Deck 5: Fraud, Internal Control, and Cash

Question 1

Financing activities involve

A) lending money.
B) acquiring investments.
C) issuing debt.
D) acquiring long-lived assets.

Answer 1

issuing debt.

Question 2

The category that is generally considered to be the best measure of a company's ability to continue as a going concern is

A) cash ?ows from investing activities.
B) cash ?ows from ?nancing activities.
C) cash ?ows from operating activities.
D) usually different from year to year.

Answer 2

cash ?ows from operating activities.

Question 3

Which of the following transactions does not affect cash during a period?

A) Write-off of an uncollectible account
B) Collection of an accounts receivable
C) Sale of common shares
D) Redemption of bonds

Answer 3

Write-off of an uncollectible account

Question 4

How should the statement of cash flows be dated?

A) December 31, 20X.
B) At Year-End December 31, 20X.
C) For the Year Ended December 31, 20X.
D) At December 31, 20X.

Question 5

Which one of the following items is not generally used in preparing a statement of cash ?ows?

A) Comparative statements of ?nancial position
B) Current Statement of earnings
C) Additional information
D) Adjusted trial balance

Question 6

The cash flow statement will not report the

A) amount of cheques outstanding at the end of the period.
B) sources of cash in the current period.
C) uses of cash in the current period.
D) change in the cash balance for the current period.

Question 7

Under the indirect approach adjustments must be made to net income in the operations section for all of the following items, except

A) depreciation.
B) gain on the sale of equipment.
C) loss on the sale of land.
D) proceeds for the sale of temporary investments.

Question 8

Which of the following is a cash in?ow from ?nancing activities?

A) Proceeds from selling investments in equity securities of another company.
B) Proceeds from selling equipment.
C) Proceeds from issuance of bonds payable.
D) Receipt of interest payments.

Question 9

In the indirect method, an increase in trade receivables is reported on the statement of cash ?ows as:

A) an increase to cash.
B) a decrease to cash.
C) an increase to sales.
D) a decrease to sales.

Question 10

The information in statement of cash ?ows should help investors and creditors evaluate:

A) the company's ability to generate past cash ?ows.
B) the company's ability to receive dividends and meet shareholder obligations
C) the reasons for the difference between net liabilities and net cash provided or used by operating activities.
D) the investing and ?nancing transactions during the period.

Question 11

The indirect method starts with net earnings and converts them to net cash provided by operating activities. This means that:

A) the indirect method starts with net earnings and adds back all the expenses relating to operating activities.
B) the indirect method calculates net earnings as the difference between net assets and net liabilities.
C) the indirect method adjusts net earnings, for items that affected reported net earnings but did not affect cash.
D) the indirect method adjusts net earnings for contra account balances.

Question 12

Which of the following transactions is not a direct use of cash?

A) Acquisition of inventory for cash.
B) Purchase of treasury shares with cash.
C) Exchange of bonds payable for land.
D) Cash dividend paid.

Question 13

Which of the following is a cash equivalent?

A) A short-term bank loan
B) A demand note receivable from another company
C) Government of Canada 180-day treasury bill
D) A note payable to a supplier

Question 14

For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and which of the following is correct?

A) It must be identi?ed as a cash equivalent on the statement of earnings.
B) It must mature within 4 months.
C) The investment must have a known foreign exchange rate.
D) Must be su?ciently close to its maturity date so that its market value is relatively insensitive to interest rate changes.

Question 15

In the indirect method, a gain on sale of equipment is reported as:

A) an increase to cash provided by investing activities.
B) a decrease to net earnings.
C) an increase to revenues.
D) a decrease to equipment purchases.

Question 16

Which of the following transactions is not a direct source of cash?

A) Disposal of inventory for cash.
B) Borrowing cash.
C) Sale and issuance of shares for cash.
D) Sale of services on credit.

Question 17

Investing activities include

A) collecting the principal on loans made.
B) obtaining cash from creditors.
C) obtaining capital from owners.
D) repaying money previously borrowed.

