Question 1

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

Accepted Answer

A) inflow and outflow of cash. 
B) outflow of cash. 
C) addition to net income in the adjustments to reconcile net income to cash from operating activities. 
D) deduction from net income in the adjustments to reconcile net income to cash from operating activities. 
E) None of these answers is correct. 
A) inflow and outflow of cash. 
B) outflow of cash. 
C) addition to net income in the adjustments to reconcile net income to cash from operating activities. 
D) deduction from net income in the adjustments to reconcile net income to cash from operating activities. 
E) None of these answers is correct.

Question 2

Which of the following is not true?

Accepted Answer

A) Most derivative acquisitions represent marketable securities held as current assets. 
B) The cash flow from operations section shows a subtraction for the increase in the current asset accounts in an amount equal to the firm's expenditure to acquire the derivative. 
C) If the firm classifies the derivative as a nonoperating asset, then the cash outflow appears in the investing section of the statement of cash flows. 
D) Subsequent to acquisition, the firm may report changes in the fair value of the derivative in income. 
E) Firms engage in transactions involving derivatives and for the most part, the complex parts of these transactions occur before the firm has acquired the derivative. 
A) Most derivative acquisitions represent marketable securities held as current assets. 
B) The cash flow from operations section shows a subtraction for the increase in the current asset accounts in an amount equal to the firm's expenditure to acquire the derivative. 
C) If the firm classifies the derivative as a nonoperating asset, then the cash outflow appears in the investing section of the statement of cash flows. 
D) Subsequent to acquisition, the firm may report changes in the fair value of the derivative in income. 
E) Firms engage in transactions involving derivatives and for the most part, the complex parts of these transactions occur before the firm has acquired the derivative.

Question 3

The accounting records of Dominick Inc.indicate that the firm sold for $1,800 during Year 2 a machine originally costing $6,000, with accumulated depreciation of $4,600.The journal entry made to record this sale was as follows:
Cash ........................................1,800
Accumulated Depreciation.......................4,600
Equipment..........................................6,000
Gain on Disposal of Equipment...........................400

(Use the information about Dominick Inc.to answer this question.) In preparing the Statement of cash flows, all the cash proceeds of $1,800 appear as an increase in cash from

Accepted Answer

A) a financing activity. 
B) an investing activity. 
C) an operating activity. 
D) an exchange activity. 
E) none of the above 
A) a financing activity. 
B) an investing activity. 
C) an operating activity. 
D) an exchange activity. 
E) none of the above

Question 4

Clayborne Company reported the following changes in the balance sheet accounts between Year 1 and Year 2.No dividends are paid during the year, land was sold at its book value of $30,000 and any change in the patent account is due to amortization.
  Required:

Given the changes in the balance sheet for Year 2, state:
a.	whether the change in each account indicates that an addition or subtraction needs to be made to determine cash flow, and
b.	in what section of the statement of cash flows the adjustment would appear. Indicate if no adjustment is necessary.

Accepted Answer

The answer of Clayborne Company reported the following changes in...

Question 5

In U.S.GAAP, which of the following accurately describe(s) the effects of transactions involving investments on the statement of cash flows?

Accepted Answer

A) If investor acquired the debt at a price below par, then cash flow from operations includes only the interest coupon received. 
B) If the holder acquired the debt at a price below par, then cash flow from operations will include the amount of interest revenue for the period, with source of the remainder of the cash received appearing as a [dis-]investing activity, the same as the proceeds of selling an investment. 
C) When using the indirect method, add back realized holding losses, and subtract realized holding gains included in income for the period to derive cash flow from operations. 
D) Investor's cash flow from operations increases by only the amount of dividends received.In the indirect method, deduct the investor's share of the undistributed earnings of the investee. 
E) all of the above 
A) If investor acquired the debt at a price below par, then cash flow from operations includes only the interest coupon received. 
B) If the holder acquired the debt at a price below par, then cash flow from operations will include the amount of interest revenue for the period, with source of the remainder of the cash received appearing as a [dis-]investing activity, the same as the proceeds of selling an investment. 
C) When using the indirect method, add back realized holding losses, and subtract realized holding gains included in income for the period to derive cash flow from operations. 
D) Investor's cash flow from operations increases by only the amount of dividends received.In the indirect method, deduct the investor's share of the undistributed earnings of the investee. 
E) all of the above

Question 6

The statement of cash flows classifies cash used for interest expense as

Accepted Answer

A) an operating activity 
B) an investing activity. 
C) a financing activity. 
D) an exchange activity. 
E) a funds usage activity. 
A) an operating activity 
B) an investing activity. 
C) a financing activity. 
D) an exchange activity. 
E) a funds usage activity.

