Deck 13: Statement of Cash Flows

Question 1

1-5 Cash equivalents include highly liquid investments that can be readily converted into cash.

Answer 1

True

Question 2

1-6 Operating activities include activities that affect long-term liabilities and owners' equity.

Answer 2

False

Question 3

1-20 Which of the following is included in the statement of cash flows? A)Total changes in retained earnings
B)Total changes in total liabilities
C)Total changes in cash from investing activities
D)Total changes in stockholder's equity

Answer 3

C

Question 4

1-7 The investing activities section of the statement of cash flows is the most important section.

Question 5

1-14 Which of the following financial statements reports an entity's cash receipts and cash payments during the period? A)The statement of cash flows
B)The statement of retained earnings
C)The balance sheet
D)The income statement

Question 6

1-13 For anything to be considered a "cash equivalent",the investment must be: A)convertible to cash within 5 years.
B)convertible to a known amount of cash.
C)convertible to cash without loss of value.
D)convertible to cash within 1 year.

Question 7

1-16 Which of the following statements about the information included on a statement of cash flows is TRUE? A)The statement of cash flows contains information about the business's ability to generate positive cash flows in future periods.
B)The statement of cash flows contains information about stock splits and stock dividends distributed by the company.
C)The statement of cash flows contains information about the business's percentage change in each item of revenue and expense.
D)The statement of cash flows contains information about the differences between net income and additions to retained earnings.

Question 8

1-19 Which of the following is an acceptable basis for the preparation of the statement of cash flows? A)The sum of cash,inventory,and money market accounts
B)The sum of cash and accounts receivable
C)The sum of cash and cash equivalents
D)Cash

Question 9

1-12 A statement of cash flows is generated to show: A)the revenues the company has earned.
B)the expenses the company incurred during the time period.
C)the inflow and outflow of cash during the time period.
D)how profits were generated.

Question 10

1-9 Investing activities include activities that affect the long-term asset section of the balance sheet.

Question 11

1-2 The statement of cash flows reports why cash increased or decreased during the period.

Question 12

1-1 The statement of cash flows reflects cash flows on a particular date.

Question 13

1-8 The financing activities section of the statement of cash flows includes paying dividends and paying off loans.

Question 14

1-18 Which of the following is a purpose for the statement of cash flows? A)To evaluate board of directors' decisions
B)To help predict management's future decisions
C)To determine the ability to pay dividends to stockholders and interest and principle to creditors
D)To report the earnings per share

Question 15

1-11 Which of the following is TRUE of the statement of cash flows? A)The statement of cash flows reports why cash increased or decreased during the period.
B)The statement of cash flows covers a span of time and is dated "Year Ended Month Day,Year".
C)The statement of cash flows shows where cash came from and how cash was spent.
D)All of the above are true of the statement of cash flows.

Question 16

1-10 Financing activities include activities that affect current assets and liabilities on the balance sheet.

Question 17

1-17 Which of the following is TRUE about a statement of cash flows? A)The statement of cash flows is prepared at the option of management.
B)The statement of cash flows is required by generally accepted accounting principles.
C)The statement of cash flows may be combined with the income statement.
D)The statement of cash flows does not have to be completed if an income statement is prepared.

Question 18

1-3 Investors and management use the statement of cash flows to evaluate a firm's profitability.

Question 19

1-15 Which of the following are created by operating activities? A)Revenues and expenses
B)An increase in common stock
C)An increase in long-term debt
D)Both A and B

Question 20

1-4 For purposes of the statement of cash flows,"cash" includes cash on hand,cash in the bank and cash equivalents.

Question 21

1-33 Which of the following sections from the statement of cash flows includes the issuance of stock and the payment of dividends? A)Investing section
B)Financing section
C)Operating section.
D)None of the above

Question 22

1-26 Which of the following sections from the statement of cash flows includes activities that create revenue,expenses,gains and losses? A)Investing section
B)Financing section
C)Operating section
D)None of the above

Question 23

1-21 Which of the following is TRUE if a corporation shows a net loss on its income statement? A)The company may still have a net increase in cash.
B)The company will not be able to sell stock.
C)The company will not be able to pay dividends.
D)The company may still have an increase in retained earnings.

