
 $\begin{array}{lr}
\text { Sales revenue } & \$ 89,000 \
\text { Insurance expense } & 4,000 \
\text { Salaries expense } & 31,000
\end{array}$ 
Determine the amount of cash paid for salaries during 2017.

Accepted Answer

$31,000 -

Question 18

How will a company classify the exchange of common stock for land on its statement of cash flows?

Accepted Answer

A) An operating activity 
B) An investing activity 
C) A financing activity 
D) A footnote 
A) An operating activity 
B) An investing activity 
C) A financing activity 
D) A footnote

Question 19

How will a company classify payments for inventory acquisitions on its statement of cash flows?

Accepted Answer

A) Cash provided from operations 
B) Cash used in operations 
C) Cash provided from investing activities 
D) Cash used for investing activities 
A) Cash provided from operations 
B) Cash used in operations 
C) Cash provided from investing activities 
D) Cash used for investing activities

Question 20

During the current year, Martini Foods reported sales of $250,000, and wrote off $7,000 of accounts receivable as uncollectible under the direct write-off method. On January 1 and December 31 of the current year, Richard Young had accounts receivable of $26,000 and $14,000, respectively. Determine the amount of cash collected from customers during the current year.

Accepted Answer

$250,000 - $7,000 +

How is the statement of cash flows linked to the other financial statements?

Equipment that cost $10,000 that had a book value of $6,000 was sold for $7,000. Data from the comparative balance sheets are: 12/31/17 12/31/16 Equipment \ 420,000 \ 310,000 Accumulated Depreciation 59,000 36,000 Equipment purchased during 2017 cost

How does the direct method of preparing the statement of cash flows differ from the indirect method?

How will a company classify the sale of treasury stock at an amount equal to its cost on its statement of cash flows?

Which one of the following is consistent with a company recording a large operating loss but still having healthy cash flows from operations?

During 2017, Bacon Co. reported a net operating loss of $19,000. The only asset or liability changes during 2017 were a decrease in accounts receivable of $11,000 and an increase in accumulated depreciation of $42,000. Calculate cash flows from operations during 2017 (indicate outflow or inflow).

In determining cash flow from operating activities, which of the following adjustments will be made as a result of an increase in accounts receivable during a period?

Payments for purchases of property, plant, and equipment and other productive assets are classified as cash outflows from

What is reported on the statement of cash flows?

Which statement is true with respect to the preparation of the cash flows from operating activities' section?

International financial reporting standards require a statement of cash flows. Why is this and what are some of the unique issues that multinational companies must understand when interpreting these statements?

Which one of the following is consistent with a company recording a large operating income but having a net cash outflow from operations?

How will a company classify the exchange of common stock for land on its statement of cash flows?

How will a company classify payments for inventory acquisitions on its statement of cash flows?

Financial Accounting and Its Economic Context

A Closer Look at the Financial Statements

The Measurement Fundamentals of Financial Accounting

The Mechanics of Financial Accounting

Using Financial Statement Information

The Current Asset Classification, Cash, and Accounts Receivable

Merchandise Inventory

Investments in Equity Securities

Long-Lived Assets

Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies

Long-Term Liabilities: Notes, Bonds, and Leases

Stockholders Equity

The Complete Income Statement

The Time Value of Money

Filters

Exam 14: The Statement of Cash Flows

How is the statement of cash flows linked to the other financial statements?

Equipment that cost $10,000 that had a book value of $6,000 was sold for $7,000. Data from the comparative balance sheets are: 12/31/17 12/31/16 Equipment \ 420,000 \ 310,000 Accumulated Depreciation 59,000 36,000 Equipment purchased during 2017 cost

How does the direct method of preparing the statement of cash flows differ from the indirect method?

How will a company classify the sale of treasury stock at an amount equal to its cost on its statement of cash flows?

Which one of the following is consistent with a company recording a large operating loss but still having healthy cash flows from operations?

During 2017, Bacon Co. reported a net operating loss of $19,000. The only asset or liability changes during 2017 were a decrease in accounts receivable of $11,000 and an increase in accumulated depreciation of $42,000. Calculate cash flows from operations during 2017 (indicate outflow or inflow).

In determining cash flow from operating activities, which of the following adjustments will be made as a result of an increase in accounts receivable during a period?

Payments for purchases of property, plant, and equipment and other productive assets are classified as cash outflows from

What is reported on the statement of cash flows?

Which statement is true with respect to the preparation of the cash flows from operating activities' section?

International financial reporting standards require a statement of cash flows. Why is this and what are some of the unique issues that multinational companies must understand when interpreting these statements?

Which one of the following is consistent with a company recording a large operating income but having a net cash outflow from operations?

How will a company classify the exchange of common stock for land on its statement of cash flows?

How will a company classify payments for inventory acquisitions on its statement of cash flows?

Financial Accounting and Its Economic Context

A Closer Look at the Financial Statements

The Measurement Fundamentals of Financial Accounting

The Mechanics of Financial Accounting

Using Financial Statement Information

The Current Asset Classification, Cash, and Accounts Receivable

Merchandise Inventory

Investments in Equity Securities

Long-Lived Assets

Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies

Long-Term Liabilities: Notes, Bonds, and Leases

Stockholders Equity

The Complete Income Statement

The Time Value of Money

Filters