Deck 9: The Statement of Cash Flows

Question 1

On January 1, 2020, Prepaid Insurance had a balance of $6,700 and on December 31, 2020, a balance of $8,320. The income statement for the year reported Insurance Expense of $49,310. Payments for insurance during the year amounted to:

A) $49,310
B) $50,930
C) $47,690
D) $57,630

Answer 1

B

Question 2

Which of the following would appear on a direct method statement of cash flows?

A) loss on sale of assets
B) Depreciation Expense
C) cash payments for inventory
D) increase in Accounts Receivable

Answer 2

C

Question 3

Activities which lead to an increase or decrease in long-term debt of a corporation are referred to as:

A) financing activities
B) investing activities
C) future debt activities
D) operating activities

Answer 3

A

Question 4

A statement of cash flows:

A) is prepared at the option of management
B) is a basic financial statement required for publicly held companies
C) may be combined with the statement of retained earnings at the option of management
D) may be combined with the balance sheet

Question 5

Under ASPE the receipt of interest on loans would be reported on a statement of cash flows under the:

A) financing activities
B) investing activities
C) operating activities
D) no activities because interest received on loans would not be reported on a statement of cash flows

Question 6

The purchase of land for cash and the sale of a capital asset are viewed as:

A) a positive and negative item on the statement of cash flows
B) a negative and positive item on the statement of cash flows
C) both positive items on the statement of cash flows
D) neither positive nor negative items on the statement of cash flows

Question 7

In 2020, Nutrient Company reported sales of $725,000 and cost of goods sold of $480,000. During 2020, Nutrient's Inventory account increased $25,000 and its Accounts Payable account (which
Relates solely to the purchase of merchandise) decreased $18,000. Nutrient Company's payments to suppliers for inventory during 2020 were:

A) $473,000
B) $437,000
C) $523,000
D) $487,000

Question 8

SHE Management Corporation had accounts receivable of $105,000 and $120,000 on January 1, 2020, and December 31, 2020, respectively. Sales on account in 2020 were $310,000. The amount of
Collections o be reported on the statement of cash flows under the operating activities is:

A) $15,000
B) $325,000
C) ($15,000)
D) $295,000

Question 9

The issuance of common shares for cash would be reported on a statement of cash flows under:

A) the investing activities
B) the operating activities
C) the financing activities
D) either investing activities or operating activities

Question 10

Beyond the Boardroom Corporation sold used equipment with a carrying amount of $25,000 for $29,000. The indirect method statement of cash flows will reflect:

A) an addition of $25,000 in the investing activities section and an addition of $4,000 in the operating activities section
B) an addition of $25,000 in the investing activities section and a deduction of $4,000 in the operating activities section
C) an addition of $29,000 in the investing activities section and a deduction of $4,000 in the operating activities section
D) an addition of $29,000 in the investing activities section and an addition of $4,000 in the operating activities section

Question 11

Cassidy Lake Corporation sold some of its used equipment for $65,000. The indirect method statement of cash flows shows an addition to net income of $6,000. The accumulated depreciation on the equipment to date of sale was $63,000. The original cost of the equipment was:

A) $71,000
B) $122,000
C) $69,000
D) $134,000

Question 12

Which of the following activities creates revenues and expenses in a company's major line of business?

A) warehousing activities
B) operating activities
C) investing activities
D) financing activities

Question 13

All of the following are cash equivalents except:

A) money market investments
B) short-term investments
C) investments in Canadian Government Treasury bills
D) notes receivable

Question 14

Fertilizer Incorporated reports an increase in Accounts Payable of $9,200 and an increase in inventory of $45,000 for the current year. Accounts Payable relates solely to the purchase of merchandise. Sales on account were $532,100 and cost of goods sold was $358,000. The total purchases of merchandise for the period were:

A) $174,100
B) $403,000
C) $358,000
D) $313,000

Question 15

Under the indirect method of preparing a statement of cash flows, cash disbursed for theacquisition of a capital asset is:

