Deck 14: The Statement of Cash Flows

Question 1

Which one of the following transactions is an investing activity?

A) Sale of equipment at book value
B) Sale of merchandise on credit
C) Declaration of cash dividend
D) Issuance of bonds payable at a discount

Answer 1

A

Question 2

Equipment that cost $10,000 that had a book value of $6,000 was sold for $7,000. Data from the comparative balance sheets are: Equipment purchased during 2009 cost

A) $120,000.
B) $110,000.
C) $145,000.
D) $10,000.

Answer 2

A

Question 3

How will a company classify money paid for the acquisition of land on its statement of cash flows?

A) Cash provided from operations
B) Cash used in financing activities
C) Cash provided from investing activities
D) Cash used for investing activities

Answer 3

D

Question 4

How will a company classify money paid for inventory acquisitions on its statement of cash flows?

A) Cash provided from operations
B) Cash used in operations
C) Cash provided from investing activities
D) Cash used for investing activities

Question 5

A company uses the direct method of preparing the statement of cash flows. Current year depreciation expense can be found on the

A) balance sheet and income statement.
B) income statement and statement of cash flows.
C) statement of cash flows and balance sheet.
D) income statement only.
E) statement of cash flows only.

Question 6

How will a company classify the exchange of common stock for land on its statement of cash flows?

A) An operating activity
B) An investing activity
C) A financing activity
D) A footnote

Question 7

How will a company classify 'proceeds received from the issuance of long-term bonds' on its statement of cash flows?

A) Cash provided from operations
B) Cash used in operations
C) Cash provided from investing activities
D) Cash provided from financing activities

Question 8

If an investor is interested in the solvency of a company, he/she should analyze the

A) balance sheet and income statement.
B) income statement, balance sheet, and statement of cash flows.
C) balance sheet and statement of cash flows.
D) statement of cash flows only.

Question 9

A company declares cash dividends on the last day of the year. Payment will be made during the following fiscal period. Cash flows

A) from operations will be less than if dividends were not declared.
B) from operations will be more than if dividends were not declared.
C) from investing activities will be less than if dividends were not declared.
D) from financing activities will be less than if dividends were not declared.
E) will be the same as if dividends had not been declared.

Question 10

How will a company classify the income tax payments on its statement of cash flows?

A) Operating activities
B) Taxing activities
C) Lending activities
D) Financing activities

Question 11

Which statement is true with respect to the preparation of the cash flows from operating activities' section?

A) It can be calculated by using the direct or indirect methods.
B) Cash flows are calculated as the difference between revenues and expenses.
C) It is always equal to accrual accounting income.
D) Cash payments for depreciation and dividends are reported in the operating activates sections.

Question 12

How will a company classify money paid to suppliers on its statement of cash flows?

A) Cash provided from operations
B) Cash used in operations
C) Cash provided from investing activities
D) Cash used in financing activities

Question 13

Payments for purchases of property, plant, and equipment and other productive assets are classified as cash outflows from

A) operating activities.
B) financing activities.
C) investing activities.
D) selling activities.

Question 14

An investor is interested in assessing the effectiveness of a company's cash management. Where will the investor look to evaluate this?

A) Statement of cash flows
B) Income statement
C) Balance sheet
D) Company's bank statements

Question 15

A company uses the indirect method of preparing the statement of cash flows. Current year depreciation expense can be found on the

A) income statement and statement of cash flows.
B) balance sheet and income statement.
C) statement of cash flows and balance sheet.
D) income statement and statement of comprehensive income.

Question 16

What is reported on the statement of cash flows?

A) Operating, investing, and financing activities of an entity for a period of time
B) All revenues and expense listed by operating, financing, and operating activity
C) Operating, investing, and financing activities of an entity at the balance sheet date
D) A detail of all incoming and outgoing cash flows of a business

Question 17

How will a company classify money received from selling equipment no longer used in operations on its statement of cash flows?

A) Cash provided from operations
B) Cash provided from financing activities
C) Cash provided from investing activities
D) Cash used for investing activities

Question 18

A company uses straight-line instead of the units of production method of depreciation. Assuming a tax rate of zero, which statement is true as a result of its choice of depreciation methods?

