Question 1

Free cash flow may be used for all of the following except:

Accepted Answer

A)  expanding the business. 
B)  paying off debt. 
C)  building up the cash balance. 
D)  paying employees. 
A)  expanding the business. 
B)  paying off debt. 
C)  building up the cash balance. 
D)  paying employees.

Question 2

The Viviana Co.uses the indirect method to determine its cash flow from operations.Which of the following items will be subtracted from net income to find its cash flow from operations?

Accepted Answer

A)  Decrease in Supplies 
B)  Increase in Accounts Payable 
C)  Depreciation Expense 
D)  Increase in Accounts Receivable. 
A)  Decrease in Supplies 
B)  Increase in Accounts Payable 
C)  Depreciation Expense 
D)  Increase in Accounts Receivable.

Question 3

If a company uses the indirect method to determine cash flows from operating activities,gains:

Accepted Answer

A)  must be added to net income and losses subtracted from net income. 
B)  and losses must be added to net income. 
C)  must be subtracted from net income and losses added to net income. 
D)  and losses must be subtracted from net income. 
A)  must be added to net income and losses subtracted from net income. 
B)  and losses must be added to net income. 
C)  must be subtracted from net income and losses added to net income. 
D)  and losses must be subtracted from net income.

Question 4

The following information is taken from the income statement of Muir Company:
 
Based on this information,what is the amount of net cash flow provided by operating activities?

Accepted Answer

A)  $149,000 
B)  $140,000 
C)  $146,000 
D)  $134,000 
A)  $149,000 
B)  $140,000 
C)  $146,000 
D)  $134,000

Question 5

Choose the appropriate letter to match the account balance change with the type of adjustment made to net income when using the indirect method to determine net cash flow provided by operating activities.
Account Balance Change
1._____ Decrease in Property,Plant,and Equipment
2._____ Increase in Accounts Receivable
3._____ Decrease in Inventory
4._____ Decrease in Prepaid Expenses
5._____ Increase in Accounts Payable
6._____ Decrease in Accrued Liabilities
7._____ Decrease in Income Tax Payable
8._____ Increase in Dividends Payable
9._____ Gain on Sales of Property,Plant and Equipment
10._____ Depreciation
Type of Adjustment
A - Add item to net income
S - Subtract item from net income
N - No adjustment necessary

Accepted Answer

1.N
2.S
3.

Question 6

If a company's Sales Revenue was $171,356 and cash collected from customers was $167,803,which of the following would be consistent with this difference?

Accepted Answer

A)  Accounts Receivable could have decreased. 
B)  Cash payments could have been larger than the related expense accounts. 
C)  Accounts Receivable could have increased. 
D)  Cash payments could have been smaller than the related expense accounts. 
A)  Accounts Receivable could have decreased. 
B)  Cash payments could have been larger than the related expense accounts. 
C)  Accounts Receivable could have increased. 
D)  Cash payments could have been smaller than the related expense accounts.

Question 7

In determining cash flows related to investing activities,which accounts are analyzed?

Accepted Answer

A)  Inventory and accounts receivable. 
B)  Loans payable and common stock. 
C)  Short-term investments and prepaid expenses. 
D)  Long-lived tangible and intangible assets. 
A)  Inventory and accounts receivable. 
B)  Loans payable and common stock. 
C)  Short-term investments and prepaid expenses. 
D)  Long-lived tangible and intangible assets.

Question 8

Which of the following represent cash outflows from financing activities?

Accepted Answer

A)  Distributing a stock dividend 
B)  Paying a bond's face value at maturity 
C)  Issuing long-term bonds at a discount 
D)  Paying interest on promissory notes 
A)  Distributing a stock dividend 
B)  Paying a bond's face value at maturity 
C)  Issuing long-term bonds at a discount 
D)  Paying interest on promissory notes

Question 9

A corporation had a net increase in Retained Earnings of $65,000 for the year.The corporation also paid $20,000 of cash dividends that had been declared in the previous year.This year,the corporation declared $18,000 of dividends but has not paid them as of year-end.Given this information,the net income for the current year must have been:

Accepted Answer

A)  $63,000 
B)  $85,000 
C)  $65,000 
D)  $83,000 
A)  $63,000 
B)  $85,000 
C)  $65,000 
D)  $83,000

Question 10

The net cash flow provided by operating activities is an inflow of $37,042,the net cash flow used in investing activities is $16,831,and the net cash flow used in financing activities is $26,397.If the beginning cash account balance is $11,283,what is the ending cash account balance?