A) added in the financing activities section
B) subtracted in the investing activities section
C) subtracted in the operating activities section
D) added in the investing activities section

Question 16

Under ASPE the receipt of interest on loans would be reported on a statement of cash flows under the:

A) financing activities
B) investing activities
C) operating activities
D) no activities because interest received on loans would not be reported on a statement of cash flows

Question 17

If the cash collections from customers amounted to $634,800 and the Accounts Receivable accountdecreased $19,400 during the same period, sales for the period were:

A) $634,800
B) $654,200
C) $615,400
D) indeterminable from the information given

Question 18

On an indirect method statement of cash flows, a gain on the sale of capital assets is:

A) deducted from net income
B) reflected in the investing activities section
C) added to net income
D) reflected in the financing activities section

Question 19

The issuance of bonds for cash would be reported on a statement of cash flows under the:

A) financing activities
B) operating activities
C) investing activities
D) no activities because issuing bonds for cash would not be reported on a statement of cash flows

Question 20

During 2020, Toxic Release LLC paid a total of $64,000 in cash for insurance. Toxic Release'sPrepaid Insurance account had a balance on January 1, 2020, of $8,000 and a balance on December 31, 2020, of $5,500. The amount of Insurance Expense to be reported on Toxic Release's income statement for the year ended December 31, 2020, is:

A) $58,500
B) $61,500
C) $66,500
D) $64,000

Question 21

The sale of repurchased shares is a(n) _ on a statement of cash flows.

A) financing activity
B) operating activity
C) investing activity
D) financing activity or an investing activity

Question 22

The sale of equipment at its carrying amount would be reported on a statement of cash flows under:

A) the financing activities
B) the operating activities
C) the investing activities
D) either investing activities or financing activities

Question 23

Under ASPE interest paid on debt would be reported on a statement of cash flows under the:

A) operating activities
B) investing activities
C) financing activities
D) interest paid on debt would not be reported on a statement of cash flows

Question 24

The repurchase of shares would be reported on a statement of cash flows under the:

A) operating activities
B) financing activities
C) investing activities
D) either investing activities or operating activities

Question 25

The issuance of common shares in exchange for land and equipment will:

A) not affect a cash flow statement
B) affect the operating activities section of a cash flow statement
C) affect the investing activities section of a cash flow statement
D) affect the financing activities section of a cash flow statement

Question 26

In 2020 Phosphate Aurora Inc. reported an increase in Accounts Receivable of $7,500 and cash collections on account of $430,000. Sales on account for the period were:

A) $437,500
B) $422,500
C) $7,500
D) $430,000

Question 27

Stock dividends distributed appear in which, if any, section of the cash flow statement?

A) operating and investing activities section
B) operating activities section only
C) financing and investing activities section
D) The distribution of a stock dividend does not appear anywhere in the cash flow statement.

Question 28

All of the following might appear on an indirect method statement of cash flows except:

A) decrease in inventory
B) depreciation expense
C) interest received on notes receivable
D) loss on sale of capital assets

Question 29

Under ASPE all of the following would be reported in the financing activities section under the direct method statement of cash flows except:

A) paying a cash dividend
B) repurchase of shares
C) issuing common shares
D) issuing a stock dividend

Question 30

Proceeds from the issuance of shares appear in which, if any, section of the cash flow statement?

A) investing activities section
B) financing activities section
C) operating activities section
D) Proceeds from the issuance of shares do not appear in the cash flow statement.