Question 24

1-24 Which of the following are the three major categories included on the statement of cash flows? A)Investing,operating and financing activities
B)Investing,capital and financing activities
C)Investing,operating and capital activities
D)Financial,operating and capital activities

Question 25

1-40 Paying cash dividends would be: A)a cash outflow from financing.
B)a cash outflow from operations.
C)a cash outflow from investing.
D)none of the above.

Question 26

1-36 Which of the following sections from the statement of cash flows would include the purchase of a building totally financed by a mortgage? A)Investing section
B)Operating section
C)Financing section
D)None of the above

Question 27

1-28 Which of the following sections from the statement of cash flows includes activities that affect current assets and current liabilities on the balance sheet? A)Investing section
B)Financing section
C)Operating section
D)None of the above

Question 28

1-31 Which of the following sections from the statement of cash flows includes purchases and sales of long- term assets? A)Financing section
B)Operating section
C)Investing section
D)None of the above

Question 29

1-39 Which of the following sections from the statement of cash flows would include the payment of a note payable by issuing common stock? A)Investing section
B)Financing section
C)Operating section
D)None of the above

Question 30

1-32 Which of the following sections from the statement of cash flows includes activities that increase and decrease long-term liabilities and owners' equity? A)Financing section
B)Operating section
C)Investing section
D)None of the above

Question 31

1-38 Which of the following sections from the statement of cash flows includes loans to others and collections on loans? A)Financing section
B)Investing section
C)Operating section
D)None of the above

Question 32

1-27 Which of the following sections from the statement of cash flows includes activities that affect net income on the income statement? A)Financing section
B)Operating section
C)Investing section
D)None of the above

Question 33

1-30 Which of the following sections from the statement of cash flows includes activities that increase and decrease long-term assets? A)Financing section
B)Operating section
C)Investing section
D)None of the above

Question 34

1-22 Which of the following descriptions DO apply to cash equivalents? A)Cash equivalents' values change because of interest rate changes.
B)Cash equivalents are invested in fixed assets.
C)Cash equivalents are long-term.
D)Cash equivalents are highly liquid.

Question 35

1-34 Which of the following sections from the statement of cash flows includes the purchase and sale of treasury stock? A)Financing section
B)Operating section
C)Investing section
D)None of the above

Question 36

1-29 Which of the following sections from the statement of cash flows is the most important section because it reflects the day-to-day operations that determine the future of an organization? A)The financing section
B)The operating section
C)The investing section
D)None of the above

Question 37

1-23 Which of the following is the correct order of the sections on a statement of cash flows? A)Operating,financing,investing
B)Financing,investing,operating
C)Investing,operating,financing
D)Operating,investing,financing

Question 38

1-25 Which of the following are the activities that are included in the operating activities section of the statement of cash flows? A)Activities that obtain the cash needed to launch and sustain the business
B)Activities that create revenue or expenses in the entity's major line of business
C)Activities that increase or decrease long-term assets
D)None of the above

Question 39

1-35 Which of the following sections from the statement of cash flows includes borrowing money and paying off loans? A)Investing section
B)Operating section
C)Financing section
D)None of the above

Question 40

1-37 Which of the following sections from the statement of cash flows would include the acquisition of a building by issuing common stock? A)Investing section
B)Financing section
C)Operating section
D)None of the above

Question 41

1-51 Creditor and stockholder transactions are considered ___________ activities. A)planning
B)financing
C)operating
D)investing

Question 42

1-46 An outflow of cash from an investing activity would be: A)purchasing treasury stock.
B)issuing notes payable.
C)paying cash dividends to stockholders.
D)making loans to third parties.

Question 43

1-60 Which of the following are the activities that are included in the financing activities section of the statement of cash flows? A)Activities that obtain the cash needed to launch and sustain the business
B)Activities that increase or decrease long-term assets
C)Activities that create revenue or expenses in the entity's major line of business
D)None of the above

Question 44

1-54 Which of the following sections from the statement of cash flows would include the issuance of a stock dividend? A)Operating section
B)Financing section
C)Investing section
D)None of the above

Question 45

1-49 A payment of interest on a loan would be considered a: A)cash outflow from operating activities.
B)cash outflow from investing activities.
C)cash outflow from financing activities.
D)cash outflow from depreciation.

