Question 1

When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

Accepted Answer

A) A decrease in accounts payable. 
B) Proceeds from the disposal of a long-term asset with no gain or loss. 
C) An increase in accounts receivable. 
D) A decrease in accrued expenses payable. 
E) An increase in prepaid expenses. 
A) A decrease in accounts payable. 
B) Proceeds from the disposal of a long-term asset with no gain or loss. 
C) An increase in accounts receivable. 
D) A decrease in accrued expenses payable. 
E) An increase in prepaid expenses.

Question 2

What are the five usual steps involved in the preparation of the statement of cash flows?

Accepted Answer

The preparation of the statement of cash

Question 3

The reporting of investing activities in the statement of cash flows is identical under either the direct or indirect methods.

Accepted Answer

A) True 
 B)False

Question 4

A company's Inventory balance at the end of the year was $188,000 and $200,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $84,000 and $80,000 at the beginning of the year, and its cost of goods sold for the year was $720,000. The company's total amount of cash payments for merchandise during the year equals:

Accepted Answer

A) $720,000. 
B) $736,000. 
C) $712,000. 
D) $728,000. 
E) $704,000. 
A) $720,000. 
B) $736,000. 
C) $712,000. 
D) $728,000. 
E) $704,000.

Question 5

A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash flows from operations of $554,000, and cash flows for plant assets of $850,000. The cash flow on total assets ratio equals:

Accepted Answer

A) 17.23%. 
B) 64.39%. 
C) 41.04%. 
D) 41.97%. 
E) 26.43%. 
A) 17.23%. 
B) 64.39%. 
C) 41.04%. 
D) 41.97%. 
E) 26.43%.

Question 6

Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $28,000; net cash used in investing activities was $10,000 and net cash used in financing activities was $12,000. If the beginning cash balance is $5,000, what is the ending cash balance?

Accepted Answer

A) $31,000. 
B) $45,000. 
C) $6,000. 
D) $55,000. 
E) $11,000. 
A) $31,000. 
B) $45,000. 
C) $6,000. 
D) $55,000. 
E) $11,000.

Question 7

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Accepted Answer

A) Direct activities. 
B) Indirect activities. 
C) Financing activities. 
D) Operating activities. 
E) Investing activities. 
A) Direct activities. 
B) Indirect activities. 
C) Financing activities. 
D) Operating activities. 
E) Investing activities.

Question 8

The purchase of stock in another company is classified as a financing activity.

Accepted Answer

A) True 
 B)False

Question 9

A cash equivalent is:

Accepted Answer

A) Another name for cash. 
B) Generally within 12 months of its maturity date. 
C) An investment readily convertible to a known amount of cash. 
D) Is not considered highly liquid. 
E) Close to its maturity date but its market value may still be affected by interest rate changes. 
A) Another name for cash. 
B) Generally within 12 months of its maturity date. 
C) An investment readily convertible to a known amount of cash. 
D) Is not considered highly liquid. 
E) Close to its maturity date but its market value may still be affected by interest rate changes.

Question 10

Investing 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 11

If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported:

Accepted Answer

A) A decrease in cash flows from investing activities 
B) An increase in cash flows from operating activities 
C) An increase in cash flows from investing activities 
D) A decrease in cash flows from operating activities 
E) An increase in cash flows from financing activities 
A) A decrease in cash flows from investing activities 
B) An increase in cash flows from operating activities 
C) An increase in cash flows from investing activities 
D) A decrease in cash flows from operating activities 
E) An increase in cash flows from financing activities

Question 12

Match between columns
                        Premises: Signed a note payable in exchange for cash.
Paid interest on a note payable.
Reissued treasury stock.
Cash sales of merchandise.
Paid cash to settle an account payable.
Purchased supplies for cash.
Purchased equipment in exchange for a 6-month note payable.
Purchased equipment for cash.
Purchased a warehouse in exchange for shares of its stock.
Sale of land for cash.