Question 18

If a company reports a net loss, it

A) will not be able to pay cash dividends.
B) may still have a net increase in cash.
C) will not be able to get a loan.
D) may not be able to make capital expenditures.

Question 19

One of the primary purposes of the cash ?ow statement is to

A) determine the company's annual pro?t after taxes
B) inform users of dividends declared during the year
C) segregate operating revenues from non-operating revenues
D) determine if the company is adequately managing accounts receivable and inventory

Question 20

A company has incurred some routine maintenance costs. If they decide to capitalize these costs instead of expensing them, what would be the effect on cash from operations and cash from investing activities in that period?

A) Cash from operations would increase; cash from investing would increase.
B) Cash from operations would increase; cash from investing would decrease.
C) Cash from operations would decrease; cash from investing would increase.
D) Cash from operations would decrease; cash from investing would decrease.

Question 21

The differences in the indirect method and the direct method of the statement of cash ?ows are evident in which section?

A) Operating activities
B) Investing activities
C) Financing activities
D) Cash reconciliation section

Question 22

Winn Company's 20X2 income statement reported total revenues, $110,000, and total expenses (including $10,000 depreciation), $70,000 . The 20X2 balance sheet reported the following: trade receivables--beginning balance, $16,000 and ending balance, $14,000; wages payable--beginning balance, $2,000 and ending balance, $1,500. Therefore, based only on this information, the 20X2 net cash inflow from operating activities was which of the following?

A) $48,500.
B) $50,000.
C) $51,500.
D) $59,500.

Question 23

The 20X2 income statement of Dunn Company reported total sales revenue of $106,000 and total expenses of $108,000 . Expenses were: building depreciation, $10,000 and patent amortization, $5,000. There was an increase in inventory of $1,000. What was cash flow from operating activities during 20X2 (parentheses indicate outflow)?

A) ($3,000).
B) $7,000.
C) $12,000.
D) $14,000.

Question 24

The 20X2 income statement for Ryan Corporation showed the following:

$\begin{array}{|l|r|}\hline \text { Profit } & \$ 81,000 \\\hline \text { Depreciation expense } & 8,000 \\\hline\end{array}$

The statement of financial position showed:

$\begin{array}{|l|r|}\hline \text { Trade receivables increase } & \$ 5,000 \\\hline \text { Prepaid expenses decrease } & 2,000 \\\hline\end{array}$

-What was the cash flow from operating activities?

A) $66,000.
B) $70,000.
C) $82,000.
D) $86,000.

Question 25

Mason Corporation reported a net loss of $12,000 for the year ended December 31, 20X3. During the year, accounts receivable decreased $5,000, merchandise inventory increased $4,000, accounts payable increased by $13,000, and depreciation expense of $7,000 was recorded. During 20X3, operating activities using the indirect method was

A) used net cash of $33,000.
B) used net cash of $23,000.
C) provided net cash of $9,000.
D) provided net cash of $7,000.

Question 26

The following information pertains to Brockville Inc. for 20X4: $$\begin{array} { | l | r | } \hline \text { Inventory January 1, } & \$ 300,000 \\\hline \text { Inventory December 31, } & \$ 335,000 \\\hline \text { Accounts payable January 1 } & \$ 45,000 \\\hline \text { Accounts payable December 31 } & \$ 48,000 \\\hline \text { Cost of goods sold during 20X4 } & \$ 2,400,000 \\\hline\end{array}$$ If Brockville prepares their cash flow statement using the indirect method, what adjustment to the net income will be made for the year for Cornwall when calculating their cash flow from operations?