Accepted Answer

A)  $5,097 
B)  ($6,186) 
C)  $38,759 
D)  $27,476 
A)  $5,097 
B)  ($6,186) 
C)  $38,759 
D)  $27,476

Question 11

Brighton,Inc.uses the indirect method to determine its cash flow from operations.During the course of the year,Brighton,Inc.'s Accounts Receivable increased by $10,000 and its Accounts Payable decreased by $5,000.As a result of these two items,the net addition (or subtraction)to convert net income to cash flow from operations equals:

Accepted Answer

A)  $5,000. 
B)  ($5,000). 
C)  $15,000. 
D)  ($15,000). 
A)  $5,000. 
B)  ($5,000). 
C)  $15,000. 
D)  ($15,000).

Question 12

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.
  
-Use the information above to answer the following question.If the cash balance at the beginning of the current year was $0,what is the amount of cash at the end of the year?

Accepted Answer

A)  $112,500 
B)  $425,000 
C)  $737,500 
D)  $311,500 
A)  $112,500 
B)  $425,000 
C)  $737,500 
D)  $311,500

Question 13

The management team of Wickersham Brothers Inc.is preparing its annual financial statements.The statements are complete except for the statement of cash flows.The completed comparative balance sheets and income statements are summarized.
   
Other information from the company's records includes the following:
-Bought equipment for cash,$50,000.
-Paid $10,000 on long-term note payable.
-Issued new shares of common stock for $20,000 cash.
-Cash dividends of $16,000 were declared and paid to stockholders.
-Accounts Payable arose from inventory purchases on credit.
-Income Tax Expense ($4,000)and Interest Expense ($3,000)were paid in full at the end of both years and are included in Other Expenses.
Required:
Part a.Prepare the statement of cash flows using the indirect method.Include any supplemental disclosures.
Part b.Interpret the statement of cash flows by explaining the main sources and uses of cash during the year.

Accepted Answer

Part a
 @#IMG-DLM& 
Part b
Although operating acti

Question 14

Which of the following statements about preparation of the statement of cash flows is correct?

Accepted Answer

A)  GAAP allows the indirect method only. 
B)  GAAP allows the direct method only. 
C)  GAAP allows either the indirect or direct method. 
D)  Although GAAP allows either method for the preparation of the operating activities section of the statement of cash flows, the indirect method must be used to prepare the investing activities section of the statement of cash flows. 
A)  GAAP allows the indirect method only. 
B)  GAAP allows the direct method only. 
C)  GAAP allows either the indirect or direct method. 
D)  Although GAAP allows either method for the preparation of the operating activities section of the statement of cash flows, the indirect method must be used to prepare the investing activities section of the statement of cash flows.

Question 15

Which of the following statements about the reporting of operating cash flows using the direct method is correct?

Accepted Answer

A)  Although most U.S. companies use the indirect method, the Financial Accounting Standards Board (FAS
B)  prefers the direct method of accounting for cash flows from operating activities. 
B)  The FASB prefers the indirect method of calculating cash flows from operating activities because it gives a more accurate calculation of cash provided by operating activities. 
C)  The direct method results in a larger amount of cash flow from operating activities than does the indirect method. 
D)  The direct and indirect methods use different presentations for cash flows from investing and financing activities. 
A)  Although most U.S. companies use the indirect method, the Financial Accounting Standards Board (FAS
B)  prefers the direct method of accounting for cash flows from operating activities. 
B)  The FASB prefers the indirect method of calculating cash flows from operating activities because it gives a more accurate calculation of cash provided by operating activities. 
C)  The direct method results in a larger amount of cash flow from operating activities than does the indirect method. 
D)  The direct and indirect methods use different presentations for cash flows from investing and financing activities.

Question 16

If Cost of Goods Sold is $145,000 and the beginning and ending Inventory balances are $18,000 and $13,000,respectively,inventory purchases equal:

Accepted Answer

A)  $145,000. 
B)  $140,000. 
C)  $150,000. 
D)  $132,000. 
A)  $145,000. 
B)  $140,000. 
C)  $150,000. 
D)  $132,000.

Question 17

Chino Company reported net income of $20,000 for the current year.During the year,Inventory decreased by $7,000,Accounts Payable decreased by $8,000,Depreciation Expense was $10,000,and Accounts Receivable increased by $6,500.If the indirect method is used,what is the net cash provided by operating activities?