Question 46

1-53 Which of the following are the activities that are included in the investing activities section of the statement of cash flows? A)Activities that increase or decrease long-term assets
B)Activities that obtain the cash needed to launch and sustain the business
C)Activities that create revenue or expenses in the entity's major line of business
D)None of the above

Question 47

1-45 Of the following,which is NOT a cash inflow from a financing activity? A)Additional owner investment
B)Issuance of stock
C)Interest revenue on loans
D)Mortgage proceeds

Question 48

1-48 Which of the following is NOT a cash outflow from an operating activity? A)Payment of interest on a loan
B)Payment for purchasing inventory
C)Owner withdrawal from the company
D)Payments to the government for taxes

Question 49

1-50 Cash received from selling merchandise would be considered a: A)cash inflow from investing activities.
B)cash inflow from operating activities.
C)cash inflow from financing activities.
D)cash outflow from operating activities.

Question 50

1-42 Buying and selling property,plant and equipment would be considered in: A)the operating portion of the statement of cash flows.
B)the investing portion of the statement of cash flows.
C)the financing portion of the statement of cash flows.
D)none of the above portions of the statement of cash flows.

Question 51

1-47 Money borrowed for a mortgage would be a(n)__________activity. A)operating
B)investing
C)financing
D)non-cash

Question 52

1-43 Of the following,which is NOT a cash outflow from an investing activity? A)Purchase of equity securities
B)Loans made to another party
C)Purchase of treasury stock
D)Purchase of commercial real estate

Question 53

1-41 Issuing preferred stock to stockholders would be a: A)cash inflow from investing.
B)cash inflow from operations.
C)cash inflow from financing.
D)cash inflow from depreciation.

Question 54

1-44 Of the following,which is the primary source of cash over the life of a business? A)Operating activities
B)Financing activities
C)Investing activities
D)None of the above

Question 55

1-59 Where are noncash investing and financing activities reported? A)The financing activities section of the statement of cash flows
B)The investing activities section of the statement of cash flows
C)A schedule accompanying the statement of cash flows
D)In both A and B

Question 56

1-52 A loss of $35,000 from the sale of equipment would be included in which of the activities sections of the statement of cash flows? A)Operating
B)Investing
C)Financing
D)Would not be on the statement of cash flows

Question 57

1-55 Which of the following would be considered an operating activity on the statement of cash flows? A)Dividends paid to stockholders
B)The sale of inventory
C)Gain on sale of short-term investments
D)The receipt of stock dividends from investment stock

Question 58

1-56 Which of the following items would be reported as an operating activity on the statement of cash flows? A)A purchase of treasury stock
B)A payment of dividends
C)An issuance of stock
D)A payment of interest

Question 59

1-57 Which of the following would be considered an investing activity on the statement of cash flows? A)A sale of land
B)A purchase of treasury stock
C)Depreciation of equipment
D)A sale of inventory

Question 60

1-58 Which of the following items would be reported in the financing activities section on the statement of cash flows? A)Cash paid for interest
B)Cash received from customers
C)Cash paid for operating expenses
D)Cash received from a sale of treasury stock

Question 61

2-9 A company uses the indirect method to prepare the statement of cash flows.Which of the following items would be subtracted from net income in determining the net cash flow from operating activities? A)Amortization of a premium on bonds payable would be subtracted from net income.
B)An increase in dividends payable would be subtracted from net income.
C)A loss on the sale of equipment would be subtracted from net income.
D)Depreciation expense would be subtracted from net income.

Question 62

2-4 When a company uses the indirect method to present the statement of cash flows,an increase in a current liability must be subtracted from net income to reconcile to net cash provided by operating activities.

Question 63

List three ways that owners and investors use the statement of cash flows.

Question 64

2-10 A company uses the indirect method to prepare the statement of cash flows.How will the adjustment to reflect the amount of cash payments to employees be presented on the statement? A)The adjustment will be for the increase or decrease in accrued expenses for the period and will adjust net income in the operating activities section.
B)The adjustment will be for the increase or decrease in accounts receivable for the period and will adjust net income in the operating activities section.
C)The adjustment will be for the increase or decrease in inventory for the period and will adjust net income in the operating activities section.
D)The adjustment will be for the increase or decrease in accounts payable for the period and will adjust net income in the operating activities section.

Question 65

2-16 To prepare the statement of cash flows,you need the: A)accounts payable ledger.
B)accounts receivable ledger.
C)general journal.
D)balance sheet from the beginning and ending of the period.

