Deck 10: Statement of Cash Flows

Question 1

Which of the following should not be considered as part of "cash and cash equivalents"?

A)Cash on hand
B)Cash on deposit
C)Highly liquid investments
D)Investments in short-term securities (<90 day maturity)
E)Cash restricted for retirement of bonds

Answer 1

E

Question 2

The retirement of debt by the issuance of common stock should be presented in a statement of cash flows in which of the following sections?

A)Supplemental schedule of noncash investing and financing activities
B)Cash flows from operating activities
C)Cash flows from investing activities
D)Cash flows from financing activities
E)Supplemental schedule to reconcile net income to net cash provided by operations

Answer 2

A

Question 3

Which of the following accounts is not part of working capital?

A)Cash
B)Accounts receivable
C)Inventory
D)Accounts payable
E)Investments

Answer 3

E

Question 4

Francis Company had operating expenses of $20,000 and depreciation expenses of $4,000.Assuming no other transactions, what was the cash paid for operating expenses?

A)$24,000
B)$22,000
C)$16,000
D)$20,400
E)$23,000

Question 5

Which of the following is not a typical cash flow under financing activities?

A)Cash inflow from sale of equity securities
B)Cash inflow from sale of bonds
C)Cash outflow for payment of dividends
D)Cash outflow for loans to other entities
E)Cash outflow for payment of amounts borrowed

Question 6

Which of the following is not an item added back to income in the operations section of the statement of cash flows when using the indirect presentation?

A)Depreciation
B)Amortization of goodwill
C)Increase in deferred income taxes
D)Amortization of bond premium
E)Amortization of patents

Question 7

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

A)Cash inflow from receipt of loans
B)Cash inflow from sale of property, plant, and equipment
C)Cash outflow for payment of amounts borrowed
D)Cash outflow for loans to other entities
E)Cash outflow for purchase of property, plant, and equipment

Question 8

The statement of cash flows became a required statement in which year?

A)1995
B)1978
C)1971
D)1987
E)1993

Question 9

Management should not use the statement of cash flows for which of the following purposes?

A)To determine dividend policy
B)To determine cash flow from operations
C)To determine cash flow from investing activities
D)To determine cash flow from financing activities
E)To determine the balance in accounts receivable

Question 10

Which of the following transactions is not reflected in a statement of cash flows?

A)Sale of treasury stock
B)Declaration of a stock dividend
C)Purchase of foreign subsidiary with cash
D)Issuance of convertible bonds
E)Purchase of equipment with cash

Question 11

Conroy Company had sales of $50,000, increase in accounts payable of $4,000, decrease in accounts receivable of $3,000, tax expense of $5,000, and an increase in taxes payable of $1,000.What was the cash outflow for taxes?

A)$54,000
B)$4,000
C)$6,000
D)$53,000
E)$45,000

Question 12

Tim Company had sales of $30,000, increase in accounts payable of $5,000, decrease in accounts receivable of $1,000, increase in inventories of $4,000, and depreciation expense of $4,000.What was the cash collected from customers?

A)$31,000
B)$35,000
C)$34,000
D)$25,000
E)$26,000

Question 13

Amortization of patents can be added to income in the operations section of the statement of cash flows because:

A)it is not a tax deductible expense.
B)it results in an increase in income.
C)it does not require the outlay of cash.
D)patent amortization is not an expense.
E)it represents an inflow of cash.

Question 14

Which of the following accounts will not be considered when computing cash flow from operations?

A)Accounts receivable
B)Inventories
C)Equipment
D)Accounts payable
E)Taxes payable

Question 15

Which of the following is not a typical cash flow under operating activities?

A)Cash inflows from sale of goods or services
B)Cash inflows from interest
C)Cash outflows to employees
D)Cash outflows to suppliers
E)Cash inflows from sale of property, plant, and equipment

Question 16

Working capital is defined as:

A)total assets less intangible assets.
B)current assets divided by current liabilities.
C)current assets less current liabilities.
D)total assets less current assets.
E)current assets less liabilities.

Question 17

Which of the following is the focus for the statement of cash flows?

A)Cash
B)Cash and cash equivalents
C)Current assets
D)Working capital
E)None of the answers are correct.

Question 18

Which of the following is not a purpose of the statement of cash flows?

A)To show cash flow from operations
B)To show cash flow from financing activities
C)To show cash flow from investing activities
D)To show all investing and financing transactions
E)To show operating expenses for a period of time

Question 19

In a statement of cash flows (indirect method), depreciation expense should be presented as:

A)a cash flow from financing activities.
B)a cash flow from investing activities.
C)a deduction from net income.
D)an addition to net income.
E)a financial activity.

Question 20

The statement of cash flows is presented on a working capital basis.

Question 21

The operating cash flow/current maturities of long-term debt and current notes payable is a ratio that indicates long-term, debt-paying ability.

Question 22

Cash flow per share is usually higher than earnings per share.

Question 23

Sale of equipment for cash is an operating activity.

Question 24

The statement of cash flows should be reviewed for several time periods in order to determine the major sources of cash and the major uses of cash.

Question 25

Cash flow per share can be viewed as a substitute for earnings per share in terms of a firm's profitability.

Question 26

The conversion of long-term bonds into common stock is an example of a transaction involving two financing activities with no cash flow effect.

Question 27

Depreciation expense reduces operating income but does not require the use of cash.

Question 28

Payment of cash dividends is an operating activity.

Question 29

Within an individual account, there may be an explanation of both a source and a use of cash.

Question 30

Cash flow per share is a better indication of a firm's ability to make capital expenditure decisions and pay dividends than is earnings per share.

Question 31

A supporting schedule to the statement of cash flows may include noncash flow items.

Question 32

The income statement does not fairly represent the cash from operations.

Question 33

With the indirect method of presenting cash from operations, the income statement is essentially presented on a cash receipts and cash payments basis.

Question 34

The acquisition of land using notes payable is an example of a noncash transaction.

Question 35

Only cash flow transactions are presented in the statement of cash flows, including supporting schedules.

Question 36

Working capital is considered to be one of the prime indicators of liquidity.

Question 37

The purchase of equipment using cash is an investing activity.

Question 38

The operating cash flow/total debt ratio is one that indicates a firm's ability to meet its current maturities of debt.

Question 39

A cash outflow will be generated by an increase in a liability.