Question 7

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations under the indirect method depends on the nature of its operations.Firms that decrease in size will usually show

Accepted Answer

A) additions or subtractions for losses and gains on the disposal of assets. 
B) additions, only for gains on the disposal of assets. 
C) subtractions, only for losses on the disposal of assets. 
D) no adjustment for losses and gains on the disposal of assets. 
E) none of the above 
A) additions or subtractions for losses and gains on the disposal of assets. 
B) additions, only for gains on the disposal of assets. 
C) subtractions, only for losses on the disposal of assets. 
D) no adjustment for losses and gains on the disposal of assets. 
E) none of the above

Question 8

Firms typically report cash flows from operations using the

Accepted Answer

A) direct method. 
B) indirect method. 
C) financial position method. 
D) variable method. 
E) funds flow method. 
A) direct method. 
B) indirect method. 
C) financial position method. 
D) variable method. 
E) funds flow method.

Question 9

For each of the following transactions, determine what adjustments are necessary to prepare the statement of cash flows using the indirect method.
a.	Firm A sells equipment with a cost of $2,000 and accumulated depreciation of $1,000 for $600 cash.
b.	Firm A uses the equity method to record its investment in Firm B. In the current year, A records $1,500 as equity in earnings of affiliate. A also received $1,600 in dividends from B in the current year.
c.	Firm A converts $50,000 of debt to common stock. Firm A chooses to report this transaction in the statement of cash flows.

Accepted Answer

The answer of For each of the following transactions, determine...

Question 10

Discuss the indirect and direct methods in deriving cash flow from operations.

Accepted Answer

The direct method's presentation of cash

Question 11

Which of the following is/aretrue regarding the fair value option for marketable securities and derivatives?

Accepted Answer

A) Subsequent to the acquisition of a derivative, the firm may report changes in fair value of derivatives in Other Comprehensive Income. 
B) Subsequent to the acquisition of a derivative, the firm may report changes in fair value of derivatives, but they have no effect on any lines of the statement of cash flows. 
C) Firms using the fair value option mark the carrying value of the asset to fair value each period. 
D) If the change in fair value of the derivative decreases carrying value, then the firm reports the amount of that decrease as a loss during the current period. 
E) all of the above 
A) Subsequent to the acquisition of a derivative, the firm may report changes in fair value of derivatives in Other Comprehensive Income. 
B) Subsequent to the acquisition of a derivative, the firm may report changes in fair value of derivatives, but they have no effect on any lines of the statement of cash flows. 
C) Firms using the fair value option mark the carrying value of the asset to fair value each period. 
D) If the change in fair value of the derivative decreases carrying value, then the firm reports the amount of that decrease as a loss during the current period. 
E) all of the above

Question 12

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for trading securities and fair value hedges?

Accepted Answer

A) Realized gains and losses appear in net income.Unrealized gains and losses appear in Other Comprehensive Income. 
B) Realized gains and losses appear in Other Comprehensive Income.Unrealized gains and losses appear in net income. 
C) Realized gains and losses appear in Retained Earnings.Unrealized gains and losses appear in Other Comprehensive Income. 
D) Realized gains and losses appear in Retained Earnings.Unrealized gains and losses appear in net income. 
E) Both realized and unrealized gains and losses appear in net income. 
A) Realized gains and losses appear in net income.Unrealized gains and losses appear in Other Comprehensive Income. 
B) Realized gains and losses appear in Other Comprehensive Income.Unrealized gains and losses appear in net income. 
C) Realized gains and losses appear in Retained Earnings.Unrealized gains and losses appear in Other Comprehensive Income. 
D) Realized gains and losses appear in Retained Earnings.Unrealized gains and losses appear in net income. 
E) Both realized and unrealized gains and losses appear in net income.

Question 13

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations between cash flows from operating, investing, and financing activities.At the beginning of the decline phase,

Accepted Answer

A) profitability increases. 
B) accounts receivable decline. 
C) inventories increase. 
D) all of the above. 
E) none of the above. 
A) profitability increases. 
B) accounts receivable decline. 
C) inventories increase. 
D) all of the above. 
E) none of the above.

Question 14

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations depends on the nature of its operations. Some firms use _____ to finance the working capital needs.

Accepted Answer

A) suppliers 
B) equity financing 
C) short-term borrowing 
D) long-term borrowing 
E) all of the above 
A) suppliers 
B) equity financing 
C) short-term borrowing 
D) long-term borrowing 
E) all of the above

Question 15

The growth phase portrays cash flow characteristics similar to the introduction phase.

Accepted Answer

A) True 
 B)False

Question 16

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities.During the _____, net income usually reaches a peak, and working capital stops growing.Operations generate positive cash flow, enough to finance expenditures on property, plant, and equipment.Capital expenditures usually maintain, rather than increase, productive capacity.Firms use the excess cash flow to repay borrowing from the introduction and growth phases and to begin paying dividends to shareholders.