A) Cash flows from operations will be less than under the straight-line method
B) Cash flows from operations will be more than under the straight-line method
C) Cash used for investing activities will be more than under the straight-line method
D) Cash used for investing activities will be less than under the straight-line method.
E) Cash flows are the same as if the straight-line method had been used.

Question 19

How will a company classify the sale of treasury stock at an amount equal to its cost on its statement of cash flows?

A) Operating activity
B) Investing activity
C) Extraordinary activity
D) Financing activity

Question 20

An acquisition of land by signing a 10-year mortgage payable is reported on the statement of cash flows as

A) an operating activity.
B) an investing activity.
C) a financing activity.
D) a footnote.

Question 21

Which one of the following is subtracted from net income in determining cash flows from operations?

A) Loss from sale of land
B) Depreciation expense
C) Stock dividends declared and distributed
D) Gain from sale of equipment

Question 22

Which one of the following is consistent with a company recording a large operating income but having a net cash outflow from operations?

A) A great amount of depreciation expense
B) An increase in accounts receivable and inventory
C) An increase in accounts payable
D) Acquisition of new plant assets for cash

Question 23

Which of the following is subtracted from income in determining cash flows from operations?

A) Decrease in accounts payable
B) Depreciation
C) Cash dividends declared and distributed
D) Amounts due from customers at yearend

Question 24

When preparing a statement of cash flows using the indirect method, an increase in inventory will result in an adjustment to reported net income because

A) cost of goods sold on an accrual basis is less than on a cash basis.
B) inventory was paid for with cash, but is still on hand at the end of the period.
C) acquisition of inventory is an investment activity.
D) inventory purchased created smaller cash outflows than cash inflows received from inventory sales.

Question 25

Relevant account balances for Martinez Corporation are:

How much cash was paid to suppliers for inventory during 2009?

A) $2,000
B) $59,000
C) $63,000
D) $61,000

Question 26

In determining cash flow from operating activities, which of the following adjustments will be made as a result of an increase in accounts receivable during a period?

A) An addition to net income when the direct method is used
B) An addition to net income when the indirect method is used
C) A deduction to net income when the direct method is used
D) A deduction to net income when the indirect method is used

Question 27

An increase in inventory is reported in a statement of cash flows using the indirect method as a(n)

A) addition to net income in arriving at net cash flows from operating activities.
B) deduction from net income in arriving at net cash flows from operating activities.
C) cash outflow from investing activities.
D) cash outflow from financing activities.

Question 28

Which one of the following is consistent with a company recording a large operating loss but still having healthy cash flows from operations?

A) A large amount of depreciation and/or amortization expense
B) An increase in accounts receivable and inventory
C) A decrease in accounts payable
D) All sales are on a cash basis.

Question 29

Selected information from Hsu Inc. is provided below for the years ending December 31, 2009 and 2008. During 2009, depreciation expense was recorded. New equipment was acquired for cash. Old equipment which was 70% depreciated with an original cost of $26,000 was sold for a gain of $4,000. For how much was the equipment sold?

A) $11,800
B) $5,000
C) $3,800
D) $31,000

Question 30

In determining net cash flows from operating activities, a decrease in salaries payable during a period

A) means that income on an accrual basis is equal to income on a cash basis.
B) must be added to net income under the indirect method.
C) creates a cash outflow to pay for salaries that were previously accrued.
D) creates a cash inflow from employees.

Question 31

The primary purpose of the statement of cash flows is to provide information

A) about the revenue and expenses of an entity's operations during a period.
B) that predicts future cash flows.
C) about the operating, investing, and financing activities of an entity during a period.
D) about the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.

Question 32

Which one of the following is added to net income in determining cash flows from operations?

A) Amortization of intangibles
B) Decrease in accounts payable
C) Increase in accounts receivable
D) A gain on the sale of plant assets

Question 33

Which one of the following is subtracted from net income in determining cash flows from operations?

