Question 1

The statement of cash flows cannot help address questions such as:

Accepted Answer

A) Why is cash flow from operations different from income? 
B) What is the source of cash for new plant assets? 
C) How much of the company's revenues have been retained as profit? 
D) How much cash is generated from or used in operations? 
E) How is the increase in investments financed? 
A) Why is cash flow from operations different from income? 
B) What is the source of cash for new plant assets? 
C) How much of the company's revenues have been retained as profit? 
D) How much cash is generated from or used in operations? 
E) How is the increase in investments financed?

Question 2

To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

Accepted Answer

A) True 
 B)False

Question 3

A company had average total assets of $1,660,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $750,000. The cash flow on total assets ratio equals:

Accepted Answer

A) 22.0%. 
B) 79.5%. 
C) 11.65%. 
D) 12.3%. 
E) 45.2%. 
A) 22.0%. 
B) 79.5%. 
C) 11.65%. 
D) 12.3%. 
E) 45.2%.

Question 4

On a spreadsheet used to prepare the operating activities section of the statement of cash flows, depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

Accepted Answer

A) True 
 B)False

Question 5

The accountant for Mandarin Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array}{l|r}
\hline \text { Retained earnings balance at the beginning of the year } & \$ 819,000 \
\hline \text { Net income for the year } & 230,000 \
\hline \text { Cash dividends declared for the year } & 42,000 \
\hline \text { Retained earnings balance at the end of the year } & 1,007,000 \
\hline \text { Cash dividends payable at the beginning of the year } & 10,000 \
\hline \text { Cash dividends payable at the end of the year } & 11,000
\end{array}$ 84
What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows?

Accepted Answer

A) $63,000. 
B) $41,000. 
C) $1,000. 
D) $43,000. 
E) $42,000. 
A) $63,000. 
B) $41,000. 
C) $1,000. 
D) $43,000. 
E) $42,000.

Question 6

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are added to net income.

Accepted Answer

A) True 
 B)False

Question 7

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from investing activities generally affect:

Accepted Answer

A) Noncurrent liability and equity accounts. 
B) Noncurrent assets. 
C) Equity accounts only. 
D) Net income, current assets, and current liabilities. 
E) Both noncurrent assets and noncurrent liabilities. 
A) Noncurrent liability and equity accounts. 
B) Noncurrent assets. 
C) Equity accounts only. 
D) Net income, current assets, and current liabilities. 
E) Both noncurrent assets and noncurrent liabilities.

Question 8

The direct method of reporting operating cash flows:

Accepted Answer

A) Is considered supplementary disclosure. 
B) Is not recommended by the FASB, but is commonly used. 
C) Is used by most companies. 
D) Must be used by all companies. 
E) Is recommended but not required by the FASB. 
A) Is considered supplementary disclosure. 
B) Is not recommended by the FASB, but is commonly used. 
C) Is used by most companies. 
D) Must be used by all companies. 
E) Is recommended but not required by the FASB.

Question 9

Investing activities include receiving cash dividends from investments in other companies' stocks.

Accepted Answer

A) True 
 B)False

Question 10

Equipment costing $200,000 with accumulated depreciation of $160,000 is sold at a loss of $10,000. This implies that $30,000 cash was received from the sale.

Accepted Answer

A) True 
 B)False

Question 11

Financing activities include (a)the purchase and sale of long-term assets, (b)the purchase and sale of short-term investments, and (c)lending and collecting on loans.

Accepted Answer

A) True 
 B)False

Question 12

Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities: $\begin{array}{|l|r|}
\hline \text { Net income } & \$ 182,000 \
\hline \text { Gain on the sale of equipment } & 12,300 \
\hline \text { Proceeds from the sale of equipment } & 92,300 \
\hline \text { Depreciation expense - equipment } & 50,000 \
\hline \text { Payment of bonds at maturity } & 100,000 \
\hline \text { Purchase of land } & 200,000 \
\hline \text { Issuance of common stock } & 300,000 \
\hline \text { Increase in merchandise inventory } & 35,400 \
\hline \text { Decrease in accounts receivable } & 28,800 \
\hline \text { Increase in accounts payable } & 23,700 \
\hline \text { Payment of cash dividends } & 32,000\\hline
\end{array}$

Accepted Answer

A) $191,700. 
B) $168,000. 
C) $200,000. 
D) ($168,000). 
E) ($191,700). 
A) $191,700. 
B) $168,000. 
C) $200,000. 
D) ($168,000). 
E) ($191,700).

