Question 1

The payment to shareholders for repurchase of treasury shares is a cash ﬂow from a ﬁnancing activity.

Accepted Answer

A) True 
 B)False

Question 2

When the statement of cash ﬂows is prepared in conformity with IFRS there is only one acceptable way to measure and report cash ﬂows from operating activities.

Accepted Answer

A) True 
 B)False

Question 3

Depreciation expense does not cause a cash outﬂow for the current period; therefore, it should never be shown on the statement of cash ﬂows.

Accepted Answer

A) True 
 B)False

Question 4

Preferred shares issued in exchange for land would be reported on the statement of cash ﬂows in

Accepted Answer

A)  the cash ﬂows from ﬁnancing activities section. 
B)  the cash ﬂows from investing activities section. 
C)  the notes to the ﬁnancial statements. 
D)  the cash ﬂows from operating activities section. 
A)  the cash ﬂows from ﬁnancing activities section. 
B)  the cash ﬂows from investing activities section. 
C)  the notes to the ﬁnancial statements. 
D)  the cash ﬂows from operating activities section.

Question 5

A company acquired some land, which had been independently appraised at $12,000, and paid for it by issuing 1,000 shares of its common shares. The shares had a par value of $10 per share and no market price was available. How should this be reported on the statement of cash ﬂows?

Accepted Answer

A)  Report $12,000 as inﬂow and outﬂow of cash. 
B)  Report $12,000 as an inﬂow of cash. 
C)  Should not be reported on the statement of cash ﬂows. 
D)  Report on a schedule of signiﬁcant noncash transactions if it is material. 
A)  Report $12,000 as inﬂow and outﬂow of cash. 
B)  Report $12,000 as an inﬂow of cash. 
C)  Should not be reported on the statement of cash ﬂows. 
D)  Report on a schedule of signiﬁcant noncash transactions if it is material.

Question 6

Mansour Machines had cash ﬂow from operations of $5,070, cash ﬂows from investments of $(1,244), capital expenditures of $1,244, cash ﬂows from ﬁnancing of $(3,537), including $1,500 of dividends paid, and net income of $2,314. Mansour's free cash ﬂow is:

Accepted Answer

A)  $2,326 
B)  $1,533 
C)  $2,756 
D)  $3,826 
A)  $2,326 
B)  $1,533 
C)  $2,756 
D)  $3,826

Question 7

Cox Co. reported the following information from their statement of cash flows in millions of dollars: $$\begin{array} { | l | r | r | r | } 
\hline & \underline { \mathbf { 2 0 X 7 } } & \underline { \mathbf { 2 0 X 6 } } & \underline { \mathbf { 2 0 X 5 } } \
\hline \text { Profit } & \$ 2,431 & \$ 3,533 & \$ 4,129 \
\hline \text { Cash provided by operating activities } & \$ 3,883 & \$ 3,433 & \$ 4,033 \
\hline
\end{array}$$ (A) Calculate the quality of earnings ratio for Cox Co for the three years: (B) In 20X6, Pax Co. reported a quality of earnings ratio of 1.61. Compare C Co .'s quality of earnings ratio for that year to their competitor's ratio.

Accepted Answer

(A) 20X7: 1.60, 20X6: .97, 20X5: .98. 
(

Question 8

Which of the following transactions does not affect cash during a period?

Accepted Answer

A)  Write-off of an uncollectible account 
B)  Collection of an accounts receivable 
C)  Sale of common shares 
D)  Redemption of bonds 
A)  Write-off of an uncollectible account 
B)  Collection of an accounts receivable 
C)  Sale of common shares 
D)  Redemption of bonds

Question 9

The net increase (or decrease) in cash that is reported on the statement of cash ﬂows should be the same as the change in the balance of the cash account for the two most recent years on the comparative statements of ﬁnancial position.

Accepted Answer

A) True 
 B)False

Question 10

Typical financing activities do NOT include the following

Accepted Answer

A)  Proceeds from issuance of short- and long-term borrowings. 
B)  Principal payments on short- and long-term borrowings. 
C)  Purchase of short- or long-term investments for cash. 
D)  Purchase of shares for retirement. 
A)  Proceeds from issuance of short- and long-term borrowings. 
B)  Principal payments on short- and long-term borrowings. 
C)  Purchase of short- or long-term investments for cash. 
D)  Purchase of shares for retirement.

Question 11

The payment of interest on a note payable is a cash ﬂow from an operating activity.

Accepted Answer

A) True 
 B)False

Question 12

It is not possible for a ﬁrm to be highly proﬁtable and go bankrupt.

Accepted Answer

A) True 
 B)False

Question 13

The following information was available for Brockville Corp for the 20X6 fiscal year: $$\begin{array} { | l | r | } 
\hline \text { Cash inflow from financing activities } & \$ 225,000 \
\hline \text { Cash outflow from investing activities } & \$ 415,000 \
\hline \text { Cash inflow from operations } & \$ 372,500 \
\hline \text { Dividends paid } & \$ 25,000 \
\hline \text { Amount spent on capital expenditures } & \$ 300,000 \
\hline
\end{array}$$ What is Brockville's free cash flow for 20X6?