A) Increase in prepaid insurance
B) Increase in accounts payable
C) Decrease in accounts receivable
D) Decrease in prepaid insurance

Question 34

Which one of the following is added to net income in determining cash flows from operations?

A) Decrease in amounts paid to reduce long-term notes
B) Decrease in accounts payable
C) Depreciation or amortization
D) Cash received from selling treasury stock

Question 35

Which one of the following is added to net income in determining cash flows from operations?

A) Cash dividends paid
B) Increase in accounts payable and decrease in accounts receivable
C) Decrease in accounts receivable and cash dividends declared
D) Increase in prepaid expenses

Question 36

Which one of the following is added to net income in determining cash flows from operations?

A) Increase in inventory
B) Decrease in wages payable
C) Loss from sale of land
D) Gain from selling treasury stock above its original cost

Question 37

How much is 'net cash provided by financing activities' during 2009?
a. $(500,000)
b. $550,000
c. $50,000
d. $600,000

Question 38

Relevant account balances for Martinez Corporation are:

How much cash was received from customers during 2009?

A) $120,000
B) $116,000
C) $138,000
D) $124,000

Question 39

Which one of the following would you expect to find as part of cash flows from investing activities?

A) The issuance of common stock in exchange for a factory
B) Cash dividends paid
C) Cash inflows from the proceeds of a sale of a building
D) The write-off of accounts receivable

Question 40

Calvin Company provided the following information during 2009:

How much is 'net cash provided (used) by investing activities' during 2009?

A) $790,000
B) $360,000
C) $910,000
D) $(120,000)

Question 41

Relevant account balances for Martinez Corporation are:

How much is Martinez's cash flows from operations for 2009?

A) $28,400
B) $38,400
C) $23,600
D) $33,600

Question 42

The comparative balance sheets of Shad Inc. contain prepaid insurance of $48,000 on January 1, 2009 and $37,000 on December 31, 2009. Shad's 2009 income statement contains insurance expense of $15,000. Calculate the amount of cash paid for insurance premiums during 2009.

Question 43

Johnson Company engaged in the following transactions during 2010: 1. Johnson wrote off an open receivable as uncollected.
2) Johnson purchased a piece of plant equipment
3) Johnson reacquired 5,000 shares of its common stock.
4) Johnson sold a building at a loss in exchange for a five-year note.
5) Johnson declared, but did not pay a cash dividend.
If Johnson uses the indirect method, which of these transactions or parts of these transactions would be included in the operating activity section of the statement of cash flows?

A) Transaction 4
B) Transaction 1
C) More than one of these transactions would be found in the operating activity section.
D) None of these transactions would be found in the operating activity section.

Question 44

The following year-end totals were taken from the records of Langston Company.
What is the amount of cash outflow associated with wages during 2010?
a. $9,500
b. $2,500
c. $5,500
d. $7,000

Question 45

The following information was taken from the records of Albert's Fine Coffee:
During 2010, machinery with a cost of $16,000 was sold.
Based on this information, how much cash was collected on the sale of the machinery during 2010?
a. $10,000
b. $20,000
c. $4,000
d. $16,000

Question 46

The following year-end totals were taken from the records of Langston Company.
What is the amount of cash outflow associated with insurance during 2010?
a. $4,000
b. $2,800
c. $1,700
d. $6,800

Question 47

The following is the cash ledger account for Jensen Corp., which summarizes events that impacted the cash account during 2010.
Using the information contained in the cash ledger, complete the following cash flow statement.

Question 48

Relevant account balances for Martinez Corporation are:

The May 1 and May 31 balances in accounts receivable are $35,000 and $36,000, respectively. During May, the company reported sales totaling $235,000 from its customers. The company incurred $211,000 of expenses, although $12,000 was not paid as of May 31. How much is cash flows from operations for May?

A) $24,000
B) $37,000
C) $11,000
D) $35,000

Question 49

The following are relevant account balances from Forman Incorporated's comparative balance sheet and 2009 income statement:

Determine the amount of cash that Forman Incorporated paid for salaries during 2009.