Accepted Answer

A) introduction phase 
B) growth phase 
C) mature phase 
D) late maturity phase 
E) decline phase 
A) introduction phase 
B) growth phase 
C) mature phase 
D) late maturity phase 
E) decline phase

Question 17

During Year 5, Taylor Corporation signed a long-term lease for a building.It classified the lease as a capital lease and recorded it in the accounts as follows: Building ........... ..........................3,000
Capitalized Lease Obligation ..........................3,000
The transaction requires

Accepted Answer

A) inclusion in the statement of cash flows as an operating activity, only. 
B) inclusion in the statement of cash flows as an investing activity, only. 
C) inclusion in the statement of cash flows as a financing activity, only. 
D) disclosure in a supplementary schedule or notes to the financial statements. 
E) disclosure in managements' discussion and analysis. 
A) inclusion in the statement of cash flows as an operating activity, only. 
B) inclusion in the statement of cash flows as an investing activity, only. 
C) inclusion in the statement of cash flows as a financing activity, only. 
D) disclosure in a supplementary schedule or notes to the financial statements. 
E) disclosure in managements' discussion and analysis.

Question 18

Cash flow from financing activities include(s)

Accepted Answer

A) cash issues of long-term borrowings. 
B) cash redemptions of long-term borrowings. 
C) cash sales and cash repurchases of common and preferred shares. 
D) cash dividends. 
E) all of the above. 
A) cash issues of long-term borrowings. 
B) cash redemptions of long-term borrowings. 
C) cash sales and cash repurchases of common and preferred shares. 
D) cash dividends. 
E) all of the above.

Question 19

To avoid understating the amount of cash flow from operations, the accountant

Accepted Answer

A) subtracts the loss from net income. 
B) adds back the loss to retained earnings. 
C) adds back the loss to net income. 
D) subtracts the loss from retained earnings. 
E) none of the above 
A) subtracts the loss from net income. 
B) adds back the loss to retained earnings. 
C) adds back the loss to net income. 
D) subtracts the loss from retained earnings. 
E) none of the above

Question 20

Exxon Corporation declared and paid $90,000 of dividends to its shareholders during Year 3.The statement of cash flows classifies the transaction as a(n)

Accepted Answer

A) investing activity. 
B) financing activity. 
C) operating activity 
D) exchange transaction. 
E) equity activity. 
A) investing activity. 
B) financing activity. 
C) operating activity 
D) exchange transaction. 
E) equity activity.

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

Which of the following is not true?

In U.S.GAAP, which of the following accurately describe(s) the effects of transactions involving investments on the statement of cash flows?

The statement of cash flows classifies cash used for interest expense as

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations under the indirect method depends on the nature of its operations.Firms that decrease in size will usually show

Firms typically report cash flows from operations using the

Discuss the indirect and direct methods in deriving cash flow from operations.

Which of the following is/aretrue regarding the fair value option for marketable securities and derivatives?

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for trading securities and fair value hedges?

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations between cash flows from operating, investing, and financing activities.At the beginning of the decline phase,

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations depends on the nature of its operations. Some firms use _____ to finance the working capital needs.

The growth phase portrays cash flow characteristics similar to the introduction phase.

During Year 5, Taylor Corporation signed a long-term lease for a building.It classified the lease as a capital lease and recorded it in the accounts as follows: Building ........... ..........................3,000 Capitalized Lease Obligation ..........................3,000 The transaction requires

Cash flow from financing activities include(s)

To avoid understating the amount of cash flow from operations, the accountant

Exxon Corporation declared and paid $90,000 of dividends to its shareholders during Year 3.The statement of cash flows classifies the transaction as a(n)

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Synthesis and Extensions

Filters

Exam 16: Statement of Cash Flows: Another Look

The amortization of patents should be presented in a statement of cash flows prepared using the indirect method as a(n)

Which of the following is not true?

In U.S.GAAP, which of the following accurately describe(s) the effects of transactions involving investments on the statement of cash flows?

The statement of cash flows classifies cash used for interest expense as

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations under the indirect method depends on the nature of its operations.Firms that decrease in size will usually show

Firms typically report cash flows from operations using the

Discuss the indirect and direct methods in deriving cash flow from operations.

Which of the following is/aretrue regarding the fair value option for marketable securities and derivatives?

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for trading securities and fair value hedges?

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations between cash flows from operating, investing, and financing activities.At the beginning of the decline phase,

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations depends on the nature of its operations. Some firms use _____ to finance the working capital needs.

The growth phase portrays cash flow characteristics similar to the introduction phase.

During Year 5, Taylor Corporation signed a long-term lease for a building.It classified the lease as a capital lease and recorded it in the accounts as follows: Building ........... ..........................3,000 Capitalized Lease Obligation ..........................3,000 The transaction requires

Cash flow from financing activities include(s)

To avoid understating the amount of cash flow from operations, the accountant

Exxon Corporation declared and paid $90,000 of dividends to its shareholders during Year 3.The statement of cash flows classifies the transaction as a(n)

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Synthesis and Extensions

Filters