Question 1

Accounting standards:

Accepted Answer

A)  Allow companies to omit the statement of cash flows from a complete set of financial statements if cash is an insignificant asset 
B)  Require that companies omit the statement of cash flows from a complete set of financial statements if the company has no investing activities 
C)  Require that companies include a statement of cash flows in a complete set of financial statements 
D)  Allow companies to include the statement of cash flows in a complete set of financial statements if the cash balance makes up more than 50% of the current assets 
E)  Allow companies to omit the statement of cash flows from a complete set of financial statements if the company has no financing activities 
A)  Allow companies to omit the statement of cash flows from a complete set of financial statements if cash is an insignificant asset 
B)  Require that companies omit the statement of cash flows from a complete set of financial statements if the company has no investing activities 
C)  Require that companies include a statement of cash flows in a complete set of financial statements 
D)  Allow companies to include the statement of cash flows in a complete set of financial statements if the cash balance makes up more than 50% of the current assets 
E)  Allow companies to omit the statement of cash flows from a complete set of financial statements if the company has no financing activities

Question 2

Spirit Company, a merchandiser, recently completed its 2010 calendar year. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company's balance sheet and income statement follow:   
 
Additional Information on Year 2010 Transactions
 
What is the net cash flows provided (used) by investing activities?

Accepted Answer

A)  ($23,375) 
B)  $23,375 
C)  $46,500 
D)  ($35,000) 
E)  $35,000 
A)  ($23,375) 
B)  $23,375 
C)  $46,500 
D)  ($35,000) 
E)  $35,000

Question 3

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

Accepted Answer

A)  $522,800 
B)  $533,600 
C)  $528,200 
D)  $536,000 
E)  $543,800 
A)  $522,800 
B)  $533,600 
C)  $528,200 
D)  $536,000 
E)  $543,800

Question 4

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

Accepted Answer

A)  Credit sales 
B)  Cash collections from customers 
C)  Depreciation expense 
D)  Cash received from the sale of a building 
E)  Cash received from the sale of treasury stock 
A)  Credit sales 
B)  Cash collections from customers 
C)  Depreciation expense 
D)  Cash received from the sale of a building 
E)  Cash received from the sale of treasury stock

Question 5

When using a spreadsheet to prepare the statement of cash flows, a decrease in accounts payable is entered in the Analysis of Changes column with a debit in the statement of cash flows section and a credit in the balance sheet section.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following is representative of typical cash flows from operating activities?

Accepted Answer

A)  Proceeds from collecting the principal amount of loans 
B)  Repayment of principal on loans 
C)  Proceeds from the issuance of bonds and notes payable 
D)  Payments by a merchandiser to acquire equity securities of other companies 
E)  Receipts of cash sales 
A)  Proceeds from collecting the principal amount of loans 
B)  Repayment of principal on loans 
C)  Proceeds from the issuance of bonds and notes payable 
D)  Payments by a merchandiser to acquire equity securities of other companies 
E)  Receipts of cash sales

Question 7

The direct method for the preparation of the operating activities section of the statement of cash flows:

Accepted Answer

A)  Separately lists each major item of operating cash receipts and cash payments 
B)  Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement 
C)  Reports a different amount of cash flows from operations than if the indirect method is used 
D)  Is required if the company is a merchandiser 
E)  Is required by the FASB 
A)  Separately lists each major item of operating cash receipts and cash payments 
B)  Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement 
C)  Reports a different amount of cash flows from operations than if the indirect method is used 
D)  Is required if the company is a merchandiser 
E)  Is required by the FASB

Question 8

Managers only use the cash flow statement to evaluate the net cash increase or decrease and do not pay much attention to the details of cash flows from operating activities, cash flows from investing activities and cash flows from financing activities.

Accepted Answer

A) True 
 B)False

Question 9

Kodak reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year. Kodak's net cash flows from operations was $2,204 million. Calculate Kodak's cash flow on total assets ratio.

Accepted Answer

$2,204/[($

Question 10

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

Accepted Answer

A)  Operating activities 
B)  Financing activities 
C)  Investing activities 
D)  Noncash activities 
E)  None of these as this is not reported in the statement of cash flows 
A)  Operating activities 
B)  Financing activities 
C)  Investing activities 
D)  Noncash activities 
E)  None of these as this is not reported in the statement of cash flows

Question 11

A company had net cash flows from operations of $120,000, total cash flows of $500,000 and average total assets of $2,500,000. The cash flow on total assets ratio equals:

Accepted Answer

A)  4.8% 
B)  5.0% 
C)  20.0% 
D)  20.8% 
E)  24.0% 
A)  4.8% 
B)  5.0% 
C)  20.0% 
D)  20.8% 
E)  24.0%

Question 12

The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

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

Question 14

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

Accepted Answer

A)  Operating activities 
B)  Financing activities 
C)  Investing activities 
D)  Schedule of noncash investing or financing activity 
E)  None of these as this is not reported on the statement of cash flows 
A)  Operating activities 
B)  Financing activities 
C)  Investing activities 
D)  Schedule of noncash investing or financing activity 
E)  None of these as this is not reported on the statement of cash flows

Question 15

Define and discuss the differences between operating, investing and financing activities.

Accepted Answer

Operating activities involve the day-to-

Question 16

Given the following information, determine the amount of cash flows from investing and financing activities.

Accepted Answer

A)     
B)    
C)   
D)   
E)   
A)     
B)    
C)   
D)   
E)

Question 17

Use the following information to calculate cash paid for wages and salaries:

Accepted Answer

A)  $157,400 
B)  $163,800 
C)  $168,000 
D)  $172,200 
E)  $174,400 
A)  $157,400 
B)  $163,800 
C)  $168,000 
D)  $172,200 
E)  $174,400

Question 18

A company reported operating cash flows of $57,000 and average total assets of $962,000. Calculate the company's cash flow on total assets ratio.

Accepted Answer

$57,000/$9

Question 19

The full disclosure principle requires that noncash investing and financing activities be disclosed as part of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 12: Reporting and Analyzing Cash Flows

Accounting standards:

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

When using a spreadsheet to prepare the statement of cash flows, a decrease in accounts payable is entered in the Analysis of Changes column with a debit in the statement of cash flows section and a credit in the balance sheet section.

Which one of the following is representative of typical cash flows from operating activities?

The direct method for the preparation of the operating activities section of the statement of cash flows:

Managers only use the cash flow statement to evaluate the net cash increase or decrease and do not pay much attention to the details of cash flows from operating activities, cash flows from investing activities and cash flows from financing activities.

Kodak reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year. Kodak's net cash flows from operations was $2,204 million. Calculate Kodak's cash flow on total assets ratio.

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

A company had net cash flows from operations of $120,000, total cash flows of $500,000 and average total assets of $2,500,000. The cash flow on total assets ratio equals:

The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.

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

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

Define and discuss the differences between operating, investing and financing activities.

Given the following information, determine the amount of cash flows from investing and financing activities.

Use the following information to calculate cash paid for wages and salaries:

A company reported operating cash flows of $57,000 and average total assets of $962,000. Calculate the company's cash flow on total assets ratio.

The full disclosure principle requires that noncash investing and financing activities be disclosed as part of the statement of cash flows.

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

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

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