Deck 19: Company Performance: Cash Flows

Question 1

Which of the following activities is correctly associated with its cash flow classification?

A)Operating - Sale of company's own common stock
B)Financing - Purchase of Treasury Stock
C)Investing - Payment of rent for next two months
D)Financing - Payment of interest on bonds payable

Answer 1

Financing - Purchase of Treasury Stock

Question 2

To assess a company's ability to meet its obligations and pay dividends,the _________ activities section would be analyzed.

A)investing
B)financing
C)operating
D)both a and b are correct

Answer 2

operating

Question 3

Payments to employees would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Answer 3

operating activities

Question 4

Cash inflow from the sale of Trading Securities would be reported in which of the following in the statement of cash flows?

A)Operating
B)Investing
C)Financing
D)Both A and C

Question 5

All of the following represent sections of the statement of cash flows except:

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

Question 6

Receipt of dividends from an investment in another company would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 7

Collections from customers would be reported in the following section of the statement of cash flows:

A)investing activities
B)financing activities
C)operating activities
D)noncash investing and financing activities

Question 8

Cash payments made to acquire equipment would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 9

Which of the following activities is not correctly associated with its cash flow classification?

A)Operating - Sale of merchandise for cash
B)Financing - Sale of company's Preferred Stock
C)Investing - Purchase of Treasury Stock
D)Operating - Purchase of advertising for the year

Question 10

To assess a company's ability to generate positive future cash flows,the _________ activities section would be analyzed.

A)financing
B)investing
C)operating
D)noncash investing and financing

Question 11

All of the following are primary purposes of the statement of cash flows except:

A)to assess the entity's ability to generate positive future net cash flows
B)to assess management's success in limiting the income taxes paid to the federal government
C)to assess the reasons for differences between income and associated cash receipts and payments
D)to assess both the cash and noncash aspects of the entity's investing and financing transactions during the period

Question 12

The proceeds from the issuance of common stock would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 13

Cash paid for interest on a note payable would be found in the ______ section of the cash flow statement.

A)investing
B)financing
C)operating
D)Both A and B

Question 14

The purchase of machinery by signing a long-term note payable would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 15

Cash flows resulting from a company's normal earnings process are reported on the statement of cash flows in the:

A)financing activities section
B)investing activities section
C)operating activities section
D)noncash investing and financing activities section

Question 16

Cash payments for dividends would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 17

The issuance of common stock in exchange for a patent would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 18

When adjusting net income to cash using the indirect method describe how each of the following should adjust net income.Added (+),Subtracted (-)or No Adjustment (N

A).
_____ 1.Increases in Accounts Receivable
_____ 2.Gain on Sale of Equipment
_____ 3.Decrease in Accounts Payable
_____ 4.Depreciation Expense
_____ 5.Increase in Land account
_____ 6.Decrease in Inventory
_____ 7.Decrease in Dividend Payable
_____ 8.Increase in Prepaid Insurance
_____ 9.Decrease in Discount on Bonds Payable
_____10.Decrease in Salaries Payable

Question 19

Payment of cash for interest is considered which of the following in the statement of cash flows?

A)Operating
B)Financing
C)Investing
D)B and C

Question 20

Collections of cash from the sale of land would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 21

Interest revenue for the current year was $4,500 more than cash collected for interest.This difference is most likely due to a(n):

A)increase in the interest payable account
B)decrease in the interest payable account
C)increase in the interest receivable account
D)decrease in the interest receivable account

Question 22

The reporting format for the statement of cash flows which shows the actual cash inflows and outflows of operating activities is the:

A)direct format
B)indirect format
C)noncash format
D)allowance format

Question 23

Sales totaled $385,000,net accounts receivable had a beginning and ending balance of $39,000 and $45,500,respectively.Cash collections from customers were:

A)$367,000
B)$385,000
C)$378,500
D)$391,500

Question 24

Cost of Goods Sold for the period totaled $598,000,accounts payable had a beginning and ending balance of $97,000 and $86,500,respectively,and inventory had a beginning and ending balance of $156,000 and $142,500,respectively.Cash payments for inventory were:

A)$574,000
B)$595,000
C)$601,000
D)$622,000

Question 25

Interest expense for the period was $7,250 less than cash payments for interest.This difference is most likely due to a(n):

A)increase in the interest payable account
B)decrease in the interest payable account
C)increase in the interest receivable account
D)decrease in the interest receivable account

Question 26

On a statement of cash flows using the indirect format,cash paid for interest is:

A)deducted from net income in the operating activities section
B)included as an outflow in the investing activities section
C)added to net income in the operating activities section
D)reported as an additional disclosure at the end of the statement.