Accepted Answer

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

Question 13

When preparing a statement of cash flows using the indirect method, which of the following is correct?

Accepted Answer

A) The declaration of a cash dividend should be a use of cash in the financing activities section. 
B) The issuance of a stock dividend should be a use of cash in the financing activities section. 
C) The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section. 
D) Proceeds from the sale of equipment should be added to net income in the operating activities section. 
E) A loss on the sale of land should be added to net income in the operating activities section. 
A) The declaration of a cash dividend should be a use of cash in the financing activities section. 
B) The issuance of a stock dividend should be a use of cash in the financing activities section. 
C) The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section. 
D) Proceeds from the sale of equipment should be added to net income in the operating activities section. 
E) A loss on the sale of land should be added to net income in the operating activities section.

Question 14

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

Accepted Answer

A) Materiality principle. 
B) Historical cost principle. 
C) Business entity principle. 
D) Full disclosure principle. 
E) Going concern principle. 
A) Materiality principle. 
B) Historical cost principle. 
C) Business entity principle. 
D) Full disclosure principle. 
E) Going concern principle.

Question 15

The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

Accepted Answer

A) True 
 B)False

Question 16

The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

Accepted Answer

A) True 
 B)False

Question 17

Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

Accepted Answer

A) True 
 B)False

Question 18

Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l  }
 \text {Retained earnings balance at the beginning of the year  }&\$233,000 \
 \text {Cash dividends declared for the year }&50,000 \
 \text {Proceeds from the sale of equipment }&85,000 \
 \text { Gain on the sale of equipment}&4,500 \
 \text { Cash dividends payable at the beginning of the year}&22,000 \
 \text {Cash dividends payable at the end of the year }& 30,000\
 \text {Net income for the year }&110,000\
\end{array}$
 The amounc of cash paid for dividends was:

Accepted Answer

A) $60,000. 
B) $42,000. 
C) $52,000. 
D) $58,000. 
E) $50,000. 
A) $60,000. 
B) $42,000. 
C) $52,000. 
D) $58,000. 
E) $50,000.

Question 19

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: $$\begin{array} { l | r } 
\text { Net income for the year was } & \$ 52,000 \
\hline \text { Accounts payable decreased by } & 18,000 \
\hline \text { Accounts receivable increased by } & 25,000 \
\hline \text { Inventories increased by } & 5,000 \
\hline \text { Depreciation expense was } & 30,000
\end{array}$$ Net cash provided by operating activities was:

Accepted Answer

A) $60,000. 
B) $34,000. 
C) $80,000. 
D) $52,000. 
E) $70,000. 
A) $60,000. 
B) $34,000. 
C) $80,000. 
D) $52,000. 
E) $70,000.

Question 20

Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:

Accepted Answer

A) Financing activities. 
B) This is not reported in the statement of cash flows. 
C) Investing activities. 
D) Noncash activities. 
E) Operating activities. 
A) Financing activities. 
B) This is not reported in the statement of cash flows. 
C) Investing activities. 
D) Noncash activities. 
E) Operating activities.

When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

What are the five usual steps involved in the preparation of the statement of cash flows?

The reporting of investing activities in the statement of cash flows is identical under either the direct or indirect methods.

A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash flows from operations of $554,000, and cash flows for plant assets of $850,000. The cash flow on total assets ratio equals:

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

The purchase of stock in another company is classified as a financing activity.

A cash equivalent is:

Investing 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.

If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported:

When preparing a statement of cash flows using the indirect method, which of the following is correct?

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:

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

When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

What are the five usual steps involved in the preparation of the statement of cash flows?

The reporting of investing activities in the statement of cash flows is identical under either the direct or indirect methods.

A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash flows from operations of $554,000, and cash flows for plant assets of $850,000. The cash flow on total assets ratio equals:

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

The purchase of stock in another company is classified as a financing activity.

A cash equivalent is:

Investing 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.

If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported:

When preparing a statement of cash flows using the indirect method, which of the following is correct?

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:

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

Filters