Question 31

The most important section of a statement of cash flows is the:

A) financing activities
B) operating activities
C) investing activities
D) all of the sections are equally important

Question 32

The payment of principal amounts (excluding interest) to creditors would be reported on a statement of cash flows under the:

A) financing activities
B) investing activities
C) operating activities
D) either investing activities or financing activities

Question 33

The balance in Common Shares on January 1, 2020, and December 31, 2020, is respectively $145,000 and $172,500. During the year, $57,000 repurchase of shares was recorded. During the
Year, shares were issued. The proceeds from the issue of shares amounted to:

A) $84,500
B) $260,500
C) $29,500
D) $64,500

Question 34

Governance Corporation uses the direct method when preparing its statement of cash flows. Governance sold equipment with a carrying amount of $13,000 at a loss of $3,000. The amount to
Be reported on the statement of cash flows under "proceeds from the sale of capital assets" is:

A) $10,000
B) $3,000
C) $13,000
D) $16,000

Question 35

Whitehurst Creek Shop reported interest revenue of $9,500 and its Interest Receivable account decreased $1,200 during the same period. Interest received for the period amounted to:

A) $9,500
B) $1,200
C) $10,700
D) $8,300

Question 36

Fertilizer Incorporated reports an increase in Accounts Payable of $9,200 and an increase in inventory of $45,000 for the current year. Accounts Payable relates solely to the purchase of merchandise. Sales on account were $532,100 and cost of goods sold was $358,000. The payments to suppliers for inventory during the period were:

A) $412,200
B) $322,200
C) $303,800
D) $393,800

Question 37

The statement of cash flows is designed to fulfill all of the following purposes except:

A) to predict future cash flows
B) to determine the company's ability to pay dividends to shareholders
C) to show the relationship of net income to changes in the company's cash
D) to assess the collectibility of accounts receivable

Question 38

On an indirect method statement of cash flows, an increase in accounts payable would be:

A) added to net income
B) reflected in the investing activities section
C) deducted from net income
D) netted against any decreases in accounts receivable

Question 39

Phosphoric Company reported capital assets, net of accumulated depreciation, on January 1, 2020, at $645,000 and $732,500 on December 31, 2020. The income statement showed depreciation of $48,300 and a $5,600 loss on sale of capital assets. Phosphoric Company acquired $213,000 of capital assets during the year. The proceeds from the sale of capital assets were:

A) $89,900
B) $77,200
C) $125,500
D) $71,600

Question 40

The sale of repurchased shares would be reported on a statement of cash flows as a:

A) cash outflow under the financing activities
B) cash inflow under the operating activities
C) cash inflow under the investment activities
D) cash inflow under the financing activities

Question 41

Retained Earnings had a balance on January 1, 2020, and December 31, 2020, respectively, of $234,500 and $411,000. Net income for the year was $199,500 and the only other event affecting
Retained Earnings was the declaration of dividends. If there was no change in the Dividends account during the year, the payments for dividends was:

A) $176,500
B) $376,000
C) $0
D) $23,000

Question 42

Cash collected from customers can be computed by the following formula:

A) ending accounts receivable minus beginning accounts receivable plus sales
B) beginning accounts receivable minus ending accounts receivable minus sales
C) beginning accounts receivable minus ending accounts receivable plus sales
D) ending accounts receivable plus beginning accounts receivable minus sales

Question 43

All of the following would appear on a direct method statement of cash flows except:

A) cash receipts from customers
B) net income
C) cash purchase of equipment
D) cash payments for interest and taxes

Question 44

Under ASPE which of the following is not an example of an operating activity?

A) dividends declared
B) interest expense
C) dividend income
D) interest income

Question 45

The declaration of dividends by the board of directors would be reported on a statement of cash flows as a(an):

A) activity that would not be reported on a statement of cash flows
B) cash outflow under the financing activities
C) cash outflow under the investing activities
D) cash inflow under the financing activities

Question 46

Salary Expense on the income statement was $264,780 for the year ended December 31, 2020. The Salary Payable account decreased $24,370 during the same period. The amount of cash payments to employees for the year ended December 31, 2020, is:

A) $289,150
B) $240,410
C) $264,780
D) indeterminable from the information given

Question 47

Under ASPE interest paid on debt would be reported on a statement of cash flows under the:

A) operating activities
B) investing activities
C) financing activities
D) interest paid on debt would not be reported on a statement of cash flows

Question 48

Under ASPE all of the following might appear as adjustments to net income on an indirect method statement of cash flows except:

