Question 1

All of the following statements related to reporting cash flows from operating activities under U.S. GAAP and IFRS are True except:

Accepted Answer

A)  The definition of cash and cash equivalents is similar for U.S. GAAP and IFRS. 
B)  U.S. GAAP requires cash flows from interest revenue and dividend revenue be classified as operating activities. 
C)  IFRS permits classification of interest revenue and dividend revenue under operating or investing activities. 
D)  U. S. GAAP requires cash outflows for interest expense to be classified as financing activities. 
E)  IFRS permits classification of interest expense under operating or financing activities. 
A)  The definition of cash and cash equivalents is similar for U.S. GAAP and IFRS. 
B)  U.S. GAAP requires cash flows from interest revenue and dividend revenue be classified as operating activities. 
C)  IFRS permits classification of interest revenue and dividend revenue under operating or investing activities. 
D)  U. S. GAAP requires cash outflows for interest expense to be classified as financing activities. 
E)  IFRS permits classification of interest expense under operating or financing activities. D

Question 2

Explain the value of separating cash flows into operating activities, investing activities and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

Accepted Answer

By separating cash flows into three categories, the statement of cash flows allows users to focus their analysis on specific areas of importance. The operating section of the statement reveals the net effect of cash inflows and cash outflows from the core activities of a business which directly affect its operating income. Operating cash flows indicate the health of a business. A business with a declining or negative amount of cash from operating activities may be in financial difficulty. Analysis of the financing section reveals to financial statement users how a business raises funds from the outside. Analysis of the investing activity section reveals whether or not a firm is acquiring new assets and disposing of existing assets and thus investing in the future of the company.

Question 3

Cash flows from selling trading securities are usually 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. 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. This is not reported in the statement of cash flows. A

Question 4

A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 5

Information to prepare the statement of cash flows usually comes from three sources: (1) ________________________, (2) _____________________, and (3) __________________.

Accepted Answer

C omparative balance

Question 6

Information to prepare the statement of cash flows usually comes from (a) comparative balance sheets, (b) current income statement, and (c) additional information.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The statement of cash flows reports and proves the net change in cash for a reporting period.

Accepted Answer

A) True 
 B)False

Question 9

A cash coverage ratio of less than 1 indicates cash inadequacy to meet asset growth.

Accepted Answer

A) True 
 B)False

Question 10

The cash flow on total assets ratio is calculated by:

Accepted Answer

A)  Dividing cash flows from operations by average total assets. 
B)  Dividing total cash flows by average total assets. 
C)  Dividing average total assets by cash flows from investing activities. 
D)  Dividing average total assets by total cash flows. 
E)  Total cash flows divided by average total assets times 365. 
A)  Dividing cash flows from operations by average total assets. 
B)  Dividing total cash flows by average total assets. 
C)  Dividing average total assets by cash flows from investing activities. 
D)  Dividing average total assets by total cash flows. 
E)  Total cash flows divided by average total assets times 365.

Question 11

Use the following information to calculate cash received from dividends:

Accepted Answer

A)  $26,400. 
B)  $29,000. 
C)  $29,800. 
D)  $30,600. 
E)  $32,400. 
A)  $26,400. 
B)  $29,000. 
C)  $29,800. 
D)  $30,600. 
E)  $32,400.

Question 12

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 13

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 14

A company had average total assets of $1,760,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $850,000. The cash flow on total assets ratio equals:

Accepted Answer

A)  1.33%. 
B)  8.58%. 
C)  11.65%. 
D)  15.5%. 
E)  75%. 
A)  1.33%. 
B)  8.58%. 
C)  11.65%. 
D)  15.5%. 
E)  75%.

Question 15

A company's Inventory balance at 12/31/11 was $188,000 and $200,000 at 12/31/10. Its Accounts Payable balance at 12/31/11 was $84,000 and $80,000 at 12/31/10, and its cost of goods sold for 2011 was $720,000. The company's total amount of cash payments for merchandise in 2011 equals:

Accepted Answer

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

Question 16

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used.

Accepted Answer

A) True 
 B)False

Question 17

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

Accepted Answer

Noncash investing and financing activiti

Question 18

Weston 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 operating activities using the indirect method:

Accepted Answer

A)  $332,200. 
B)  $236,800. 
C)  $261,400. 
D)  $186,800. 
E)  $189,400. 
A)  $332,200. 
B)  $236,800. 
C)  $261,400. 
D)  $186,800. 
E)  $189,400.

Question 19

The statement of cash flows is:

Accepted Answer

A)  Another name for the statement of financial position. 
B)  A financial statement that presents information about changes in equity during a period. 
C)  A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities. 
D)  A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date. 
E)  A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period. 
A)  Another name for the statement of financial position. 
B)  A financial statement that presents information about changes in equity during a period. 
C)  A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities. 
D)  A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date. 
E)  A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.

Question 20

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

Exam 16: Reporting the Statement of Cash Flows

All of the following statements related to reporting cash flows from operating activities under U.S. GAAP and IFRS are True except:

Explain the value of separating cash flows into operating activities, investing activities and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

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

A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.

Information to prepare the statement of cash flows usually comes from three sources: (1) ________________________, (2) _____________________, and (3) __________________.

Information to prepare the statement of cash flows usually comes from (a) comparative balance sheets, (b) current income statement, and (c) additional information.

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

The statement of cash flows reports and proves the net change in cash for a reporting period.

A cash coverage ratio of less than 1 indicates cash inadequacy to meet asset growth.

The cash flow on total assets ratio is calculated by:

Use the following information to calculate cash received from dividends:

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

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

A company had average total assets of $1,760,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $850,000. The cash flow on total assets ratio equals:

A company's Inventory balance at 12/31/11 was $188,000 and $200,000 at 12/31/10. Its Accounts Payable balance at 12/31/11 was $84,000 and $80,000 at 12/31/10, and its cost of goods sold for 2011 was $720,000. The company's total amount of cash payments for merchandise in 2011 equals:

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used.

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

Weston 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 operating activities using the indirect method:

The statement of cash flows is:

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.

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 Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

Filters

Information to prepare the statement of cash flows usually comes from three sources: (1) ______________, (2) _, and (3) ________.