Question 13

The direct method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

Accepted Answer

A) True 
 B)False

Question 14

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported in the operating activities section reported under the direct method is:

Accepted Answer

A) $50,000. 
B) Zero. This is a financing activity. 
C) $45,000. 
D) Zero. This is an investing activity. 
E) $5,000. 
A) $50,000. 
B) Zero. This is a financing activity. 
C) $45,000. 
D) Zero. This is an investing activity. 
E) $5,000.

Question 15

Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 16

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array} { l  }
 \text {Cost of goods sold. } &\$735,000\
 \text {Merchandise inventory, January 1. } &84,700\
 \text {Merchandise inventory, December 31 } &82,400\
 \text {Accounts payable, January 1. } &54,500\
 \text {Accounts payable, December 31. } &60,200\
\end{array}$

Accepted Answer

A) $727,000. 
B) $726,300. 
C) $732,700. 
D) $737,700. 
E) $737,300. 
A) $727,000. 
B) $726,300. 
C) $732,700. 
D) $737,700. 
E) $737,300.

Question 17

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is unaffected by interest rate changes is a(n):

Accepted Answer

A) Operating activity. 
B) Cash equivalent. 
C) Short-term marketable equity security. 
D) Common stock. 
E) Financing activity. 
A) Operating activity. 
B) Cash equivalent. 
C) Short-term marketable equity security. 
D) Common stock. 
E) Financing activity.

Question 18

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: $$\begin{array} { l | r } 
\text { Net income } & \$ 85,300 \
\hline \text { Depreciation expense } & 12,000 \
\hline \text { Increase in merchandise inventory } & 2,050 \
\hline \text { Increase in accounts payable } & 6,150 \
\hline
\end{array}$$

Accepted Answer

A) $85,700. 
B) $69,900. 
C) $93,900. 
D) $108,900. 
E) $81,600. 
A) $85,700. 
B) $69,900. 
C) $93,900. 
D) $108,900. 
E) $81,600.

Question 19

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

Accepted Answer

The indirect method for preparing the op

Question 20

Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.

Accepted Answer

A) True 
 B)False

The statement of cash flows cannot help address questions such as:

To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

A company had average total assets of $1,660,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $750,000. The cash flow on total assets ratio equals:

On a spreadsheet used to prepare the operating activities section of the statement of cash flows, depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are added to net income.

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from investing activities generally affect:

The direct method of reporting operating cash flows:

Investing activities include receiving cash dividends from investments in other companies' stocks.

Equipment costing $200,000 with accumulated depreciation of $160,000 is sold at a loss of $10,000. This implies that $30,000 cash was received from the sale.

Financing activities include (a)the purchase and sale of long-term assets, (b)the purchase and sale of short-term investments, and (c)lending and collecting on loans.

The direct method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported in the operating activities section reported under the direct method is:

Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is unaffected by interest rate changes is a(n):

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: Net income \ 85,300 Depreciation expense 12,000 Increase in merchandise inventory 2,050 Increase in accounts payable 6,150

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Analysis of Financial Statements

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Exam 16: Reporting the Statement of Cash Flows

The statement of cash flows cannot help address questions such as:

To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

A company had average total assets of $1,660,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $750,000. The cash flow on total assets ratio equals:

On a spreadsheet used to prepare the operating activities section of the statement of cash flows, depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are added to net income.

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from investing activities generally affect:

The direct method of reporting operating cash flows:

Investing activities include receiving cash dividends from investments in other companies' stocks.

Equipment costing $200,000 with accumulated depreciation of $160,000 is sold at a loss of $10,000. This implies that $30,000 cash was received from the sale.

Financing activities include (a)the purchase and sale of long-term assets, (b)the purchase and sale of short-term investments, and (c)lending and collecting on loans.

The direct method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported in the operating activities section reported under the direct method is:

Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is unaffected by interest rate changes is a(n):

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: Net income \ 85,300 Depreciation expense 12,000 Increase in merchandise inventory 2,050 Increase in accounts payable 6,150

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Analysis of Financial Statements

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