Question 66

2-11 A company uses the indirect method to prepare the statement of cash flows.How will the adjustment to reflect the amount of cash paid for interest be presented on the statement? A)The adjustment will be for the increase or decrease in accounts receivable for the period and will adjust net income in the operating activities section.
B)The adjustment will be for the increase or decrease in inventory for the period and will adjust net income in the operating activities section.
C)The adjustment will be for the increase or decrease in accrued expenses for the period and will adjust net income in the operating activities section.
D)The adjustment will be for the increase or decrease in accounts payable for the period and will adjust net income in the operating activities section.

Question 67

2-8 A company uses the indirect method to prepare the statement of cash flows.Which of the following items would be added to net income in determining the net cash flow from operating activities? A)A decrease in accounts receivable would be added to net income.
B)An increase in inventory would be added to net income.
C)A decrease in accounts payable would be added to net income.
D)An increase in preferred dividends payable would be added to net income.

Question 68

2-12 A company uses the indirect method to prepare the statement of cash flows.How will the adjustment to reflect the amount of cash payments to suppliers be presented on the statement? A)The adjustment will be for the increase or decrease in accounts payable for the period and will adjust net income in the operating activities section.
B)The adjustment will be for the increase or decrease in inventory for the period and will adjust net income in the operating activities section.
C)The adjustment will be for the increase or decrease in accrued expenses for the period and will adjust net income in the operating activities section.
D)The adjustment will be for the increase or decrease in accounts receivable for the period and will adjust net income in the operating activities section.

Question 69

2-3 When a company uses the indirect method to present the statement of cash flows,a gain on the sale of a long-term asset must be subtracted from net income to reconcile to net cash provided by operating activities.

Question 70

2-14 The balance in the ___________ can be used to check the accuracy of the statement of cash flows. A)asset and liability accounts
B)liability accounts
C)asset accounts
D)cash and cash equivalent accounts

Question 71

2-17 Operating activities resulting from the sales of goods and services relate to: A)retained earnings reported on the balance sheet.
B)assets and liabilities reported on the balance sheet.
C)net income on the retained earnings statement.
D)the income statement.

Question 72

2-15 Computing cash generated from operating activities is: A)the same for both the direct and indirect methods.
B)different in that the direct method considers depreciation.
C)different in that the indirect method considers depreciation.
D)none of the above.

Question 73

2-7 A company uses the indirect method to prepare the statement of cash flows.How will a loss from the sale of equipment be presented on the statement? A)A loss from the sale of equipment will be an addition in the financing activities section.
B)A loss from the sale of equipment will be added to net income in the operating activities section.
C)A loss from the sale of equipment will be deducted from net income in the operating activities section.
D)A loss from the sale of equipment will be an addition in the investing activities section.

Question 74

2-5 When a company uses the indirect method to present the statement of cash flows,cash received from the sale of a long-term asset increases the amount of net cash provided by investing activities.

Question 75

2-18 Which of the following would NOT be done when calculating the change in cash from operating activities under the indirect method? A)Add an increase in accrued interest payable
B)Deduct the purchase of equipment
C)Add a decrease in merchandise inventory
D)Deduct a decrease in accounts payable

Question 76

2-1 The indirect method of presenting the investing activities section of the statement of cash flow reconciles net income to net cash provided by investing activities.

Question 77

2-19 Which is NOT reported as an operating activity on a cash flow statement? A)Proceeds from the sale of equipment
B)Interest revenue
C)Interest expense
D)Dividend revenue

Question 78

2-2 When a company uses the indirect method to present the statement of cash flows,depreciation expense must be added to net income to reconcile to net cash provided by operating activities.

Question 79

2-13 A company uses the indirect method to prepare the statement of cash flows.How will the adjustment to reflect the amount of cash received from customers be presented on the statement? A)The adjustment will be for the increase or decrease in accounts receivable for the period and will adjust net income in the operating activities section.
B)The adjustment will be for the increase or decrease in accounts payable for the period and will adjust net income in the operating activities section.
C)The adjustment will be for the increase or decrease in accrued expenses for the period and will adjust net income in the operating activities section.
D)The adjustment will be for the increase or decrease in inventory for the period and will adjust net income in the operating activities section.

Question 80

2-6 A company uses the indirect method to prepare the statement of cash flows.How will depreciation be presented on the statement? A)Depreciation expense will be added to net income in the financing activities section.
B)Depreciation expense will be subtracted from net income in the operating section.
C)Depreciation expense will be added to net income in the operating activities section.
D)Depreciation expense will be added to net income in the investing activities section.