Deck 21: Statement of Cash Flows

Question 1

The cash flow statement has all of the following sections except:

A)net cash flow from managing activities.
B)net cash flow from operating activities.
C)net cash flow from investing activities.
D)net cash flow from financing activities.

Answer 1

A

Question 2

The purpose of a cash flow statement is to show the inflows and outflows of cash.

Answer 2

True

Question 3

Transactions involving the purchase and sale of fixed assets would be considered:

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

Answer 3

D

Question 4

Discuss the purpose of a statement of cash flows,and describe its components.

Question 5

A cash outflow from a financing activity would be:

A)paying cash dividends.
B)buying debt and equity securities.
C)paying interest on notes payable.
D)making payments for additional inventory.

Question 6

According to GAAP,the statement of cash flows is an optional statement.

Question 7

The statement of cash flows provides information about all of the following except:

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

Question 8

When preparing the statement of cash flows by the indirect method,if current assets have increased the difference is:

A)added to net income.
B)added to investments.
C)deducted from net income.
D)subtracted from investments.

Question 9

The activity that is probably the most important indicator of financial health is the net cash flow from:

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

Question 10

A statement of cash flows:

A)has three main sections: net cash flow from operating,investing,and financing activities.
B)may be computed directly or indirectly.
C)is a statement used to better understand the financing and investing activities.
D)All of the above are correct.

Question 11

A statement of cash flow's purpose is to:

A)show the revenue earned.
B)show the profits that were generated.
C)show the expenses that were incurred.
D)show how cash was generated and used during an accounting period.

Question 12

The income statement shows the results of the operations of the business.

Question 13

If Accounts Receivable decreases on a comparative balance sheet,this means:

A)collections were more than sales.
B)credit sales are decreasing.
C)credit sales are increasing more than collections.
D)None of these answers are correct.

Question 14

If,on the comparative balance sheet,Accounts Payable has decreased,the amount of decrease would be:

A)added to net income on the statement of cash flows.
B)subtracted from net income on the statement of cash flows.
C)ignored because cash is not involved.
D)None of these answers are correct.

Question 15

If a company issues a comparative balance sheet showing the change in the cash balance,a statement of cash flows is not needed.

Question 16

Using the indirect method for cash flows,depreciation expense is added to net income to determine the:

A)cash flow from investing activities.
B)cash flow from financing activities.
C)cash flow from operating activities.
D)cash flow from fixed asset activities.

Question 17

The final cash amount on the statement of cash flows must match the cash balance shown on the balance sheet.

Question 18

An inflow of cash from investing activities would be:

A)the issuance of stock.
B)the sale of investment in equity securities.
C)interest received on loans.
D)the purchase of fixed assets.

Question 19

The difference between the direct and indirect method of computing the cash flow statement occurs in the:

A)financing activities section.
B)operating activities section.
C)investing activities section.
D)managing activities section.

Question 20

A statement of cash flows is helpful in:

A)evaluating.
B)comparing.
C)predicting future cash flows.
D)All of these answers are correct.

Question 21

When preparing the statement of cash flows by the indirect method,if accumulated depreciation increases the difference is:

A)added to net income.
B)added to investments.
C)deducted from net income.
D)not considered in the statement of cash flows using the indirect method.

Question 22

Which of the following would be included in the net cash flows from operating activities section of a cash flow statement using the indirect method?

A)Sales of plant,property and equipment
B)Making loans and paying out interest
C)Payment of interest and expenses
D)Issuing bonds and notes

Question 23

Carmen's Candies' Net Income was $40,000.Other accounts that changed included: Accounts Receivable decreased by $30,000; Merchandise Inventory increased by $20,000; Accounts Payable decreased by $4,000; and Salaries Payable increased by $1,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

A)$33,000.
B)$47,000.
C)$53,000.
D)$61,000.

Question 24

The records of Ashley Boutique showed Net Loss,$25,000; Depreciation Expense,$35,000; and increase in Supplies on Hand,$8,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

A)$18,000.
B)$ 2,000.
C)($18,000).
D)($2,000).

Question 25

In the statement of cash flows,which event would cause net income to be increased?

A)A decrease in Inventory
B)An increase in Prepaid Insurance
C)A decrease in Accounts Payable
D)An increase in Accounts Receivable

Question 26

Fidelity Furniture's Net Income was $25,000.Other accounts that changed included: Accounts Receivable decreased by $18,000; Merchandise Inventory increased by $7,000; Accounts Payable increased by $4,000; and Salaries Payable decreased by $3,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

A)$57,000.
B)$43,000.
C)$37,000.
D)$15,000.