A) $35,000 addition to net income
B) $35,000 deduction from net income
C) $32,000 addition to net income
D) $32,000 deduction from net income

Question 27

Jackson Company gathered the following data to prepare its 20X7 statement of cash flows: $$\begin{array} { | l | r | } \hline \text { Profit } & \$ 40,000 \\\hline \text { Depreciation expense } & 5,000 \\\hline \text { Trade receivables decrease } & 3,000 \\\hline \text { Wages payable increase } & 4,000 \\\hline \text { Amortization of patent } & 1,000 \\\hline \text { Income tax payable decrease } & 2,000 \\\hline\end{array}$$ Based only on the above data, the net cash inflow from operating activities during 20X7 was which of the following?

A) $43,000.
B) $45,000.
C) $51,000.
D) $53,000.

Question 28

Allen Company reported total sales revenue of $150,000 and total expenses of $152,000 (i.e., a net loss of $2,000) for the year ended December 31, 20X4. During 20X4, trade receivables decreased by $1,000, trade payables increased by $5,000, wages payable increased by $3,000, and $18,000 in depreciation expense was recorded. Assuming no other adjustments are needed, what was the "net cash flow from operating activities" for 20X4 (parentheses indicate net cash outflow)?

A) ($1,000).
B) $23,000.
C) $25,000.
D) $29,000.

Question 29

Trade receivables arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. Profit reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the cash flows from operating activities, prepared using the indirect method, is

A) $120,000.
B) $155,000.
C) $115,000.
D) $125,000.

Question 30

Restless Company's 20X2 income statement reported total sales revenue of $100,000. The 20X1- 20X2, comparative statements of financial position showed that trade receivables decreased by $10,000. What were the 20X2 "cash receipts from customers"?

A) $80,000.
B) $90,000.
C) $100,000.
D) $110,000.

Question 31

The statement of cash ?ows (indirect method) reports depreciation expense as an addition to pro?t because depreciation does which of the following?

A) Causes an in?ow of funds for the replacement of assets.
B) Reduces reported pro?t of the period but does not involve an out?ow of cash for that period.
C) Is a direct use of cash
D) Reduces reported pro?t and causes an in?ow of cash.

Question 32

ABC Company reported total sales revenue of $80,000 and total expenses of $72,000 (i.e., profit of $8,000) for the year ended December 31, 20X. During 20X, trade receivables increased by $3,000, merchandise inventory decreased by $2,000, trade payables increased by $1,000, and $5,000 in depreciation expense was recorded. Assuming no other adjustments to profit are needed, what was the net cash inflow from operating activities?

A) $10,000.
B) $11,000.
C) $13,000.
D) $19,000.

Question 33

Matlock Company reported total sales revenue of $55,000 and total expenses amounting to $45,000 on its income statement for the year ended December 31, 20X2. During 20X2, trade receivables decreased by $4,000, merchandise inventory decreased by $6,000, trade payables increased by $2,000 and depreciation of $8,000 was recorded. Therefore, based only on this information, the net cash flow from operating activities for 20X2 would be which of the following?

A) $10,000.
B) $18,000.
C) $19,000.
D) $30,000.

Question 34

Assume the 20X4 income statement reported total sales revenue of $160,000. The 20X3-20X4, comparative statements of financial position showed that trade receivables increased by $10,000. What was the "cash inflow from customers" for 20X4?

A) $140,000.
B) $150,000.
C) $160,000.
D) $170,000.

Question 35

WT Company reported sales revenue of $100,000 and total expenses of $90,000 (including depreciation) for the year ended December 31, 20X1. During 20X1, trade receivables decreased by $4,000, merchandise inventory increased by $3,000, trade payables increased by $2,000, and depreciation expense of $6,000 was recorded. Assuming no other data are needed, what was the net cash inflow from operating activities for 20X1?

A) $19,000.
B) $20,000.
C) $21,000.
D) $24,000.

Question 36

Which of the following is not true of the direct method of preparing a statement of cash ?ows?

A) It gives the user a sense of the magnitude of gross dollars ?owing in and out of the company.
B) It has the same cash ?ows from investing and ?nancing activities as the indirect method.
C) It results in a different net cash from operating activities than the indirect method.
D) It reports the same net increase or decrease in cash as the indirect method.