A) payment of dividends
B) depreciation expense
C) an increase in Accounts Receivable
D) gain on sale of capital assets

Question 49

No Harm Corporation sold some of its used equipment with a carrying amount of $52,000 for $47,000. The indirect method statement of cash flows will reflect an addition in the investing
Activities section of:

A) $52,000 and an addition of $5,000 in the operating activities section
B) $47,000 and an addition of $5,000 in the operating activities section
C) $52,000 and a deduction of $5,000 in the operating activities section
D) $47,000 and a deduction of $5,000 in the operating activities section

Question 50

On an indirect method statement of cash flows, a decrease in inventory would be:

A) reflected in the investing activities section
B) deducted from net income
C) added to net income
D) netted against any decreases in accounts payable

Question 51

Jantzi Company reported capital assets, net of accumulated depreciation, on January 1, 2020, at $427,500 and $579,300 on December 31, 2020. The income statement showed depreciation of
$38,700. Jantzi Company acquired $275,000 of capital assets during the year and reported proceeds from the sale of capital assets of $89,200 for the year. The gain or loss resulting from the sale of capital assets was:

A) $3,400 loss
B) $4,700 gain
C) $5,050 gain
D) $2,390 loss

Question 52

GRI Performance Enterprises uses the direct method when preparing its statement of cash flows. GRI Performance sold equipment with a carrying amount of $8,000 at a gain of $2,500. The
Amount to be reported on the statement of cash flows in the operating activities section is:

A) $2,500
B) ($2,500)
C) $10,500
D) $0

Question 53

Which of the following represents the correct order on the statement of cash flows?

A) Operating, financing then investing activities
B) Investing, financing then operating activities
C) Investing, operating and then financing activities
D) Operating, investing then financing activities

Question 54

Which of the following would not appear on a statement of cash flows prepared using the direct method?

A) cash receipt from repayment of a loan
B) cash purchase of inventory
C) cash payments for operating expenses
D) depreciation expense

Question 55

Under ASPE on an indirect method statement of cash flows, dividends paid during the year are:

A) reflected in the investing activities section
B) reflected in the financing activities section
C) added to net income
D) deducted from net income

Question 56

After a business is up and running, information about which of the following business activities is most important?

A) operating activities
B) financing activities
C) investing activities
D) warehousing activities

Question 57

The operating activities section of an indirect method statement of cash flows includes:

A) cash received from customers
B) cash paid for operating expenses
C) changes in current asset balances
D) cash paid for inventory

Question 58

Given the following information for Rat Rack Corporation: cost of goods sold $35,500, sales $65,000, increase in accounts receivables $4,200. Their receipts from customers total would be:

A) $33,700
B) $25,300
C) $69,200
D) $60,800

Question 59

Sustainability Enterprises uses the direct method when preparing its statement of cash flows. Sustainability sold equipment with a carrying amount of $22,000 at a gain of $5,000. The amount
To be reported on the statement of cash flows under "proceeds from the sale of capital assets" is:

A) $27,000
B) $22,000
C) $5,000
D) $17,000

Question 60

On an indirect method statement of cash flows, the purchase of machinery in exchange for common shares is:

A) reflected in the operating activities section
B) shown in the schedule of noncash investing and financing activities which accompanies the statement of cash flows
C) ignored
D) reflected in the investing activities section

Question 61

Under the indirect method of preparing a statement of cash flows, a decrease in the balance in the Accounts Receivable account during the year is:

A) added in the operating activities section
B) subtracted in the financing activities section
C) subtracted in the operating activities section
D) added in the investing activities section

Question 62

The amount of cash dividends declared during the period and the amount of cash dividends paid during the period are reflected in the:

A) statement of shareholders' equity and the cash flow statement, respectively
B) statement of shareholders' equity and income statement, respectively
C) income statement and cash flow statement, respectively
D) cash flow statement and statement of shareholders' equity, respectively