A) $91,000
B) $88,000
C) $85,000
D) $80,000

Question 50

Relevant account balances for Martinez Corporation are:

Selected information from Cooke Inc. is provided below for the years ending December 31, 2009 and 2008. During 2009, depreciation expense was recorded. New equipment was acquired for cash. Old equipment which was 70% depreciated with an original cost of $26,000 was sold for a gain of $4,000. What is the cost of the new equipment acquired?

A) $11,800
B) $5,000
C) $21,000
D) $31,000

Question 51

Relevant account balances for Martinez Corporation are:

How much cash was paid for insurance during 2009?

A) $5,400
B) $6,000
C) $6,600
D) $600

Question 52

Graham, Inc. experienced the following changes in its cash balance during the current calendar year:
Prepare, in good form, a cash flow statement for the current year.

Question 53

Johnson Company engaged in the following transactions during 2010: 1. Johnson wrote off an open receivable as uncollected.
2) Johnson purchased a piece of plant equipment
3) Johnson reacquired 5,000 shares of its common stock.
4) Johnson sold a building at a loss in exchange for a five-year note.
5) Johnson declared, but did not pay a cash dividend.
Which of these transactions or parts of these transactions would be included in the financing activity section of the statement of cash flows?

A) Transactions 2 and 4.
B) Transactions 2 through 5
C) Transaction 3
D) None of these choices are correct.

Question 54

The following information was taken from the records of Albert's Fine Coffee:
During 2010, machinery with a cost of $16,000 was sold.
Based on this information, how much machinery was purchased during 2010?
a. $50,000
b. $66,000
c. $40,000
d. $60,000

Question 55

Accrued wages payable on December 31, 2008 and 2009 are $9,000 and $4,000, respectively. During 2009, wages expense is $36,000. Calculate the amount of cash paid for wages during 2009.

Question 56

The following are relevant account balances from Forman Incorporated's comparative balance sheet and 2009 income statement:

Determine the amount of cash that Forman Incorporated collected from customers during 2009.

A) $150,000
B) $158,000
C) $151,000
D) $156,000

Question 57

Relevant account balances for Martinez Corporation are:

How will depreciation appear on Martinez's statement of cash flows under the direct method?

A) Added in the operating activities section
B) Subtracted in the operating activities section
C) In the investing activities section since it relates to plant assets
D) It will not be reported since it is not a cash flow.

Question 58

The following information was taken from the records of Albert's Fine Coffee:
During 2010, machinery with a cost of $16,000 was sold.
The journal entry to record the sale of the machinery would include:
a. a debit to Accumulated Depreciation of $4,000.
b. a debit to Cash of $2,000.
c. a debit to Machinery for $16,000.
d. a credit to Gain on Sale for $3,000.

Question 59

Richards Inc. presented its comparative financial data and other data as follows:
Additional information:
1. Equipment was purchased for $43,200 and was paid in cash. Other equipment was sold at a $3,000 gain and was 50% depreciated at the time of sale.
2. During 2009, Richards Inc. declared and paid cash dividends.
3. Part of the investment in the stock portfolio was sold at book value. The stock is closely-held so no fair value adjustments are made.
4. Net income was $49,000.
Prepare a statement of cash flows using the indirect method for 2010. You may omit the heading.

Question 60

Beginning and ending balances for relevant balance sheet accounts are as follows:
During 2009, cost of goods sold was $102,000. Calculate the amount of cash paid to suppliers of merchandise inventory.

Question 61

Benton Company reported insurance expense of $301,000 during the current year. On January 1 and December 31 of the current year, prepaid insurance was $28,000 and $41,000, respectively. Calculate cash paid for insurance premiums for the current year.

Question 62

The following are relevant account balances from Winthrop Company's comparative balance sheet and 2009 income statement.
Winthrop's 2009 income statement includes the following:

Determine the amount of cash collected from customers during 2009.

Question 63

Wilson Corporation reported cost of goods sold of $100,000. On January 1, Wilson Corporation had inventory and accounts payable of $21,000 and $33,000, respectively. On December 31, inventory and accounts payable were $28,000 and $20,000, respectively. Calculate cash payments to suppliers of inventory.