Question 37

Green Corporation reported net earnings of $50,000 for the year. During the year, trade receivables increased by $8,000, trade payables decreased by $4,000 and depreciation expense of $6,000 was recorded. Net cash provided by operating activities for the year, using the indirect method, is

A) $54,000.
B) $56,000.
C) $50,000.
D) $44,000.

Question 38

Toga Corporation reported profit of $50,000 for the year. During the year, trade receivables increased by $8,000, trade payables decreased by $4,000 and depreciation expense of $6,000 was recorded. Net cash provided by operating activities for the year, using the indirect method, is

A) $54,000.
B) $44,000.
C) $56,000.
D) $50,000.

Question 39

In calculating cash ?ows from operating activities using the indirect method, a loss on the sale of equipment is

A) added to net earnings.
B) deducted from net earnings.
C) ignored because it does not affect cash.
D) not reported on a cash ?ow statement.

Question 40

Travis Company reported a profit for 20X2 of $20,000, building depreciation expense of $6,000, and amortization expense (patent) of $5,000. Also, trade payables increased by $7,000 and inventory decreased by $2,000. What was the amount of "cash flows from operating activities" for 20X2?

A) $34,000.
B) $35,000.
C) $36,000.
D) $40,000.

Question 41

In the years 20X0-20X3, Bee Co.'s capital expenditures ratio was 2.74 and from 20X4-20X7, it was 1.24. From 20X4-20X7, Are Co.'s ratio was .30. Which of the following statements about Bee Co.'s capital expenditures ratio is correct?

A) Bee Co.'s capital expenditure ratio is relatively low and indicates inability to ?nance property, plant and equipment with cash ?ow from operations.
B) It appears that Are Co. is more aggressive about investing in additional property, plant and equipment than is Bee Co.
C) Bee Co.'s ratio has improved in the period 20X4-20X7.
D) It appears that Bee Co. is more aggressive about investing in additional property, plant and equipment than is Are Co.

Question 42

A banker contemplating a loan to a company should focus on which section(s) of the cash ?ow statement in order to determine the company's ability to repay the loan?

A) Operating activities
B) Operating and ?nancing activities
C) Investing activities
D) Operating and investing activities

Question 43

Crocker Inc. had the following activity during 20X7: $$\begin{array} { | l | r | } \hline \text { Proceeds from sale of bonds payable } & \$ 200,000 \\\hline \text { Loss from disposal of equipment (\$0 proceeds from disposal) } & \$ 38,000 \\\hline \text { Dividends paid to shareholders } & \$ 25,000 \\\hline \text { Sale of shares } & \$ 125,000 \\\hline \text { Gain on the sale of short term investments } & \$ 75,000 \\\hline\end{array}$$ What is the cash flow from investing activities?

A) $57,000
B) $0
C) $93,000
D) $22,000

Question 44

Which of the following would increase earnings but lower the quality of reported earnings?

A) Writing off obsolete inventory
B) Embarking on a capital expansion
C) Increasing operating expenses.
D) Decreasing operating expenses

Question 45

Which item may be of concern when analyzing cash ?ow from operating activities?

A) Increasing inventories
B) Decreasing accounts receivable
C) Repayment of debt at maturity
D) Payments of dividends

Question 46

Mansour Machines had cash ?ow from operations of $5,070, cash ?ows from investments of $(1,244), capital expenditures of $1,244, cash ?ows from ?nancing of $(3,537), including $1,500 of dividends paid, and net income of $2,314. Mansour's free cash ?ow is:

A) $2,326
B) $1,533
C) $2,756
D) $3,826

Question 47

A bank credit manager, while reviewing a company's cash ?ow statement, noticed that the company reported a large increase in inventory, but no increase in accounts receivable. Which of the following is not a possible explanation for this?

A) The company experienced a decrease in demand for its products
B) The company may be stockpiling inventory in anticipation of a strike at a supplier.
C) The company increased its credit terms but not its production time.
D) The company has obsolete inventory on hand.

