Question 1

The proceeds from the disposal of property, plant and equipment are reported on the statement of cash flows as cash used by investing activities.

Accepted Answer

A) True 
 B)False

Question 2

Bad debts expense is an item that does not provide or use cash.

Accepted Answer

A) True 
 B)False

Question 3

Conversion of preferred shares to common shares is disclosed in the financing section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 4

A gain on the disposal of a non-current asset:

Accepted Answer

A)  Involves cash inflows. 
B)  Is the result of an investing activity. 
C)  Does not reflect any cash flow. 
D)  Does not reflect any cash flow and is the result of an investing activity. 
E)  Involves cash outflows.

Question 5

The appropriate statement of cash flow activity category for the issuance of common shares for cash is:

Accepted Answer

A)  Operating. 
B)  Financing. 
C)  Investing. 
D)  Schedule of noncash investing or financing activity. 
E)  Not reported on the statement of cash flows.

Question 6

Dispositions of non-current assets:

Accepted Answer

A)  Are investing activities. 
B)  Are investing activities and can involve cash inflows. 
C)  Can involve cash inflows. 
D)  Have no impact on cash flows. 
E)  Have no impact on cash flows and are investing activities.

Question 7

Cash dividends and interest received can only be considered cash inflows from investing activities.

Accepted Answer

A) True 
 B)False

Question 8

A machine with a cost of $190,000 and accumulated depreciation of $95,000 was sold for $50,000 cash. The amount that should be reported as a source of cash under cashflows from investing activities is:

Accepted Answer

A)  $80,000. 
B)  $50,000. 
C)  $120,000. 
D)  $45,000. 
E)  $35,000.

Question 9

A loss on the disposal of a non-current asset:

Accepted Answer

A)  Involves cash inflows. 
B)  Involves cash outflows. 
C)  Does not reflect any cash flow and is the result of an investing activity. 
D)  Does not reflect any cash flow. 
E)  Is the result of an investing activity.

Question 10

Investing activities include:

Accepted Answer

A)  Sale of non-current assets. 
B)  Purchase of non-current assets. 
C)  Lending and collecting on notes receivable. 
D)  Sale of equity investments. 
E)  All of these answers are correct.

Question 11

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000. The cash received from the sale was $40,000.

Accepted Answer

A) True 
 B)False

Question 12

The indirect method for preparation of the operating activities section of the statement of cash flows involves adjustments:

Accepted Answer

A)  For income statement items involving operating activities that do not affect cash inflows or outflows. 
B)  For income statement items involving operating activities that do not affect cash inflows or outflows and for changes in noncash current assets and current liabilities. 
C)  To eliminate gains and losses resulting from investing and financing activities. 
D)  For changes in noncash current assets and current liabilities. 
E)  All of these answers are correct.

Question 13

Use the indirect method to calculate the net cash provided or used) by operating activities based on the following information:

Accepted Answer

A)  $58,000. 
B)  $45,700. 
C)  $43,200. 
D)  $35,000. 
E)  $50,000.

Question 14

The full disclosure principle requires that noncash investing and financing activities be disclosed in a separate schedule attached to the statement of cash flows, or in theaccompanying notes.

Accepted Answer

A) True 
 B)False

Question 15

A noncash purchase of land is reported in the investing section of the statement of cash flows as a separate line item.

Accepted Answer

A) True 
 B)False

Question 16

The accounting principle which requires that noncash financing and investing activities are reported on the statement of cash flows is the principle of:

Accepted Answer

A)  Materiality. 
B)  Going concern. 
C)  Historical cost. 
D)  Full disclosure. 
E)  Business entity.

Question 17

Cash outflows to repurchase shares is an example of a cash flow from a financing activity.

Accepted Answer

A) True 
 B)False

Question 18

Financing activities include receiving dividends from investments in other companies.

Accepted Answer

A) True 
 B)False

Question 19

The three-step process in determining net cash inflows outflows) from investing activities are: 1) identify changes in investing-related accounts; 2) explain these changes using reconstruction analysis; 3) report cash flow effects.

Accepted Answer

A) True 
 B)False

Question 20

Information to prepare the statement of cash flows usually comes from a) comparative balance sheets, b) current income statements, and c) additional information.

Accepted Answer

A) True 
 B)False

Exam 16: Reporting and Analyzing Cash Flows

The proceeds from the disposal of property, plant and equipment are reported on the statement of cash flows as cash used by investing activities.

Bad debts expense is an item that does not provide or use cash.

Conversion of preferred shares to common shares is disclosed in the financing section of the statement of cash flows.

A gain on the disposal of a non-current asset:

The appropriate statement of cash flow activity category for the issuance of common shares for cash is:

Dispositions of non-current assets:

Cash dividends and interest received can only be considered cash inflows from investing activities.

A machine with a cost of $190,000 and accumulated depreciation of $95,000 was sold for $50,000 cash. The amount that should be reported as a source of cash under cashflows from investing activities is:

A loss on the disposal of a non-current asset:

Investing activities include:

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000. The cash received from the sale was $40,000.

The indirect method for preparation of the operating activities section of the statement of cash flows involves adjustments:

Use the indirect method to calculate the net cash provided or used) by operating activities based on the following information:

The full disclosure principle requires that noncash investing and financing activities be disclosed in a separate schedule attached to the statement of cash flows, or in theaccompanying notes.

A noncash purchase of land is reported in the investing section of the statement of cash flows as a separate line item.

The accounting principle which requires that noncash financing and investing activities are reported on the statement of cash flows is the principle of:

Cash outflows to repurchase shares is an example of a cash flow from a financing activity.

Financing activities include receiving dividends from investments in other companies.

The three-step process in determining net cash inflows outflows) from investing activities are: 1) identify changes in investing-related accounts; 2) explain these changes using reconstruction analysis; 3) report cash flow effects.

Information to prepare the statement of cash flows usually comes from a) comparative balance sheets, b) current income statements, and c) additional information.