Question 1

Acquisitions and sales of long-lived assets are examples of investing cash ﬂows.

Accepted Answer

A) True 
 B)False  True

Question 2

A bank credit manager, while reviewing a company's cash ﬂow statement, noticed that the company reported a large increase in inventory, but no increase in accounts receivable. Which of the following is not a possible explanation for this?

Accepted Answer

A)  The company experienced a decrease in demand for its products 
B)  The company may be stockpiling inventory in anticipation of a strike at a supplier. 
C)  The company increased its credit terms but not its production time. 
D)  The company has obsolete inventory on hand. 
A)  The company experienced a decrease in demand for its products 
B)  The company may be stockpiling inventory in anticipation of a strike at a supplier. 
C)  The company increased its credit terms but not its production time. 
D)  The company has obsolete inventory on hand. C

Question 3

A transaction that does not cause an inﬂow or outﬂow of cash should be reported on the statement of cash ﬂows only if it is an adjustment to convert accrual proﬁt to the cash basis.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following transactions is not a direct source of cash?

Accepted Answer

A)  Disposal of inventory for cash. 
B)  Borrowing cash. 
C)  Sale and issuance of shares for cash. 
D)  Sale of services on credit. 
A)  Disposal of inventory for cash. 
B)  Borrowing cash. 
C)  Sale and issuance of shares for cash. 
D)  Sale of services on credit.

Question 5

Which of the following is a cash equivalent?

Accepted Answer

A)  A short-term bank loan 
B)  A demand note receivable from another company 
C)  Government of Canada 180-day treasury bill 
D)  A note payable to a supplier 
A)  A short-term bank loan 
B)  A demand note receivable from another company 
C)  Government of Canada 180-day treasury bill 
D)  A note payable to a supplier

Question 6

The statement of cash ﬂows is the only ﬁnancial statement prepared on the cash basis of accounting rather than on the accrual basis of accounting.

Accepted Answer

A) True 
 B)False

Question 7

Melmore Ltd had the following activity during 20X7: $$\begin{array} { | l | r | } 
\hline \text { Proceeds from sale of long-term investments } & \$ 156,000 \
\hline \text { Gain on the sale of long-term investments } & \$ 16,000 \
\hline \text { Loss on the disposal of equipment (\$0 proceeds from disposal) } & \$ 17,000 \
\hline \text { Proceeds from sale of preferred shares } & \$ 182,000 \
\hline \text { Repayment of long-term debt } & \$ 30,000 \
\hline
\end{array}$$ What is the cash flow from investing activities?

Accepted Answer

A)  $16,000 
B)  $156,000 
C)  $173,000 
D)  $189,000 
A)  $16,000 
B)  $156,000 
C)  $173,000 
D)  $189,000

Question 8

Havery has the following cash flow & earnings numbers: $$\begin{array} { | l | r | } 
\hline \text { Cash flows from operations } & \$ 585 \
\hline \text { Capital expenditures } & \$ 154 \
\hline \text { Net income } & \$ 166 \
\hline \text { Dividends declared } & \$ 210 \
\hline \text { Dividends paid } & \$ 180 \
\hline
\end{array}$$ Havery has free cash flows of:

Accepted Answer

A)  $221 
B)  $251 
C)  $375 
D)  $541 
A)  $221 
B)  $251 
C)  $375 
D)  $541

Question 9

For external reporting, a company must prepare either a statement of earnings or a cash ﬂow statement, but not both.

Accepted Answer

A) True 
 B)False

Question 10

The following changes were noted from the statement of financial position: trade receivables increased $8,000; inventory increased $4,000; trade payables increased $6,000; prepaid expense decreased $2,000; accrued liability decreased $5,000; and interest payable increased $1,000 ABC Corporation Income Statement For the Year Ended December 31, 20X7 $$\begin{array} { | l | r | r | } 
\hline \text { Net sales } & & \$ 100,000 \
\hline \text { Cost of goods sold } & & \$ ( 40,000 ) \
\hline \text { Gross profit on sales } &  &\$60,000 \
\hline \text { Various operating expenses } & \$ 25,000 & \
\hline \text { Depreciation expense } &5,000 & \
\hline \text { Interest expense } & 2,000 \
\hline \text { Income tax expense } & \underline { 4,000 } & \$ ( 63,000 )  \
\hline \text { Net earnings } & & \$ 24,000 \
\hline
\end{array}$$ Required: Prepare the operating activities section of the statement of cash flows using the indirect method.

Accepted Answer

Please review the following information:

Question 11

A primary objective of the statement of cash ﬂows is to show the earnings or loss on investing and ﬁnancing transactions.

Accepted Answer

A) True 
 B)False

Question 12

The income statement, statement of ﬁnancial position and statement of cash ﬂows all are prepared on the accrual basis.

Accepted Answer

A) True 
 B)False

Question 13

Keller Inc. had the following activities during the year: $$\begin{array} { | l | r | } 
\hline \text { Proceeds from the sale of land } & \$ 346,000 \
\hline \text { Gain on sale of land } & \$ 46,000 \
\hline \text { Proceeds from the issue of common shares } & \$ 800,000 \
\hline \text { Purchase of equipment } & \$ 450,000 \
\hline
\end{array}$$ What was Keller's cash flow from investing activities for the year?