Accepted Answer

A)  $10,500 
B)  $22,500 
C)  $38,500 
D)  $51,500 
A)  $10,500 
B)  $22,500 
C)  $38,500 
D)  $51,500

Question 18

When the indirect method is used,if accounts receivable increases during the accounting period,the change in accounts receivable is:

Accepted Answer

A)  added to the change in the cash account. 
B)  subtracted from net income. 
C)  added to net income. 
D)  subtracted from the change in the cash account. 
A)  added to the change in the cash account. 
B)  subtracted from net income. 
C)  added to net income. 
D)  subtracted from the change in the cash account.

Question 19

A company loaned $1,000,000 with interest at 7% to another company.The interest revenue from this loan would be reported on the statement of cash flows as a:

Accepted Answer

A)  cash inflow from operating activities. 
B)  cash inflow from investing activities. 
C)  cash inflow from financing activities. 
D)  noncash investing and/or financing activity. 
A)  cash inflow from operating activities. 
B)  cash inflow from investing activities. 
C)  cash inflow from financing activities. 
D)  noncash investing and/or financing activity.

Question 20

Which of the following would be classified as an operating activity on the statement of cash flows using the direct method?

Accepted Answer

A)  Cash dividends paid 
B)  Cash received from selling equipment 
C)  Cash paid to retire bonds payable at maturity 
D)  Cash received from accounts receivable collections 
A)  Cash dividends paid 
B)  Cash received from selling equipment 
C)  Cash paid to retire bonds payable at maturity 
D)  Cash received from accounts receivable collections

Free cash flow may be used for all of the following except:

The Viviana Co.uses the indirect method to determine its cash flow from operations.Which of the following items will be subtracted from net income to find its cash flow from operations?

If a company uses the indirect method to determine cash flows from operating activities,gains:

The following information is taken from the income statement of Muir Company: Based on this information,what is the amount of net cash flow provided by operating activities?

If a company's Sales Revenue was $171,356 and cash collected from customers was $167,803,which of the following would be consistent with this difference?

In determining cash flows related to investing activities,which accounts are analyzed?

Which of the following represent cash outflows from financing activities?

The net cash flow provided by operating activities is an inflow of $37,042,the net cash flow used in investing activities is $16,831,and the net cash flow used in financing activities is $26,397.If the beginning cash account balance is $11,283,what is the ending cash account balance?

Which of the following statements about preparation of the statement of cash flows is correct?

Which of the following statements about the reporting of operating cash flows using the direct method is correct?

If Cost of Goods Sold is $145,000 and the beginning and ending Inventory balances are $18,000 and $13,000,respectively,inventory purchases equal:

When the indirect method is used,if accounts receivable increases during the accounting period,the change in accounts receivable is:

A company loaned $1,000,000 with interest at 7% to another company.The interest revenue from this loan would be reported on the statement of cash flows as a:

Which of the following would be classified as an operating activity on the statement of cash flows using the direct method?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Measuring and Evaluating Financial Performance

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Exam 12: Reporting and Interpreting the Statement of Cash Flows

Free cash flow may be used for all of the following except:

The Viviana Co.uses the indirect method to determine its cash flow from operations.Which of the following items will be subtracted from net income to find its cash flow from operations?

If a company uses the indirect method to determine cash flows from operating activities,gains:

The following information is taken from the income statement of Muir Company: Based on this information,what is the amount of net cash flow provided by operating activities?

If a company's Sales Revenue was $171,356 and cash collected from customers was $167,803,which of the following would be consistent with this difference?

In determining cash flows related to investing activities,which accounts are analyzed?

Which of the following represent cash outflows from financing activities?

The net cash flow provided by operating activities is an inflow of $37,042,the net cash flow used in investing activities is $16,831,and the net cash flow used in financing activities is $26,397.If the beginning cash account balance is $11,283,what is the ending cash account balance?

Which of the following statements about preparation of the statement of cash flows is correct?

Which of the following statements about the reporting of operating cash flows using the direct method is correct?

If Cost of Goods Sold is $145,000 and the beginning and ending Inventory balances are $18,000 and $13,000,respectively,inventory purchases equal:

When the indirect method is used,if accounts receivable increases during the accounting period,the change in accounts receivable is:

A company loaned $1,000,000 with interest at 7% to another company.The interest revenue from this loan would be reported on the statement of cash flows as a:

Which of the following would be classified as an operating activity on the statement of cash flows using the direct method?

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Measuring and Evaluating Financial Performance

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