Deck 22: Statement of Cash Flows

Question 1

The primary purpose of the statement of cash flows is to provide information

A)about an entity's operating, investing, and financing activities during a period.
B)that is useful in assessing cash flow prospects.
C)about an entity's cash receipts and cash payments during a period.
D)about an entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.

Answer 1

C

Question 2

A fire damaged Francisco Corp.'s office building.The company received $600,000 as a settlement from their insurance company, which was $180,000 less than the book value of the building.Their income tax rate is 25%.On the statement of cash flows (indirect method), the receipt from the insurance company should

A)be shown as an addition to net income of $420,000.
B)be shown as an inflow from investing activities of $420,000.
C)be shown as an inflow from investing activities of $600,000.
D)be shown as an inflow from investing activities of $450,000.

Answer 2

C

Question 3

Oyster Corp.reports its income from investments by the equity method and recognized income of $25,000 from its investment in Pearl Ltd.during the current year, even though no dividends were declared or paid by Pearl during the year.On Oyster's statement of cash flows (indirect method), the $25,000 should

A)not be shown.
B)be shown as cash inflow from investing activities.
C)be shown as cash outflow from financing activities.
D)be shown as a deduction from net income in the cash flows from operating activities section.

Answer 3

D

Question 4

The information in a statement of cash flows enables stakeholders to assess the

A)amounts, timing and certainty of future cash flows.
B)liquidity and solvency of an entity.
C)change in working capital during the period.
D)reason(s)for the difference between net income and cash flows from financing activities.

Question 5

Cash equivalents include

A)treasury bills, equity investments and long-term bonds.
B)non-equity investments with short maturities and bank overdrafts repayable on demand.
C)treasury bills, commercial paper and all equity investments.
D)treasury bills, commercial paper, and money market funds purchased with excess cash.

Question 6

When preparing a statement of cash flows, a decrease in accounts receivable during a period would cause which one of the following adjustments in calculating cash flows from operating activities?

Question 7

Which of the following is NOT a significant non-cash transaction?

A)capital (finance)lease obligations
B)conversion of preferred shares to common shares
C)exchange of non-monetary assets
D)purchasing a building with a 10% cash down payment and mortgaging the balance

Question 8

A successful company's major source of cash should be

A)operating activities.
B)investing activities.
C)financing activities.
D)both operating activities and investing activities.

Question 9

A statement of cash flows generally would NOT include the effects of

A)common shares issued at an amount greater than par value.
B)the purchase of treasury shares.
C)cash dividends paid.
D)stock dividends declared and issued.

Question 10

Use the following information for questions.
Duncan Corp.purchased a building, paying part of the purchase price in cash and issuing a mortgage note payable to the seller for the balance.
In a statement of cash flows, what amount is included in financing activities for the above transaction?

A)the cash payment
B)the full purchase price
C)zero (but disclosed in the notes)
D)the amount mortgaged

Question 11

When preparing a statement of cash flows using the direct method, a net loss reported on the income statement will

A)automatically result in a cash outflow from operating activities.
B)be included in financing activities.
C)be disclosed as a note to the statement of cash flows.
D)not be included on the statement at all.

Question 12

In a statement of cash flows, which of the following would be reported in the cash flows from investing activities section?

A)issuance of common shares in exchange for a factory building
B)stock dividends received
C)development costs incurred (intangible asset)
D)declaration of cash dividends

Question 13

When preparing a statement of cash flows (indirect method), which of the following is NOT an adjustment to reconcile net income to cash flows from operating activities?

A)an increase in prepaid expenses
B)an increase in bonds payable
C)a decrease in income taxes payable
D)depreciation expense

Question 14

Using the indirect method, an increase in inventory would be reported in a statement of cash flows as a(n)

A)addition to net income in calculating cash flows from operating activities.
B)deduction from net income in calculating cash flows from operating activities.
C)cash flow from investing activities.
D)cash flow from financing activities.

Question 15

An analysis of the machinery accounts of Polonius Ltd.during 2017 follows: The information concerning Polonius's machinery accounts should be shown in their statement of cash flows (indirect method)for the year ended December 31, 2017, as a(n)

A)subtraction from net income of $100,000 and a $200,000 decrease in cash flows from financing activities.
B)addition to net income of $100,000 and a $200,000 decrease in cash flows from investing activities.
C)$100,000 increase in cash flows from financing activities.
D)$200,000 decrease in cash flows from investing activities.