Question 48

Havery has the following cash flow & earnings numbers: $$\begin{array} { | l | r | } \hline \text { Cash flows from operations } & \$ 585 \\\hline \text { Capital expenditures } & \$ 154 \\\hline \text { Net income } & \$ 166 \\\hline \text { Dividends declared } & \$ 210 \\\hline \text { Dividends paid } & \$ 180 \\\hline\end{array}$$ Havery has free cash flows of:

A) $221
B) $251
C) $375
D) $541

Question 49

The following information was available for Brockville Corp for the 20X6 fiscal year: $$\begin{array} { | l | r | } \hline \text { Cash inflow from financing activities } & \$ 225,000 \\\hline \text { Cash outflow from investing activities } & \$ 415,000 \\\hline \text { Cash inflow from operations } & \$ 372,500 \\\hline \text { Dividends paid } & \$ 25,000 \\\hline \text { Amount spent on capital expenditures } & \$ 300,000 \\\hline\end{array}$$ What is Brockville's free cash flow for 20X6?

A) ($67,000)
B) ($42,000)
C) $47,500
D) $347,500

Question 50

In 20X3, The W D Company reported net earnings of $1.3 billion and cash flow from operations of $5.6 billion. In 20X2, it's net earnings was $1.9 billion and cash flow from operations was $5.1 billion. What were their quality of earnings ratios for 20X3 and 20X2 respectively?

A) .23 and .37
B) .91 and 1.46
C) 1.10 and .68
D) 4.31 and 2.68

Question 51

Wyman Co. reported $26,000 of cash provided by operating activities and the following data: $$\begin{array} { | l | r | } \hline \text { Amortization } & \$ 45,000 \\\hline \text { Increase in accounts payable } & 12,000 \\\hline \text { Increase in wages payable } & 8,000 \\\hline \text { Decrease in taxes payable } & 2,000 \\\hline\end{array}$$ Wyman's net income/loss for the period was

A) $37,000 loss
B) $12,000 loss
C) $10,000 net income
D) $54,000

Question 52

In 20X3, Cee Co. disclosed cash paid for property, plant and equipment of $1.069 million and cash flow from operations of $3.883 million. Their average property, plant and equipment from the comparative statement of financial position was $3.968 million. Compute Cee Co.'s capital expenditures ratio for 20X3.

A) .28
B) .77
C) .98
D) 3.63

Question 53

Which of the following statements about the quality of earnings ratio is false?

A) An increase in operating assets and a decrease in liabilities will reduce operating cash ?ows, thereby reducing the ratio.
B) Seasonal variations in sales and purchases of inventory can cause wide deviations in the quality of earnings ratio.
C) When sales are growing, receivables and inventory normally increase at a faster rate than trade payables often causing operating cash ?ows to be less than pro?t.
D) Seasonal variations in sales have no impact on the quality of earnings ratio.

Question 54

A company sold a piece of land for $40,000 which had an original cost of $25,000. What is the cash ?ow effect of this transaction?

A) $15,000 increase in cash ?ows from operations
B) $40,000 increase in cash ?ows from operations
C) $40,000 increase in cash ?ows from investing activities
D) $15,000

Question 55

Mazoff Corp had the following activities during the year: $$\begin{array} { | l | r | } \hline \text { Proceeds from the sale of land } & \$ 300,000 \\\hline \text { Gain on sale of land } & \$ 50,000 \\\hline \text { Proceeds from the issue of common shares } & \$ 1,000,000 \\\hline \text { Purchase of equipment } & \$ 450,000 \\\hline \text { Repayment of mortgage outstanding on the sold land } & \$ 200,000 \\\hline \text { Interest paid } & \$ 22,500 \\\hline \text { Dividends paid } & \$ 10,000 \\\hline\end{array}$$ What was Mazoff's cash flow from investing activities for the year?

