Deck 16: Statement of Cash Flows Construction

Question 1

Which of the following transactions is not included in financing activities in the statement of cash flows?

A) Receipt of repayment of loans and advances.
B) Proceeds from issuing shares.
C) Repayment of shares.
D) Repayment of debts.

Answer 1

A

Question 2

Which of the following equations is correct?

A) Purchases + Change in inventory (ending - beginning)= Cost of merchandise sold
B) Purchases = Change in inventory (ending - beginning)+ Cost of merchandise sold
C) Purchases = Change in inventory (ending - beginning)- Cost of merchandise sold
D) Purchases = Change in inventory (ending - beginning)/Cost of merchandise sold

Answer 2

B

Question 3

Given the following data:
What is the amount of the cash flow from investing activities?

A) -180
B) 59
C) 10
D) -111

Answer 3

D

Question 4

The indirect method calculates the net cash flow from operating activities by adjusting net profit or loss for the effects of:

A) Changes during the period in inventories and operating receivables and payables.
B) Non-cash items such as depreciation,provisions,deferred taxes.
C) All other items included in the net income for which the cash effects are investing or financing cash flows.
D) All of these

Question 5

Which of the following items is (are)difficult to classify clearly in one of the three sections of the statement of cash flows?

A) Interest paid
B) Dividends paid
C) Taxes paid
D) All of these

Question 6

The cash flows from operating activities are different under the direct method and the indirect method.

Question 7

Which of the following transactions is not included in investing activities in the statement of cash flows?

A) Receipt of repayment of loans and advances.
B) Purchase of fixed assets.
C) Loans and advances made.
D) Repayment of debts.

Question 8

Past cash flows aid users of the financial statements in:

A) Predicting future cash flows.
B) Evaluating the way management generates and uses cash.
C) Determining a company's ability to pay interest and dividends and to pay debts when they are due.
D) All of these.

Question 9

Which of the following transactions is not included in the operating activities in the statement of cash flows?

A) Sale of goods
B) Sale of fixed assets
C) Purchase of goods
D) Salaries and social expenses

Question 10

Activities that involve obtaining resources as a borrower or issuer of shares and repaying creditors and shareholders are included in which section of the statement of cash flows?

A) Operating activities
B) Investing activities
C) Financing activities
D) Managing activities

Question 11

Which of the following equations is not correct?

A) Potential cash flow = Net income - Non-cash revenues + Non-cash expenses
B) Potential cash flow = Cash revenues - Cash expenses
C) Potential cash flow = Net income + Non-cash revenues - Non-cash expenses
D) Cash flows from operating activities = Net income + Depreciation expense + Amortization expense + Depletion expense + Provision expense - Reversal of provision - Gain on sale of fixed assets + Loss on sale of fixed assets +/- Changes in inventories,receivables,and payables

Question 12

Which of the following transactions decreases cash?

A) Charging depreciation.
B) Accruing taxes.
C) Purchasing equipment for cash.
D) Purchasing goods on credit.

Question 13

To which type of activities in the statement of cash flows does the following definition correspond: 'these cash flows represent the extent to which expenditures have been made for resources intended to generate future income and cash flows'?

A) Operating activities
B) Investing activities
C) Financing activities
D) Managing activities

Question 14

Which financial statement provides a dynamic view of the changes in the cash position?

A) Statement of financial position/Balance sheet
B) Income statement
C) Statement of cash flows
D) Statement of changes in equity

Question 15

For which of the following reason(s)do entities need cash,however different their principal revenue-producing activities might be?

A) To conduct their operations.
B) To pay their obligations.
C) To provide returns to their investors.
D) All of these

Question 16

Which of the following equations is correct?

A) Income statement items + Increase in related receivables + Decrease in related receivables - Increase in related liabilities - Decrease in related liabilities = Cash flow
B) Income statement items - Increase in related receivables + Decrease in related receivables + Increase in related liabilities - Decrease in related liabilities = Cash flow
C) Income statement items - Increase in related receivables - Decrease in related receivables + Increase in related liabilities + Decrease in related liabilities = Cash flow
D) Income statement items + Increase in related receivables - Decrease in related receivables - Increase in related liabilities + Decrease in related liabilities = Cash flow

Question 17

The majority of activities or transactions that affect the income statement are included in which section of the statement of cash flows?

A) Operating activities
B) Investing activities
C) Financing activities
D) Managing activities

Question 18

According to IAS 7,an entity shall prepare a statement of cash flows as an integral part of its financial statements for each period for which financial statements are presented.

Question 19

Which of the following statements is not correct?

A) The direct method presents receipt and payment flows separately for each category of operating activities: selling,purchasing,securing employees labor,etc.
B) The direct method provides information which may be useful in estimating future cash flows and which is not available under the indirect method but is difficult to implement.
C) The vast majority of businesses report cash flows from operating activities using the indirect method.
D) Most standards recommend the indirect method while allowing the direct method.

Question 20

Which of the following equations is correct?

A) Purchases + Change in accounts payable = Cash paid out for purchases
B) Purchases = Change in accounts payable + Cash paid out for purchases
C) Purchases + Cash paid out for purchases = Change in accounts payable
D) Purchases + Cost of merchandise sold + Change in inventory = 0

Question 21

Which of the following transactions has a direct impact on current cash flows?

A) The acquisition of assets either by assuming directly related liabilities or by means of a finance lease.
B) The acquisition of an entity exclusively by means of an equity issue.
C) The acquisition of equipment for cash.
D) The conversion of debt to equity.