Question 16

On a statement of cash flows, additional cash invested by a sole proprietor would be disclosed in

A)operating activities.
B)investing activities.
C)financing activities.
D)both operating and financing activities.

Question 17

Use the following information for questions.
Duncan Corp.purchased a building, paying part of the purchase price in cash and issuing a mortgage note payable to the seller for the balance.
In a statement of cash flows, what amount is included in investing activities for the above transaction?

A)the cash payment
B)the full purchase price
C)zero (but disclosed in the notes)
D)the amount mortgaged

Question 18

When preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to net income because

A)cash was increased while cost of goods sold was decreased.
B)acquisition of inventory is an investment activity.
C)inventory purchased during the period was less than inventory sold, resulting in a net cash increase.
D)cost of goods sold on an accrual basis is lower than on a cash basis.

Question 19

In calculating cash flows from operating activities, a decrease in accounts payable during a period

A)means that accrual basis income is less than cash basis income.
B)requires an addition to net income under the indirect method.
C)requires an increase to cost of goods sold under the direct method.
D)requires a decrease to cost of goods sold under the direct method.

Question 20

The statement of cash flows is required to be included

A)only for financial statements prepared under IFRS.
B)only for financial statements prepared under ASPE.
C)for both financial statements prepared under IFRS and under ASPE.
D)for financial statements prepared under IFRS, but is optional under ASPE.

Question 21

Macduff Ltd.'s prepaid insurance balance was $10,000 at December 31, 2017 and $5,000 at December 31, 2016.Insurance expense was $4,000 for 2017 and $3,000 for 2016.How much cash paid for insurance would be reported in Macduff's 2017 statement of cash flows prepared using the direct method?

A)$11,000
B)$9,000
C)$6,000
D)$4,000

Question 22

Free cash flow is

A)the cash flows from operating activities reported on the statement of cash flows.
B)the discretionary cash that an entity has available for increasing capacity, acquiring new investments, paying dividends, and retiring debt.
C)the discretionary cash that an entity has available for increasing capacity, selling off investments, paying dividends, and incurring new debt.
D)the cash flows from operating activities reported on the statement of cash flows increased by the capital expenditures that are needed to sustain the current level of operations.

Question 23

Use the following information for questions.
Oswald Ltd.has recently decided to go public and has hired you as their independent accountant.They wish to adhere to IFRS and know that they must prepare a statement of cash flows.Their financial statements for 2017 and 2016 are provided below: The following additional data were provided for calendar 2017:
On a statement of cash flows for calendar 2017, the cash received from customers is

A)$1,068,000.
B)$1,055,000.
C)$1,050,000.
D)$1,032,000.

Question 24

Edmund Corp.reported net income for calendar 2017 of $300,000.Additional information follows: Based on the above information, the cash provided by operating activities (indirect method)for calendar 2017 is

A)$565,000.
B)$590,000.
C)$605,000.
D)$630,000.

Question 25

Selected information from Regan Ltd.'s 2017 accounting records is as follows: Based on the above information, the cash provided by investing activities for calendar 2017 is

A)$20,000.
B)$200,000.
C)$320,000.
D)$400,000.

Question 26

During 2017, Danish Corp., which uses the allowance method of accounting for doubtful accounts, recorded bad debts expense of $10,000.As well, the corporation wrote off uncollectible accounts receivable of $4,000.As a result of these transactions, their cash flows from operating activities would be calculated (indirect method)by adjusting net income with a

A)$10,000 increase.
B)$4,000 increase.
C)$6,000 increase.
D)$6,000 decrease.

Question 27

When preparing a statement of cash flows, an increase in accounts payable during a period would require which of the following adjustments in determining cash flows from operating activities?

Question 28

Use the following information for questions.
Marcellus Corp.provided the following information for calendar 2017: Marcellus adheres to ASPE.
The cash provided by (used in)investing activities during 2017 is

A)$40,000.
B)$(240,000).
C)$(400,000).
D)$(440,000).

Question 29

Use the following information for questions.
Malcolm Corp.'s statements of financial position at December 31, 2017 and 2016 and information relating to 2017 activities are presented below: Other information relating to 2017 activities:
The cash used in investing activities in 2017 was

A)$580,000.
B)$455,000.
C)$430,000.
D)$420,000.