A) $350,000 outflow
B) $150,000 outflow
C) $100,000 outflow
D) $850,000 inflow

Question 56

Which of the following would be an example of an investing activity on the cash ?ow statement?

A) Sale of preferred shares
B) Purchase of capital assets
C) Repurchase of shares issued
D) Dividends paid to shareholders

Question 57

Melmore Ltd had the following activity during 20X7: $$\begin{array} { | l | r | } \hline \text { Proceeds from sale of long-term investments } & \$ 156,000 \\\hline \text { Gain on the sale of long-term investments } & \$ 16,000 \\\hline \text { Loss on the disposal of equipment (\$0 proceeds from disposal) } & \$ 17,000 \\\hline \text { Proceeds from sale of preferred shares } & \$ 182,000 \\\hline \text { Repayment of long-term debt } & \$ 30,000 \\\hline\end{array}$$ What is the cash flow from investing activities?

A) $16,000
B) $156,000
C) $173,000
D) $189,000

Question 58

In 20X3, C Co. reported a quality of earnings ratio of 1.60. In 20X2 and 20X1 the ratio was .97 and .98 respectively. Which of the following was the most likely cause of the large increase in the ratio?

A) An increase in current assets such as receivables and inventory.
B) An increase in trade payables and accrued liabilities.
C) An increase in sales revenue while net earnings remained the same.
D) A decrease in expense while net earnings remained the same.

Question 59

Keller Inc. had the following activities during the year: $$\begin{array} { | l | r | } \hline \text { Proceeds from the sale of land } & \$ 346,000 \\\hline \text { Gain on sale of land } & \$ 46,000 \\\hline \text { Proceeds from the issue of common shares } & \$ 800,000 \\\hline \text { Purchase of equipment } & \$ 450,000 \\\hline\end{array}$$ What was Keller's cash flow from investing activities for the year?

A) $300,000 Cash outflow from investing activities.
B) $796,000 Cash inflow from investing activities.
C) $150,000 Cash inflow from investing activities.
D) $104,000 Cash outflow from investing activities

Question 60

Which of the following statements about the quality of earnings ratio is true?

A) When sales are growing, receivables and inventory normally increase faster than payables so the ratio increases.
B) Seasonal variations in sales have no impact on the quality of earnings ratio.
C) Failure to accrue appropriate expenses will in?ate net earnings and reduce the quality of earnings ratio.
D) Failure to accrue appropriate expenses will in?ate net earnings and increase the quality of earnings ratio.

Question 61

Crocker Inc. had the following activity during 20X7: $$\begin{array} { | l | r | } \hline \text { Proceeds from sale of bonds payable } & \$ 200,000 \\\hline \text { Loss from disposal of equipment (Net book value } \$ 60,000 ) & \$ 38,000 \\\hline \text { Dividends paid to shareholders } & \$ 25,000 \\\hline \text { Sale of shares } & \$ 125,000 \\\hline \text { Gain on the sale of short term investments } & \$ 75,000 \\\hline\end{array}$$ What is the cash flow from financing activities?

A) $300,000
B) $292,000
C) $325,000
D) $275,000

Question 62

A company acquired some land, which had been independently appraised at $12,000, and paid for it by issuing 1,000 shares of its common shares. The shares had a par value of $10 per share and no market price was available. How should this be reported on the statement of cash ?ows?

A) Report $12,000 as in?ow and out?ow of cash.
B) Report $12,000 as an in?ow of cash.
C) Should not be reported on the statement of cash ?ows.
D) Report on a schedule of signi?cant noncash transactions if it is material.

Question 63

Melmore Ltd had the following activity during 20X7: $$\begin{array} { | l | r | } \hline \text { Proceeds from sale of long-term investments } & \$ 156,000 \\\hline \text { Gain on the sale of long-term investments } & \$ 16,000 \\\hline \text { Loss on the disposal of equipment ( } \$ 0 \text { proceeds from disposal) } & \$ 17,000 \\\hline \text { Proceeds from sale of preferred shares } & \$ 182,000 \\\hline \text { Repayment of long-term debt } & \$ 30,000 \\\hline\end{array}$$ What is the cash flow from financing activities?