Question 64

The August 1 and August 31 balances in accounts receivable are $21,000 and $18,000, respectively. During August, the company collected $56,000 from its customers and incurred $37,000 of expenses, all paid in cash. Calculate the amount of cash flows from operations for August.

Question 65

The following are relevant account balances from Winthrop Company's comparative balance sheet and 2009 income statement.
Winthrop's 2009 income statement includes the following:

Determine the amount of cash paid for insurance during 2009.

Question 66

Beginning and ending balances for selected accounts are as follows:
During 2009, sales revenue is $110,000. Calculate the cash collected from customers.

Question 67

Use the information for Hampton Inc. for the year ending December 31, 2009 that follows to answer questions 25 through 28.
The following are relevant account balances from Hampton's comparative balance sheet and 2009 income statement. Hampton's balance sheets:
Other information:
No equipment was sold or retired during 2009. Hampton's net income for 2009 was $33,000.
Calculate the amount of dividends paid during 2009.

Question 68

List two distinct examples of investing activities and two distinct examples of financing activities.

Question 69

During 2009, equipment was sold for $57,000. This equipment cost $90,000 and had a book value of $47,000. Accumulated depreciation for equipment was $184,000 at 12/31/05 and $147,000 at 12/31/04. Show how the results of the three items will appear on the statement of cash flows using the indirect method from this information.

Question 70

During 2009, Bacon Co. reported a net operating loss of $19,000. The only asset or liability changes during 2009 were a decrease in accounts receivable of $11,000 and an increase in accumulated depreciation of $42,000. Calculate cash flows from operations during 2009 (indicate outflow or inflow).

Question 71

Use the information for Hampton Inc. for the year ending December 31, 2009 that follows to answer questions 25 through 28.
The following are relevant account balances from Hampton's comparative balance sheet and 2009 income statement. Hampton's balance sheets:
Other information:
No equipment was sold or retired during 2009. Hampton's net income for 2009 was $33,000.
Calculate depreciation expense for 2009.

Question 72

Lawson Co. sold equipment that cost $40,000 and a current book value of $18,000, for $20,000 cash. Lawson purchased additional equipment during the year. Data from the company's balance sheets at December 31, 2009 and 2008 are:
Show how the results of the transactions will appear on the statement of cash flows using the indirect method.

Question 73

The following are relevant account balances from Winthrop Company's comparative balance sheet and 2009 income statement.
Winthrop's 2009 income statement includes the following:

Determine the amount of cash paid for salaries during 2009.

Question 74

The accounts receivable balances on January 1 and December 31 are $22,000 and $18,000, respectively. The income statement for the year included sales revenue of $120,000. Determine the amount of cash collected from customers during the year.

Question 75

During the current year, Martini Foods reported sales of $250,000, and wrote off $7,000 of accounts receivable as uncollectible under the direct write-off method. On January 1 and December 31 of the current year, Richard Young had accounts receivable of $26,000 and $14,000, respectively. Determine the amount of cash collected from customers during the current year.

Question 76

Parton Inc.. reported accounting service revenue of $450,000 for 2009. On January 1, 2009, Parton Inc. had $38,000 of accounts receivable and $0 of cash deposits received from customers. On December 31, 2009, accounts receivable and deposits received were $49,000 and $6,000, respectively. Calculate the amount of cash collected from clients during 2009.

Question 77

Selected information from Thompson Corporation is provided below for the years ending December 31, 2009 and 2008.
During 2009 depreciation expense was recorded. New equipment was acquired for cash. Old equipment which was 60% depreciated with an original cost of $26,000 was sold for a loss of $4,000. Prepare the investing activities section of the statement of cash flows.

Question 78

List two distinct examples of significant noncash transactions and two distinct examples of transactions not reported directly on a statement of cash flows

Question 79

Beginning and ending balances for relevant balance sheet accounts are as follows:
During 2010, cost of goods sold was $148,000. Calculate the amount of cash paid to suppliers of merchandise inventory.

Question 80

Relevant account balances for Jeremy Supply Co. are:
Determine the amount of cash provided (used) by operations for 2009.