Question 30

Horatio Corp.sold some of its plant assets during calendar 2017 for $21,000 cash.The original cost of the assets was $150,000, and the accumulated depreciation to the date of sale was $140,000.This transaction should be shown on Horatio's 2017 statement of cash flows (indirect method)as a(n)

A)deduction from net income of $11,000 and a $10,000 cash inflow from financing activities.
B)addition to net income of $11,000 and a $21,000 cash inflow from investing activities.
C)deduction from net income of $11,000 and a $21,000 cash inflow from investing activities.
D)addition to net income of $21,000.

Question 31

Use the following information for questions.
The statements of financial position for King Lear Corp.at the end of 2017 and 2016 are as follows During 2017, land was acquired in exchange for common shares (which had a market value of $150,000 at the time).All equipment purchased was for cash.Equipment costing $15,000 was sold for $6,000 cash; book value of the equipment at the time of sale was $12,000, and the loss was included in net income.Cash dividends of $30,000 were declared and paid during the year.King adheres to ASPE and uses the indirect method when preparing the statement of cash flows.
The cash provided by (used in)investing activities was

A)$39,000.
B)$(54,000).
C)$(60,000).
D)$(204,000).

Question 32

Use the following information for questions.
Oswald Ltd.has recently decided to go public and has hired you as their independent accountant.They wish to adhere to IFRS and know that they must prepare a statement of cash flows.Their financial statements for 2017 and 2016 are provided below: The following additional data were provided for calendar 2017:
On a statement of cash flows for calendar 2017, the cash provided by (used in)investing activities is

A)$6,000.
B)$30,000.
C)$(36,000).
D)$(44,000).

Question 33

Use the following information for questions.
Malcolm Corp.'s statements of financial position at December 31, 2017 and 2016 and information relating to 2017 activities are presented below: Other information relating to 2017 activities:
The cash provided by financing activities in 2017 was

A)$420,000.
B)$270,000.
C)$130,000.
D)$120,000.

Question 34

Claudius Ltd.sold equipment during calendar 2017 for $19,000 cash.The original cost of the equipment was $46,000, and the accumulated depreciation to the date of sale was $24,500.This transaction should be shown on Claudius' 2017 statement of cash flows (indirect method)as a(n)

A)addition to net income of $2,500 and a $19,000 cash inflow from investing activities.
B)deduction from net income of $2,500 and a $21,500 cash inflow from investing activities.
C)deduction from net income of $2,500 and a $19,000 cash inflow from investing activities.
D)addition to net income of $2,500 and a $19,000 cash inflow from financing activities.

Question 35

Use the following information for questions.
Oswald Ltd.has recently decided to go public and has hired you as their independent accountant.They wish to adhere to IFRS and know that they must prepare a statement of cash flows.Their financial statements for 2017 and 2016 are provided below: The following additional data were provided for calendar 2017:
On a statement of cash flows for calendar 2017, the cash provided by (used in)by financing activities is

A)$6,000.
B)$24,000.
C)$(54,000).
D)$(30,000).

Question 36

Ophelia Ltd.reported retained earnings at December 31, 2016 of $270,000, and at December 31, 2017, $218,000.Net income for calendar 2017 was $187,500.During 2017, a stock dividend was declared and distributed, which increased the common shares account by $116,500.As well, a cash dividend was declared and paid during the year.The stock dividend should be reported on the statement of cash flows as

A)an outflow from operating activities of $116,500.
B)an outflow from financing activities of $116,500.
C)an outflow from investing activities of $116,500.
D)Stock dividends are not shown on a statement of cash flows.

Question 37

With regard to disclosures required under IFRS and ASPE, which of the following statements is INCORRECT?

A)IFRS requires separate disclosure of taxes on income.
B)IFRS requires separate disclosure of interest received and paid and dividends received and paid.
C)ASPE does not require reporting and explanation of the amount of cash and cash equivalents that have restrictions on their use.
D)ASPE does not require separate disclosure of taxes on income.

Question 38

Use the following information for questions.
Marcellus Corp.provided the following information for calendar 2017: Marcellus adheres to ASPE.
The cash provided by financing activities during 2017 is

A)$360,000.
B)$320,000.
C)$260,000.
D)$220,000.

Question 39

Use the following information for questions.
Oswald Ltd.has recently decided to go public and has hired you as their independent accountant.They wish to adhere to IFRS and know that they must prepare a statement of cash flows.Their financial statements for 2017 and 2016 are provided below: The following additional data were provided for calendar 2017:
On a statement of cash flows for calendar 2017, the cash paid for income taxes is

A)$17,000.
B)$12,000.
C)$7,000.
D)$5,000.

Question 40

When preparing a statement of cash flows, a decrease in prepaid insurance during a period would require which of the following adjustments in determining cash flows from operating activities?