Accepted Answer

A)  $300,000 Cash outflow from investing activities. 
B)  $796,000 Cash inflow from investing activities. 
C)  $150,000 Cash inflow from investing activities. 
D)  $104,000 Cash outflow from investing activities 
A)  $300,000 Cash outflow from investing activities. 
B)  $796,000 Cash inflow from investing activities. 
C)  $150,000 Cash inflow from investing activities. 
D)  $104,000 Cash outflow from investing activities

Question 14

The financial statements for Ozzie Company show the following: $$\begin{array} { | l | r | r | } 
\hline & \text { Beginning balance } & \text { Ending balance } \
\hline \text { Merchandise inventory } & \$ 25,000 & \$ 26,000 \
\hline \text { Trade receivables } & 35,000 & 33,000 \
\hline \text { Trade payables } & 18,000 & 21,000 \
\hline \text { Cost of Goods Sold } & & \$ 121,000 \
\hline
\end{array}$$ How much cash was paid for merchandise?

Accepted Answer

A)  $117,000. 
B)  $119,000. 
C)  $121,000. 
D)  $124,000. 
A)  $117,000. 
B)  $119,000. 
C)  $121,000. 
D)  $124,000.

Question 15

Which of the following statements about the quality of earnings ratio is true?

Accepted Answer

A)  When sales are growing, receivables and inventory normally increase faster than payables so the ratio increases. 
B)  Seasonal variations in sales have no impact on the quality of earnings ratio. 
C)  Failure to accrue appropriate expenses will inﬂate net earnings and reduce the quality of earnings ratio. 
D)  Failure to accrue appropriate expenses will inﬂate net earnings and increase the quality of earnings ratio. 
A)  When sales are growing, receivables and inventory normally increase faster than payables so the ratio increases. 
B)  Seasonal variations in sales have no impact on the quality of earnings ratio. 
C)  Failure to accrue appropriate expenses will inﬂate net earnings and reduce the quality of earnings ratio. 
D)  Failure to accrue appropriate expenses will inﬂate net earnings and increase the quality of earnings ratio.

Question 16

Green Corporation reported net earnings of $50,000 for the year. During the year, trade receivables increased by $8,000, trade payables decreased by $4,000 and depreciation expense of $6,000 was recorded. Net cash provided by operating activities for the year, using the indirect method, is

Accepted Answer

A)  $54,000. 
B)  $56,000. 
C)  $50,000. 
D)  $44,000. 
A)  $54,000. 
B)  $56,000. 
C)  $50,000. 
D)  $44,000.

Question 17

The date in the heading of a statement of cash ﬂows should say, "At December 31, 20X1," rather than "For the Year Ended December 31, 20X1."

Accepted Answer

A) True 
 B)False

Question 18

The amortization of a patent is treated in a similar manner to depreciation of a building when preparing the operating activities section of the statement of cash ﬂows using the indirect method.

Accepted Answer

A) True 
 B)False

Question 19

In 20X3, The W D Company reported net earnings of $1.3 billion and cash flow from operations of $5.6 billion. In 20X2, it's net earnings was $1.9 billion and cash flow from operations was $5.1 billion. What were their quality of earnings ratios for 20X3 and 20X2 respectively?

Accepted Answer

A)  .23 and .37 
B)  .91 and 1.46 
C)  1.10 and .68 
D)  4.31 and 2.68 
A)  .23 and .37 
B)  .91 and 1.46 
C)  1.10 and .68 
D)  4.31 and 2.68

Question 20

Crocker Inc. had the following activity during 20X7: $$\begin{array} { | l | r | } 
\hline \text { Proceeds from sale of bonds payable } & \$ 200,000 \
\hline \text { Loss from disposal of equipment (Net book value } \$ 60,000 ) & \$ 38,000 \
\hline \text { Dividends paid to shareholders } & \$ 25,000 \
\hline \text { Sale of shares } & \$ 125,000 \
\hline \text { Gain on the sale of short term investments } & \$ 75,000 \
\hline
\end{array}$$ What is the cash flow from financing activities?

Accepted Answer

A)  $300,000 
B)  $292,000 
C)  $325,000 
D)  $275,000 
A)  $300,000 
B)  $292,000 
C)  $325,000 
D)  $275,000

Acquisitions and sales of long-lived assets are examples of investing cash ﬂows.

A bank credit manager, while reviewing a company's cash ﬂow statement, noticed that the company reported a large increase in inventory, but no increase in accounts receivable. Which of the following is not a possible explanation for this?

A transaction that does not cause an inﬂow or outﬂow of cash should be reported on the statement of cash ﬂows only if it is an adjustment to convert accrual proﬁt to the cash basis.

Which of the following transactions is not a direct source of cash?

Which of the following is a cash equivalent?

The statement of cash ﬂows is the only ﬁnancial statement prepared on the cash basis of accounting rather than on the accrual basis of accounting.