Question 27

The net income reported on the income statement for the current year was $60,000.Depreciation recorded on fixed assets was $31,000.What is the cash flow from operations that would appear on a cash flow statement using the indirect method?

A)$29,000
B)$60,000
C)$31,000
D)$91,000

Question 28

Collins Corporation reported net income of $35,000; depreciation expenses of $20,000; an increase in Accounts Payable of $2,000; and an increase in Accounts Receivable of $3,000.Net cash flow from operating activities using the indirect method is:

A)$55,000.
B)$54,000.
C)$50,000.
D)$56,000.

Question 29

Which of the following items would be added to Net Income to compute Net Cash Flow from Operating Activities under the indirect method?

A)A decrease in Merchandise Inventory
B)A decrease in Accrued Payables
C)A decrease in Accounts Payable
D)An increase in Prepaid Insurance

Question 30

Smith Corporation reported net income of $54,000,depreciation expenses of $10,000,an increase in Accounts Payable of $3,000 and an increase in Accounts Receivable of $1,500.Under the indirect method,net cash flow from operating activities is:

A)$62,500.
B)$59,500.
C)$48,500.
D)$65,500.

Question 31

The records of Ashley Boutique showed Net Loss,$30,000; Depreciation Expense,$25,000; and increase in Supplies on Hand,$5,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

A)$15,000.
B)$20,000.
C)($10,000).
D)($15,000).

Question 32

Of the following,which has a positive effect on the computation of cash flow from operations using the indirect method?

A)Increase in Inventory
B)Decrease in Accounts Payable
C)Increase in Accounts Receivable
D)Decrease in Prepaid Insurance

Question 33

Accounts Receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year.Income reported on the income statement for the year was $300,000.The cash flow from operating activities on the cash flow statement using the indirect method is:

A)$300,000.
B)$330,000.
C)$270,000.
D)None of these answers are correct.

Question 34

Operating activities deal with which types of accounts?

A)Current liabilities and owner's equity
B)Current and intangible assets
C)Current assets and current liabilities
D)Current assets and owner's equity

Question 35

Which of the following,under the indirect method,is not a proper adjustment to net income to arrive at cash flow from operations?

A)Adding a decrease in inventory
B)Adding an increase in salaries payable
C)Deducting a increase in prepaid expense
D)All are proper adjustments to net income.

Question 36

Trundle Corporation reported net income of $40,000; depreciation expense of $1,000; sales of additional common shares of $25,000; and a decrease in Accounts Payable of $8,000.Net cash flow from operating activities using the indirect method is:

A)$41,000.
B)$32,000.
C)$33,000.
D)$58,000.

Question 37

Rick Corporation's Accounts Receivable decreased by $25,000 during the year.What is the adjustment to the cash flow statement when it is prepared by the indirect method?

A)Subtract the decrease from the net income in operating activities.
B)Add the decrease to the net income in operating activities.
C)Add the decrease in the investing activities section.
D)Subtract the decrease in the financing activities.

Question 38

Big Toy Corporation's records show profit of $30,000; depreciation expense of $10,000; and cash dividends declared and paid of $5,000.The amount of cash used in operating activities using the indirect method is:

A)$40,000.
B)$30,000.
C)$20,000.
D)$10,000.

Question 39

When comparing net cash provided by operating activities using the indirect versus direct method:

A)net cash is higher using the indirect method
B)net cash is lower using indirect method
C)there is no difference between the two methods
D)depreciation expense is used in the direct method.

Question 40

When preparing the statement of cash flows by the indirect method,if current liabilities increase the difference is:

A)added to net income.
B)added to investments.
C)deducted from net income.
D)subtracted from investments.

Question 41

Many accountants prefer which method of computing cash flow from operating activities?

A)Combination method
B)Direct method
C)Indirect method
D)Adjusting method

Question 42

Which of the following adjustments would be in error if made to net income when computing cash from operations using the indirect method?

A)Add an increase in Accounts Payable
B)Add Depreciation Expense
C)Add an increase in Accounts Receivable
D)None of the above

Question 43

The Accounts Payable balance has increased during the year.How would this event affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 44

The Accounts Payable balance has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 45

The balance of Supplies has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 46

Management has authorized the purchase of a large quantity of inventory for early December.The purchase will have credit terms of 2/10,n/30,they will authorize payment by the discount date.How will this decision affect the period's cash flows from operations-indirect method?

A)It will increase this period's cash flows from operations.
B)It will decrease this period's cash flows from operations.
C)It will not affect this period's cash flows from operations.
D)This does not affect cash flows from operations.

Question 47

Of the following,which has a negative effect on the computation of cash flow from operations using the indirect method?