Accepted Answer

A)  ($67,000) 
B)  ($42,000) 
C)  $47,500 
D)  $347,500 
A)  ($67,000) 
B)  ($42,000) 
C)  $47,500 
D)  $347,500

Question 14

Matlock Company reported total sales revenue of $55,000 and total expenses amounting to $45,000 on its income statement for the year ended December 31, 20X2. During 20X2, trade receivables decreased by $4,000, merchandise inventory decreased by $6,000, trade payables increased by $2,000 and depreciation of $8,000 was recorded. Therefore, based only on this information, the net cash flow from operating activities for 20X2 would be which of the following?

Accepted Answer

A)  $10,000. 
B)  $18,000. 
C)  $19,000. 
D)  $30,000. 
A)  $10,000. 
B)  $18,000. 
C)  $19,000. 
D)  $30,000.

Question 15

Wyman Co. reported $26,000 of cash provided by operating activities and the following data: $$\begin{array} { | l | r | } 
\hline \text { Amortization } & \$ 45,000 \
\hline \text { Increase in accounts payable } & 12,000 \
\hline \text { Increase in wages payable } & 8,000 \
\hline \text { Decrease in taxes payable } & 2,000 \
\hline
\end{array}$$ Wyman's net income/loss for the period was

Accepted Answer

A)  $37,000 loss 
B)  $12,000 loss 
C)  $10,000 net income 
D)  $54,000 
A)  $37,000 loss 
B)  $12,000 loss 
C)  $10,000 net income 
D)  $54,000

Question 16

The 20X2 income statement of Dunn Company reported total sales revenue of $106,000 and total expenses of $108,000 . Expenses were: building depreciation, $10,000 and patent amortization, $5,000. There was an increase in inventory of $1,000. What was cash flow from operating activities during 20X2 (parentheses indicate outflow)?

Accepted Answer

A)  ($3,000). 
B)  $7,000. 
C)  $12,000. 
D)  $14,000. 
A)  ($3,000). 
B)  $7,000. 
C)  $12,000. 
D)  $14,000.

Question 17

A banker contemplating a loan to a company should focus on which section(s) of the cash ﬂow statement in order to determine the company's ability to repay the loan?

Accepted Answer

A)  Operating activities 
B)  Operating and ﬁnancing activities 
C)  Investing activities 
D)  Operating and investing activities 
A)  Operating activities 
B)  Operating and ﬁnancing activities 
C)  Investing activities 
D)  Operating and investing activities

Question 18

The comparative balance sheets for Gillen Inc. appear below: $\begin{array}{|l|r|r|}
\hline& \operatorname{Dec} 31,20X 7 & \text { Dec. } 31,20X 6\
\hline\text { Assets }\
\hline \text { Cash } & \$ 29,000 & \$ 10,000 \
\hline \text { Trade receivables } & 23,000 & 14,000 \
\hline \text { Prepaid expenses } & 6,000 & 9,000 \
\hline \text { Inventory } & 25,000 & 15,000 \
\hline \text { Long-term investments } & 0 & 23,000 \
\hline \text { Equipment } & 57,000 & 30,000 \
\hline \text { Accumulated depreciation-equipment } & \$ 18,000 & \underline{(14,000)} \
\hline \text { Total assets } &\$122,000 & \$ 87,000 \
\hline \text { Liabilities and Shareholders' Equity } & & \
\hline \text { Trade payables } & 21,000 & \$ 9,000 \
\hline \text { Mortgage notes payable } & 37,000 & 45,000 \
\hline \text { Common shares } &40,000 & 23,000 \
\hline \text { Retained earnings } &  \underline{24,000} & 10,000 \
\hline \text { Total liabilities and shareholders' equity } &\$122,000& \$ 87,000 \
\hline
\end{array}$ Additional information: 
1. Net earnings for the year ending December 31, 20X7 were $27,000. 
2. Cash dividends of $13,000 were declared and paid during the year ended December 31 20X7 . 
3. Long-term investments that had a carrying amount of $23,000 were sold for $18,000 in 20X7. Prepare a cash flow statement for the year ended December 31, 20X7, using the indirect method.

Accepted Answer

Please review the following information:

Question 19

In the years 20X0-20X3, Bee Co.'s capital expenditures ratio was 2.74 and from 20X4-20X7, it was 1.24. From 20X4-20X7, Are Co.'s ratio was .30. Which of the following statements about Bee Co.'s capital expenditures ratio is correct?