Question 63

On January 1, 2020, Agronomist Inc. had a balance of $340,000 in the long-term investments account. During 2020, Agronomist Inc. sold long-term investments for $115,000 cash, resulting in a $13,000 gain. On December 31, 2020, the long-term investments account showed a balance of $380,000. The long-term investments purchased during 2020 totalled:

A) $75,000
B) $155,000
C) $265,000
D) $142,000

Question 64

Cash means more than just cash on hand and cash in the bank. Highly liquid, short-term investments that are easily convertible into cash are called:

A) promissory notes
B) common shares
C) accounts receivable
D) cash equivalents

Question 65

The amount of cash paid for dividends for the current year can be calculated by the following formula:

A) beginning dividends payable plus ending dividends payable plus dividends declared
B) beginning dividends payable plus ending dividends payable minus dividends declared
C) beginning dividends payable minus ending dividends payable minus dividends declared
D) beginning dividends payable minus ending dividends payable plus dividends declared

Question 66

The main source of cash for a business must come from operating activities if it is to prosper in the future.

Question 67

Which of the following is a method for reporting cash flows from operating activities that begins with net income and reconciles to cash flows from operating activities?

A) cash-basis method
B) indirect method
C) direct method
D) accrual method

Question 68

Which of the following activities increase and decrease the non-current assets available to a company?

A) warehousing activities
B) financing activities
C) investing activities
D) operating activities

Question 69

Which of the following transactions would not be shown on a statement of cash flows?

A) purchase of intangible assets for cash
B) sale of equipment accepting 30% cash and a note receivable for the balance
C) purchase of land by making a 25% down payment and issuing a note payable for the balance
D) a stock split

Question 70

Cash collections from customers during the period can be computed as the ending balance in Accounts Receivable plus Sales during the period minus the beginning balance in Accounts Receivable.

Question 71

Nitrogen Company reported Insurance Expense for the year ended December 31, 2020, of $37,490. During the same period, the Prepaid Insurance account decreased $4,610. The payments for
Insurance during the year ended December 31, 2020, were:

A) $46,710
B) $37,490
C) $42,100
D) $32,880

Question 72

The indirect method of preparing the statement of cash flows:

A) produces a different amount for cash flows from operating activities than the direct method
B) produces a different amount for cash flows from investing activities than the direct method
C) is more commonly used in practice than the direct method
D) is preferred by IFRS and ASPE over the direct method

Question 73

Free cash flow is calculated by taking net cash flow for the year less planned investments in property, plant, equipment and other non-current assets.

Question 74

The amounts in the Salaries Payable account for Ammonia Company were $14,500 and $16,000 on December 31, 2019, and December 31, 2020, respectively. Cash paid to employees for the years ended December 31, 2019, and December 31, 2020, were $255,000 and $280,000, respectively. Ammonia Company's Salary Expense for the year ended December 31, 2020, was:

A) $253,500
B) $281,500
C) $256,500
D) $278,500

Question 75

Sometimes income and cash flow follow different patterns.

Question 76

Geographic Enterprise's Inventory account decreased $37,500 and its Accounts Payable account (which relates solely to the purchase of merchandise) decreased $13,760 during the year. Geographic also reported sales of $856,000 and cost of goods sold of $597,600 during the same period. Geographic's payments to suppliers for inventory during the year were:

A) $648,860
B) $573,860
C) $805,740
D) $621,340

Question 77

Using the indirect method of preparing a statement of cash flows, a loss on the sale of a capital asset is:

A) ignored
B) subtracted in the operating activities section
C) added in the operating activities section
D) added in the investing activities section

Question 78

Land Reclamation Industries began the year with $46,700 in Accounts Receivable and ended the year with $31,900 in Accounts Receivable. If sales for the year were $687,000, the cash collected from customers during the year amounted to:

A) $701,800
B) $733,700
C) $655,100
D) $672,200

Question 79

Which of the following would not appear on a statement of cash flows?

A) cost of goods sold
B) proceeds from issuance of common shares
C) payments to a supplier
D) cash sales

Question 80

Cash equivalents would include money market accounts, Canadian Treasury bills, and notes receivable.