A)Increase in Accounts Payable
B)Increase in Inventory
C)Increase in Notes Payable
D)Depreciation Expense

Question 48

When using the direct method to determine the net cash flows from operating activities,major categories would not include:

A)Cash received from customers.
B)Cash paid for salaries.
C)Cash paid for dividends.
D)Cash paid for inventory.

Question 49

Under the indirect method,net income is considered the primary source of cash from operating activities.

Question 50

Which is not a cash outflow from an operating activity?

A)Payment for interest on a loan
B)Payment to the government for taxes
C)Payment to buy merchandise inventory
D)Paying dividends to stockholders

Question 51

Cost of merchandise sold for the year was $850,000.Inventories were $60,000 and $90,000 at the beginning and end of the year,respectively.There were no changes in accounts payable from the beginning to the end of the year.Cash payment for merchandise to be reported on the cash flow statement using the direct method is:

A)$850,000.
B)$910,000.
C)$940,000.
D)$880,000.

Question 52

There was a utility bill received but not paid.How would this nonpayment affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively.
C)It would affect the operations section negatively.
D)Does not affect the cash flow from operations.

Question 53

The statement of cash flows can be used for evaluating,comparing,and predicting future cash flows.

Question 54

For a statement of cash flows to be produced,an accountant needs to compare changes in the related income statements.

Question 55

The method of reporting cash flows from operating activities under which revenues and expenses on the income statement are adjusted to reflect the amount of cash received or expended for each item is the:

A)direct method.
B)indirect method.
C)combination method.
D)adjustment method.

Question 56

The Accounts Receivable balance has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

A)It is already included in the net income.
B)It would affect the operations section positively
C)It would affect the operations section negatively
D)Does not affect the cash flow from operations

Question 57

An example of a noncash expense would be depreciation.

Question 58

Even though the cost of fuel oil is rising,management is considering using up the business's reserves and not ordering any more this period.How will this decision affect the period's cash flows from operations-indirect method?

A)It will increase this period's cash flows from operations.
B)It will decrease this period's cash flows from operations.
C)It will not affect this period's cash flows from operations.
D)This does not affect cash flows from operations.

Question 59

Operating expenses other than depreciation for the year were $335,000.Prepaid expenses decreased by $7,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

A)$335,000.
B)$342,000.
C)$328,000.
D)$7,000.

Question 60

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in:

A)the operating activities section.
B)the financing activities section.
C)the investing activities section.
D)None of the above.

Question 61

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 62

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 63

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 64

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 65

The cash flows from operating activities are reported by the direct method on the statement of cash flow.Determine the following:
a.If sales for the current year were $600,000 and accounts receivable decreased $25,500 during the year,what was the amount of cash received from customers?
b.If sales salaries expense for the current years was $80,000 and sales salaries payable increased $25,000 during the year,what was the amount of cash payments for sales salaries?

Question 66

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 67

Which would not go into the operating activities section of a statement of cash flows using the direct method?

A)Depreciation expense
B)Payment for dividends
C)Selling of plant,property and equipment
D)All of the above

Question 68

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 69

The direct method must be used to report cash flows from operating activities in the statement of cash flows.

Question 70

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 71

Which of the following is not a cash flow from investing activities?

A)Loaning cash to borrowers
B)Payment of cash dividends
C)Sale or purchase of land
D)Cash received from the sales of stock

Question 72

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 73

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 74

To determine cash received from customers for the cash flow statement using the direct method,a decrease in accounts receivable is added to sales.

Question 75

Depreciation is shown only when using the direct method of preparing a statement of cash flow.

Question 76

Under the direct method,each line of the income statement is converted to cash paid or received.

Question 77

Operating expenses other than depreciation for the year were $400,000.Accrued expenses payable increased by $35,000.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

A)$400,000.
B)$435,000.
C)$365,000.
D)$35,000.

Question 78

The cash flows from operating activities are reported by the direct method on the statement of cash flows.Determine the following:
a.If accrued expenses showed $50,000 on the income statement and payables increased from $15,000 to $18,500 on the balance sheet,what was the amount of cash paid?
b.If insurance expense showed $10,000 on the income statement and Prepaid Insurance increased from $10,000 to $12,000 on the balance sheet,what was the amount of cash paid for insurance?

Question 79

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.

Question 80

For each of the following items, indicate (by placing an X) whether the item would be found on the statement of cash flows in column 1, the direct approach for determining the cash flows from operating activities, column 2, the indirect approach for determining the cash flows from operating activities, column 3, cash flows from investing activities, column 4, cash flows from financing activities. If you identify that an item affects the cash flows from operation, indirect method, also indicate whether it will be increasing (+) or decreasing (-) the cash flows.