Accepted Answer

A)  Bee Co.'s capital expenditure ratio is relatively low and indicates inability to ﬁnance property, plant and equipment with cash ﬂow from operations. 
B)  It appears that Are Co. is more aggressive about investing in additional property, plant and equipment than is Bee Co. 
C)  Bee Co.'s ratio has improved in the period 20X4-20X7. 
D)  It appears that Bee Co. is more aggressive about investing in additional property, plant and equipment than is Are Co. 
A)  Bee Co.'s capital expenditure ratio is relatively low and indicates inability to ﬁnance property, plant and equipment with cash ﬂow from operations. 
B)  It appears that Are Co. is more aggressive about investing in additional property, plant and equipment than is Bee Co. 
C)  Bee Co.'s ratio has improved in the period 20X4-20X7. 
D)  It appears that Bee Co. is more aggressive about investing in additional property, plant and equipment than is Are Co.

Question 20

Match between columns
                        Premises: Collected a trade receivable.
Declared and paid dividends on common shares.
Sold long-term investments for cash.
Issued common shares for equipment.
Repaid a five-year note payable.
Paid employee wages.
Converted bonds payable to common shares.
Acquired long-term investment with cash.
Sold buildings and equipment for cash.
Sold merchandise to customers.

Accepted Answer

The Answer of an operating activity and an investing activity is...

The payment to shareholders for repurchase of treasury shares is a cash ﬂow from a ﬁnancing activity.

When the statement of cash ﬂows is prepared in conformity with IFRS there is only one acceptable way to measure and report cash ﬂows from operating activities.

Depreciation expense does not cause a cash outﬂow for the current period; therefore, it should never be shown on the statement of cash ﬂows.

Preferred shares issued in exchange for land would be reported on the statement of cash ﬂows in

A company acquired some land, which had been independently appraised at $12,000, and paid for it by issuing 1,000 shares of its common shares. The shares had a par value of $10 per share and no market price was available. How should this be reported on the statement of cash ﬂows?

Mansour Machines had cash ﬂow from operations of $5,070, cash ﬂows from investments of $(1,244), capital expenditures of $1,244, cash ﬂows from ﬁnancing of $(3,537), including $1,500 of dividends paid, and net income of $2,314. Mansour's free cash ﬂow is:

Which of the following transactions does not affect cash during a period?

The net increase (or decrease) in cash that is reported on the statement of cash ﬂows should be the same as the change in the balance of the cash account for the two most recent years on the comparative statements of ﬁnancial position.

Typical financing activities do NOT include the following

The payment of interest on a note payable is a cash ﬂow from an operating activity.

It is not possible for a ﬁrm to be highly proﬁtable and go bankrupt.

Wyman Co. reported $26,000 of cash provided by operating activities and the following data: Amortization \ 45,000 Increase in accounts payable 12,000 Increase in wages payable 8,000 Decrease in taxes payable 2,000 Wyman's net income/loss for the period was

A banker contemplating a loan to a company should focus on which section(s) of the cash ﬂow statement in order to determine the company's ability to repay the loan?

In the years 20X0-20X3, Bee Co.'s capital expenditures ratio was 2.74 and from 20X4-20X7, it was 1.24. From 20X4-20X7, Are Co.'s ratio was .30. Which of the following statements about Bee Co.'s capital expenditures ratio is correct?

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

The payment to shareholders for repurchase of treasury shares is a cash ﬂow from a ﬁnancing activity.

When the statement of cash ﬂows is prepared in conformity with IFRS there is only one acceptable way to measure and report cash ﬂows from operating activities.

Depreciation expense does not cause a cash outﬂow for the current period; therefore, it should never be shown on the statement of cash ﬂows.

Preferred shares issued in exchange for land would be reported on the statement of cash ﬂows in

A company acquired some land, which had been independently appraised at $12,000, and paid for it by issuing 1,000 shares of its common shares. The shares had a par value of $10 per share and no market price was available. How should this be reported on the statement of cash ﬂows?

Mansour Machines had cash ﬂow from operations of $5,070, cash ﬂows from investments of $(1,244), capital expenditures of $1,244, cash ﬂows from ﬁnancing of $(3,537), including $1,500 of dividends paid, and net income of $2,314. Mansour's free cash ﬂow is:

Which of the following transactions does not affect cash during a period?

The net increase (or decrease) in cash that is reported on the statement of cash ﬂows should be the same as the change in the balance of the cash account for the two most recent years on the comparative statements of ﬁnancial position.

Typical financing activities do NOT include the following

The payment of interest on a note payable is a cash ﬂow from an operating activity.

It is not possible for a ﬁrm to be highly proﬁtable and go bankrupt.

Wyman Co. reported $26,000 of cash provided by operating activities and the following data: Amortization \ 45,000 Increase in accounts payable 12,000 Increase in wages payable 8,000 Decrease in taxes payable 2,000 Wyman's net income/loss for the period was

A banker contemplating a loan to a company should focus on which section(s) of the cash ﬂow statement in order to determine the company's ability to repay the loan?

In the years 20X0-20X3, Bee Co.'s capital expenditures ratio was 2.74 and from 20X4-20X7, it was 1.24. From 20X4-20X7, Are Co.'s ratio was .30. Which of the following statements about Bee Co.'s capital expenditures ratio is correct?

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