Havery has the following cash flow & earnings numbers: Cash flows from operations \ 585 Capital expenditures \ 154 Net income \ 166 Dividends declared \ 210 Dividends paid \ 180 Havery has free cash flows of:

For external reporting, a company must prepare either a statement of earnings or a cash ﬂow statement, but not both.

A primary objective of the statement of cash ﬂows is to show the earnings or loss on investing and ﬁnancing transactions.

The income statement, statement of ﬁnancial position and statement of cash ﬂows all are prepared on the accrual basis.

Keller Inc. had the following activities during the year: Proceeds from the sale of land \ 346,000 Gain on sale of land \ 46,000 Proceeds from the issue of common shares \ 800,000 Purchase of equipment \ 450,000 What was Keller's cash flow from investing activities for the year?

The financial statements for Ozzie Company show the following: Beginning balance Ending balance Merchandise inventory \ 25,000 \ 26,000 Trade receivables 35,000 33,000 Trade payables 18,000 21,000 Cost of Goods Sold \ 121,000 How much cash was paid for merchandise?

Which of the following statements about the quality of earnings ratio is true?

Green Corporation reported net earnings of $50,000 for the year. During the year, trade receivables increased by $8,000, trade payables decreased by $4,000 and depreciation expense of $6,000 was recorded. Net cash provided by operating activities for the year, using the indirect method, is

The date in the heading of a statement of cash ﬂows should say, "At December 31, 20X1," rather than "For the Year Ended December 31, 20X1."

The amortization of a patent is treated in a similar manner to depreciation of a building when preparing the operating activities section of the statement of cash ﬂows using the indirect method.

In 20X3, The W D Company reported net earnings of $1.3 billion and cash flow from operations of $5.6 billion. In 20X2, it's net earnings was $1.9 billion and cash flow from operations was $5.1 billion. What were their quality of earnings ratios for 20X3 and 20X2 respectively?

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments, Financial Statements, and Financial Results

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Receivables, Bad Debt Expense, and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 5: Fraud, Internal Control, and Cash

Acquisitions and sales of long-lived assets are examples of investing cash ﬂows.

A bank credit manager, while reviewing a company's cash ﬂow statement, noticed that the company reported a large increase in inventory, but no increase in accounts receivable. Which of the following is not a possible explanation for this?

A transaction that does not cause an inﬂow or outﬂow of cash should be reported on the statement of cash ﬂows only if it is an adjustment to convert accrual proﬁt to the cash basis.

Which of the following transactions is not a direct source of cash?

Which of the following is a cash equivalent?

The statement of cash ﬂows is the only ﬁnancial statement prepared on the cash basis of accounting rather than on the accrual basis of accounting.

Havery has the following cash flow & earnings numbers: Cash flows from operations \ 585 Capital expenditures \ 154 Net income \ 166 Dividends declared \ 210 Dividends paid \ 180 Havery has free cash flows of:

For external reporting, a company must prepare either a statement of earnings or a cash ﬂow statement, but not both.

A primary objective of the statement of cash ﬂows is to show the earnings or loss on investing and ﬁnancing transactions.

The income statement, statement of ﬁnancial position and statement of cash ﬂows all are prepared on the accrual basis.

Keller Inc. had the following activities during the year: Proceeds from the sale of land \ 346,000 Gain on sale of land \ 46,000 Proceeds from the issue of common shares \ 800,000 Purchase of equipment \ 450,000 What was Keller's cash flow from investing activities for the year?

The financial statements for Ozzie Company show the following: Beginning balance Ending balance Merchandise inventory \ 25,000 \ 26,000 Trade receivables 35,000 33,000 Trade payables 18,000 21,000 Cost of Goods Sold \ 121,000 How much cash was paid for merchandise?

Which of the following statements about the quality of earnings ratio is true?

Green Corporation reported net earnings of $50,000 for the year. During the year, trade receivables increased by $8,000, trade payables decreased by $4,000 and depreciation expense of $6,000 was recorded. Net cash provided by operating activities for the year, using the indirect method, is

The date in the heading of a statement of cash ﬂows should say, "At December 31, 20X1," rather than "For the Year Ended December 31, 20X1."

The amortization of a patent is treated in a similar manner to depreciation of a building when preparing the operating activities section of the statement of cash ﬂows using the indirect method.

In 20X3, The W D Company reported net earnings of $1.3 billion and cash flow from operations of $5.6 billion. In 20X2, it's net earnings was $1.9 billion and cash flow from operations was $5.1 billion. What were their quality of earnings ratios for 20X3 and 20X2 respectively?

Business Decisions and Financial Accounting

The Balance Sheet

The Income Statement

Adjustments, Financial Statements, and Financial Results

Merchandising Operations and the Multistep Income Statement

Inventory and Cost of Goods Sold

Receivables, Bad Debt Expense, and Interest Revenue

Long-Lived Tangible and Intangible Assets

Liabilities

Stockholders Equity

Statement Cash Flows

Measuring and Evaluating Financial Performance

Filters