A) $135,000
B) $168,000
C) $169,000
D) $152,000

Question 64

The financial statements of Juliet Company show the following: $$\begin{array} { | l | r | r | } \hline & \text { Beginning balance } & \text { Ending balance } \\\hline \text { Trade receivables } & \$ 28,000 & \$ 22,000 \\\hline \text { Trade payables } & \$ 11,000 & \$ 15,000 \\\hline \text { Purchases } & & \$ 74,000 \\\hline\end{array}$$ How much cash was paid out to suppliers?

A) $11,000.
B) $15,000.
C) $70,000.
D) $74,000.

Question 65

Lori Company sold an operational asset, a machine, for cash. It originally cost $20,000. The accumulated depreciation at the date of disposal was $15,000. A gain on the disposal of $2,000 was reported. What was the cash inflow from this transaction?

A) $3,000.
B) $4,000.
C) $5,000.
D) $7,000.

Question 66

The financial statements of Juliet Company show the following: $$\begin{array} { | l | r | r | } \hline & \text { Beginning balance } & \text { Ending balance } \\\hline \text { Trade receivables } & \$ 28,000 & \$ 22,000 \\\hline \text { Trade payables } & \$ 21,000 & \$ 25,000 \\\hline \text { Sales } & & \$ 154,000 \\\hline\end{array}$$ How much cash was collected from customers?

A) $148,000.
B) $150,000.
C) $154,000.
D) $160,000.

Question 67

A new, fast-growing company may typically have which of the following patterns of cash ?ows?

A) Negative cash ?ows from operations, cash out?ows from ?nancing and cash in?ows from investing.
B) Negative cash ?ows from operations, cash in?ows from ?nancing and cash out?ows from investing.
C) Positive cash ?ows from operations, cash out?ows from ?nancing and cash in?ows from investing.
D) Positive cash ?ows from operations, cash in?ows from ?nancing and cash out?ows from investing.

Question 68

The financial statements for Ozzie Company show the following: $$\begin{array} { | l | r | r | } \hline & \text { Beginning balance } & \text { Ending balance } \\\hline \text { Merchandise inventory } & \$ 25,000 & \$ 26,000 \\\hline \text { Trade receivables } & 35,000 & 33,000 \\\hline \text { Trade payables } & 18,000 & 21,000 \\\hline \text { Cost of Goods Sold } & & \$ 121,000 \\\hline\end{array}$$ How much cash was paid for merchandise?

A) $117,000.
B) $119,000.
C) $121,000.
D) $124,000.

Question 69

Kinross Corp had the following activities during the year: $$\begin{array} { | l | r | } \hline \text { Proceeds from the sale of land } & \$ 300,000 \\\hline \text { Gain on sale of land } & \$ 50,000 \\\hline \text { Proceeds from the issue of common shares } & \$ 1,000,000 \\\hline \text { Purchase of equipment } & \$ 450,000 \\\hline \text { Repayment of mortgage outstanding on the sold land } & \$ 200,000 \\\hline \text { Interest paid } & \$ 22,500 \\\hline \text { Dividends paid } & \$ 10,000 \\\hline\end{array}$$ What was Kinross' cash flow from financing activities for the year?

A) $767,500 inflow
B) $790,000 inflow
C) $800,000 inflow
D) $1,000,000 inflow

Question 70

The financial statements of Juliet Company show the following: $$\begin{array} { | l | r | r | } \hline & \text { Beginning balance } & \text { Ending balance } \\\hline \text { Trade receivables } & \$ 28,000 & \$ 22,000 \\\hline \text { Inventories } & \$ 38,400 & 32,000 \\\hline \text { Trade payables } & \$ 11,000 & \$ 15,000 \\\hline \text { COGS } & & \$ 74,000 \\\hline\end{array}$$ How much cash was paid out to suppliers?