Question 41

Use the following information for questions.
During calendar 2017, Laertes Corp.sold equipment for $70,000.The equipment had cost $100,000 and had a book value of $52,000 at the time of sale.Data from their comparative statements of financial position are:
Equipment purchased during 2017 was

A)$170,000.
B)$100,000.
C)$70,000.
D)$30,000.

Question 42

Macbeth Corp.'s comparative statements of financial position at December 31, 2017 and 2016 reported accumulated depreciation balances of $960,000 and $720,000, respectively.Equipment with a cost of $60,000 and a book value of $48,000 was the only equipment sold in 2017.Therefore, the depreciation expense for 2017 was

A)$228,000.
B)$240,000.
C)$252,000.
D)$264,000.

Question 43

The statements of financial position for King Lear Corp.at the end of 2017 and 2016 are as follows: During 2017, land was acquired in exchange for common shares (which had a market value of $150,000 at the time).All equipment purchased was for cash.Equipment costing $15,000 was sold for $6,000 cash; book value of the equipment at the time of sale was $12,000, and the loss was included in net income.Cash dividends of $30,000 were declared and paid during the year.King adheres to ASPE and uses the indirect method when preparing the statement of cash flows.The cash provided by operating activities for calendar 2017 was

A)$72,000.
B)$78,000.
C)$84,000.
D)$99,000.

Question 44

Edgar Inc.reported net income for calendar 2017 of $3,500,000.Additional information follows: Based on the above information, the cash provided by operating activities (indirect method)for calendar 2017 is

A)$4,750,000.
B)$4,730,000.
C)$4,715,000.
D)$4,660,000.

Question 45

Use the following information for questions.
Financial statements for Bernard Corp.are presented below:
The balance in the Common Shares account at December 31, 2017 was

A)$260,000.
B)$400,000.
C)$460,000.
D)$620,000.

Question 46

Use the following information for questions.
Financial statements for Bernard Corp.are presented below:
The balance in the Accounts Payable account at December 31, 2017 was

A)$148,000.
B)$108,000.
C)$44,000.
D)$32,000.

Question 47

Use the following information for questions.
Financial statements for Bernard Corp.are presented below:
The balance in the Retained Earnings account at December 31, 2017 was

A)$500,000.
B)$440,000.
C)$380,000.
D)$180,000.

Question 48

During calendar 2017, Marcellus Inc.sold equipment for $168,000.The equipment had cost $252,000 and had a book value of $144,000 at the time of sale.Accumulated Depreciation-Equipment was $688,000 at Dec 31, 2016 and $736,000 at Dec 31, 2017.Therefore, Depreciation Expense (Equipment)for 2017 was

A)$60,000.
B)$96,000.
C)$156,000.
D)$192,000.

Question 49

Use the following information for questions.
Financial statements for Bernard Corp.are presented below:
The book value of the buildings and equipment at December 31, 2017 was

A)$508,000.
B)$520,000.
C)$588,000.
D)$712,000.

Question 50

Use the following information for questions.
Financial statements for Bernard Corp.are presented below:
When the equipment was sold, the Buildings and Equipment account was credited with

A)$48,000.
B)$56,000.
C)$80,000.
D)$104,000.

Question 51

Ophelia Ltd.reported retained earnings at December 31, 2016 of $270,000, and at December 31, 2017, $218,000.Net income for calendar 2017 was $187,500.During 2017, a stock dividend was declared and distributed, which increased the common shares account by $116,500.As well, a cash dividend was declared and paid during the year.The amount of the cash dividend declared and paid was

A)$93,000.
B)$123,000.
C)$164,500.
D)$239,500.

Question 52

Use the following information for questions.
During calendar 2017, Laertes Corp.sold equipment for $70,000.The equipment had cost $100,000 and had a book value of $52,000 at the time of sale.Data from their comparative statements of financial position are:
Depreciation expense for 2017 was

A)$86,000.
B)$68,000.
C)$18,000.
D)$12,000.

Question 53

Hamlet Ltd.adheres to ASPE.On Hamlet Ltd.'s statement of cash flows (indirect method)for calendar 2017, cash flows from operating activities were reported at $154,000.The statement included the following items: depreciation on plant assets of $60,000; impairment of goodwill of $10,000; and cash dividends paid of $72,000.Based only on the information given above, Hamlet's net income for 2014 was

A)$12,000.
B)$84,000.
C)$154,000.
D)$214,000.