Question 27

On a statement of cash flows using the indirect format,the loss on the sale of a building is:

A)ignored,since it is a noncash expenditure
B)added to net income in the operating activities section
C)included as an outflow in the investing activities section
D)deducted from net income in the operating activities section

Question 28

On a statement of cash flows using the indirect format,amortization of the premium on investments in bonds is:

A)deducted from net income in the operating activities section
B)included as an inflow in the financing activities section
C)added to net income in the operating activities section
D)ignored,since it is a noncash expenditure

Question 29

Cash collections from customers during 2010 were $300,500,while net accounts receivable increased $5,000.Sales reported on the income statement were:

A)$300,500
B)$295,500
C)$305,000
D)$310,500

Question 30

On a statement of cash flows using the indirect format,an increase in prepaid insurance is:

A)ignored,since it is a noncash expenditure
B)added to net income in the operating activities section
C)included as an inflow in the financing activities section
D)deducted from net income in the operating activities section

Question 31

On a statement of cash flows using the indirect format,amortization of the discount on notes receivable is:

A)deducted from net income in the operating activities section
B)included as an inflow in the financing activities section
C)added to net income in the operating activities section
D)ignored,since it is a noncash expenditure

Question 32

During 2010,cash payments for wages totaled $954,500,while wages payable decreased by $67,800.Wages expense reported on the income statement equaled:

A)$ 818,900
B)$ 886,700
C)$1,022,300
D)$1,090,100

Question 33

Cash collections from customers during 2010 were $468,500,while net accounts receivable decreased $14,250.Sales reported on the income statement were:

A)$440,000
B)$454,250
C)$482,750
D)$497,000

Question 34

On a statement of cash flows using the indirect format,amortization of the discount on a note payable is:

A)ignored,since it is a noncash expenditure
B)added to net income in the operating activities section
C)included as an outflow in the financing activities section
D)deducted from net income in the operating activities section

Question 35

Which of the following is true about the direct method of determining cash from operations?

A)Losses are added back to net income
B)Gains are added back to operating expenses
C)Gains are not reported in the operating section
D)Losses are subtracted from sales

Question 36

The reporting format for the statement of cash flows which shows the difference between accrual-based net income and cash flows from operations is the:

A)direct format
B)indirect format
C)noncash format
D)allowance format

Question 37

Which of the following is true about a cash flow statement using the indirect method of determining cash from operations?

A)Losses are added back to net income
B)Gains are subtracted from cash from investing events
C)Gains are added back to net income
D)Losses are subtracted from cash from financing events.

Question 38

On a statement of cash flows using the indirect format,a decrease in unearned revenue is:

A)deducted from net income in the operating activities section
B)included as an outflow in the financing activities section
C)added to net income in the operating activities section
D)ignored,since it is a noncash expenditure

Question 39

On a statement of cash flows using the indirect format,an increase in taxes payable is:

A)ignored,since it is a noncash expenditure
B)added to net income in the operating activities section
C)included as an outflow in the financing activities section
D)deducted from net income in the operating activities section

Question 40

On a statement of cash flows using the indirect format,depreciation expense is:

A)deducted from net income in the operating activities section
B)included as an outflow in the investing activities section
C)added to net income in the operating activities section
D)ignored,since it is a noncash expenditure

Question 41

Cash flows for investing activities include payments

A)to purchase operating assets
B)for dividends
C)to employees
D)for interest

Question 42

If accounts payable increased,cash paid for inventory would be equal to

A)ending inventory minus the accounts payable increase
B)ending inventory plus the accounts payable increase
C)purchases minus the accounts payable increase
D)purchases plus the accounts payable increase

Question 43

The retained earnings account began the year with a balance of $700,000 which was increased with net income of $250,000.If the ending balance of retained earnings was $800,000 and all dividends declared were paid how much cash was paid for dividends during the year.

A)$150,000
B)$250,000
C)$100,000
D)$350,000

Question 44

If accounts receivable increased during the period,cash received from customers would be equal to

A)the change in accounts receivable
B)sales plus the increase in accounts receivable
C)sales minus the increase in accounts receivable
D)unable to determine from the information given

Question 45

A machine with a cost of $196,500,and a carrying value of $84,900,was sold at a loss of $13,700.This transaction would be reported on a statement of cash flows using the indirect format as a(n):

A)$111,600 inflow from investing activities and a $13,700 outflow from operating activities
B)$97,900 inflow from investing activities and a $13,700 addition to net income
C)$84,900 inflow from investing activities and a $13,700 addition to net income
D)$71,200 inflow from investing activities and a $13,700 addition to net income.

Question 46

An increase in interest payable during the period indicates that

A)interest paid exceeded interest expense for the period
B)interest expense for the period exceeded interest paid
C)all the interest incurred during the period was paid
D)unable to determine from the information given

Question 47

Which method shows the net cash flows from operating activities without presenting the individual cash inflows and outflows from those activities.