A) $15,000
B) $70,000
C) $85,000
D) $67,600

Question 71

Nelson Company collected the following data in its accounting records in 20X7: $\begin{array}{|l|r|}\hline \text { Income Statement } & \\\hline \text { Depreciation expense } & \$ 1,000 \\\text { Loss on sale of equipment } & \$ 3,000\\\hline \\\hline \text { Statement of Financial Position } & \\ \hline \text { Beginning balance - equipment } & \$ 12,500 \\\hline \text { Ending balance - equipment } & \$ 8,000 \\\hline \text { Beginning balance - accumulated depreciation } & \$ 2,000 \\\hline \text { Ending balance - accumulated depreciation } & \$ 2,400 \\\hline\end{array}$
No new equipment was purchased during the year. What was the cash inflow from the sale of equipment in 20X7?

A) $600.
B) $900.
C) $1,000.
D) $3,900.

Question 72

If a loss of $20,000 is incurred in selling (for cash) o?ce equipment that cost $90,000 and had accumulated depreciation of $22,500, the total amount reported in the investing activities section of the statement of cash ?ows is

A) $70,000.
B) $67,500.
C) $47,500.
D) $87,500.

Question 73

The sales terms for Jensen Company are 10 percent down and the balance due by the end of the following month. Sales for January, February and March were $8,500, $11,500 and $13,000 respectively. The cash collections from operations for the month of February would be closest to?

A) $7,600
B) $8,800
C) $10,350
D) $1,150

Question 74

The income statement, statement of financial position and statement of cash flows all are prepared on the accrual basis.

Question 75

Randy, Inc., issued $50,000 of bonds, paid cash dividends of $8,000, sold long-term investments for $12,000, received $5,000 of dividend revenue, purchased treasury shares for $15,000, and purchased new equipment for $19,000. What is the net cash flow from financing activities?

A) ($20,000).
B) $27,000.
C) $70,000.
D) $80,000.

Question 76

Crocker Inc. had the following activity during 20X7: $$\begin{array} { | l | r | } \hline \text { Proceeds from sale of bonds payable } & \$ 200,000 \\\hline \text { Loss from disposal of equipment (Net book value } \$ 60,000 ) & \$ 38,000 \\\hline \text { Dividends paid to shareholders } & \$ 25,000 \\\hline \text { Sale of shares } & \$ 125,000 \\\hline \text { Gain on the sale of short term investments } & \$ 75,000 \\\hline\end{array}$$ What is the cash flow from investing activities?

A) $57,000
B) $75,000
C) $93,000
D) $22,000

Question 77

Typical financing activities do NOT include the following

A) Proceeds from issuance of short- and long-term borrowings.
B) Principal payments on short- and long-term borrowings.
C) Purchase of short- or long-term investments for cash.
D) Purchase of shares for retirement.

Question 78

Preferred shares issued in exchange for land would be reported on the statement of cash ?ows in

A) the cash ?ows from ?nancing activities section.
B) the cash ?ows from investing activities section.
C) the notes to the ?nancial statements.
D) the cash ?ows from operating activities section.

Question 79

A stable, mature company may typically have which of the following patterns of cash ?ows?

A) Positive cash ?ows from operations, cash out?ows from ?nancing and cash in?ows from investing.
B) Positive cash ?ows from operations, cash in?ows from ?nancing and cash out?ows from investing.
C) Positive cash ?ows from operations, cash out?ows from ?nancing and cash out?ows from investing.
D) Positive cash ?ows from operations, cash in?ows from ?nancing and cash in?ows from investing.

Question 80

A company wants to maintain its current debt/equity ratio. Which of the following relationships would most likely occur on the cash ?ow statement?

A) Cash from operations would be equal to any debt paid off during the year.
B) Cash from operations would be equal to cash from ?nancing activities for the year.
C) New borrowings would be less than cash from operations for the year.
D) New borrowings would replace any debt paid off.