A)indirect method
B)direct method
C)both methods
D)neither method

Question 48

On a statement of cash flows using the direct format,depreciation expense is:

A)deducted from net income in the operating activities section
B)included as an outflow in the investing activities section
C)added to net income in the operating activities section
D)ignored,since it is a noncash expense

Question 49

The retained earnings account began the year with a balance of $639,600,was reduced for dividends declared,and increased for net income of $312,000.If the cash paid for dividends was $129,500,and the dividends payable account decreased $45,000,the ending balance in the retained earnings account should be:

A)$502,100
B)$777,100
C)$822,100
D)$867,100

Question 50

Cash flows from operating activities include

A)cash receipts and collections from sales of products
B)cash receipts from the sale of operating assets
C)cash receipts from issuing common stock
D)all of the above

Question 51

The conversion of preferred stock into common stock would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 52

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

A)cash dividend
B)stock dividend
C)purchase of treasury stock
D)issuance of stock for equipment

Question 53

The sale of short-term marketable securities would be reported in the following section of the statement of cash flows:

A)investing activities
B)operating activities
C)financing activities
D)noncash investing and financing activities

Question 54

Under the indirect method,depreciation expense is added to net income to arrive at cash flow from operating activities.Depreciation is handled this way because

A)it is an inflow of cash
B)it should be subtracted in arriving at net income
C)it is deducted in arriving at net income but does not reduce cash
D)it should be subtracted in arriving at cash from investing activities

Question 55

Cash flows for financing activities do not include

A)proceeds from issuing common stock
B)proceeds from issuing bonds
C)payment of dividends
D)receipt of dividends

Question 56

Cash received on interest earned on an investment bonds is reported included in the

A)Financing section
B)Operating section
C)Investing section
D)Investing and operating section

Question 57

Which of the following would not be an investing activity?

A)collection of interest on held-to-maturity securities
B)purchase of available for-sale-securities
C)making and collecting loans
D)disposal of plant assets

Question 58

A building with a cost of $683,000,and accumulated depreciation of $397,500,was sold at a gain of $82,000.This transaction would be reported on a statement of cash flows using the indirect format as a(n):

A)$367,500 inflow from investing activities and an $82,000 deduction from net income.
B)$285,500 inflow from investing activities and an $82,000 deduction from net income
C)$397,500 inflow from investing activities and an $82,000 deduction from net income
D)$203,500 inflow from investing activities and an $82,000 inflow from operating activities

Question 59

How should the changes in current accounts be treated in computing cash flows from operating activities using the indirect method?

A)Increases in all current accounts must be added to net income
B)Increases in all current accounts must be subtracted from net income
C)Increases in all current assets must be added to net income and increases in current liabilities subtracted
D)Increases in all current assets must be subtracted from net income and increases in current liabilities added

Question 60

The purchase of treasury stock is reported on the statement of cash flows in the

A)investing section
B)financing section
C)operating section
D)noncash investing and financing section

Question 61

If a firm sells for $8,000 equipment that cost $25,000 and has $20,000 of accumulated depreciation,how is this reported in the statement of cash flows?

A)$8,000 investing activity
B)$8,000 financing activity
C)$8,000 financing activity and $3,000 addition to net income
D)$8,000 investing activity and $3,000 subtraction from net income

Question 62

Salaries payable decreased from 2009 to 2010.Using the indirect method (statement of cash flows),the decrease should be:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 63

Which of the following is subtracted from net income in computing cash flows from operating activities using the indirect method?

A)increases in accounts receivable
B)decreases in accounts receivable
C)decrease in taxes payable
D)depreciation expense

Question 64

Salaries payable increased from 2009 to 2010.Using the indirect method (statement of cash flows),the increase should be:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 65

Using the indirect method (statement of cash flows),a decrease in current assets would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 66

Using the indirect method (statement of cash flows),a loss would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 67

Using the indirect method (statement of cash flows),a decrease in current liabilities would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 68

Using the indirect method (statement of cash flows),an increase in current assets would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 69

Which of the following statements about the statement of cash flows is false?

A)The direct method provides more information than the indirect method
B)Firms can use either the direct method or the indirect method of reporting operating activities
C)Cash flows from operating activities is larger if the indirect method is used instead of the direct method
D)If firms use the direct method,they must also provide a reconciliation of net income and operating cash flows

Question 70

Using the direct method (statement of cash flows),depreciation expense would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 71

Using the indirect method (statement of cash flows),an increase in current liabilities would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 72

Using the indirect method (statement of cash flows),a decrease in inventory would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 73

Using the indirect method (statement of cash flows),a gain would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 74

Using the indirect method (statement of cash flows),a gain from the sale of equipment would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 75

Since firms must publish an income statement,why is a statement of cash flows also necessary?

Question 76

RLV Inc.issued $ 10,000 worth of stock.What section of statement of cash flows will include the cash inflow?

A)operating
B)investing
C)financing
D)not included in the statement of cash flows

Question 77

The beginning balance in accounts receivable is $ 8,000.Sales during the period equaled $ 15,000.The ending balance in accounts receivable equals $ 2,000.What was the cash received from customers?

A)$ 7,000
B)$ 8,000
C)$ 15,000
D)$ 21,000

Question 78

Using the indirect method (statement of cash flows),a decrease in interest receivable would:

A)be subtracted from net income
B)be added to net income
C)have no adjustment made to net income
D)be added to the investing section of the statement of cash flows

Question 79

The beginning balance in accounts receivable is $ 8,000.Sales during the period equaled $ 15,000.What was the cash received from customers?

A)$ 7,000
B)$ 8,000
C)$ 15,000
D)no answer can be developed

Question 80

What are the four primary purposes of the statement of cash flows?