Deck 11: The Cash Flow Statement

Question 1

Operating activities reflect such things as purchasing fixed assets.

Answer 1

False

Question 2

In order to determine why net income and cash on the balance sheet do not equal, an accountant can prepare a(n):

A) income statement.
B) statement of retained earnings.
C) balance sheet.
D) cash flow statement.
E) statement of owner's equity.

Answer 2

cash flow statement.

Question 3

Operating cash flows affect:

A) current assets and current liabilities.
B) long-term asset accounts.
C) equity accounts.
D) long-term liability accounts.
E) current assets.

Answer 3

current assets and current liabilities.

Question 4

The cash flow statement is prepared to show why the cash amount changed from the beginning of the period to the end of the period.

Question 5

What is the purpose of the cash flow statement?

Question 6

Identify the four types of financial statements.

Question 7

A cash flow statement shows the company's sources of cash, but does not detail how the cash was used by the company.

Question 8

Current assets on the balance sheet would be affected by and be part of operating activities.

Question 9

The __________ is the financial statement associated with the operating, investing, and financing activities of a corporation.

Question 10

What does the cash flow statement help investors and creditors do?

Question 11

A comparative balance sheet reports at least two consecutive years of ending cash balances that can be used to compile a cash flow statement.

Question 12

Past cash receipts and payments do NOT help to predict:

A) management decisions.
B) ability to pay debts.
C) future cash flows.
D) future net income.
E) ability to pay dividends.

Question 13

In order to help the business prosper, a cash flow statement can aid in all EXCEPT:

A) predicting future net income.
B) predicting future cash flows.
C) evaluating management decisions.
D) ability to pay debts.
E) ability to pay dividends.

Question 14

Identify the sources and uses of cash reported on the cash flow statement.

Question 15

The three types of business activities on a cash flow statement are operating, investing, and management activities.

Question 16

Which of the following is NOT a part of operating activities?

A) Paying dividends
B) Paying payables
C) Earnings revenue
D) Paying utilities
E) Depreciation expense

Question 17

How is the cash flow statement the communicating link between the accrual-based income statement and the cash reported on the balance sheet?

Question 18

The accuracy of the cash flow statement can be verified by computing the change in the balance of the:

A) cash and cash equivalent accounts.
B) equity account.
C) revenue accounts.
D) asset and liability accounts.
E) expense accounts.

Question 19

Which financial statement represents a point in time?

Question 20

Which of the following is NOT a part of financing activities?

A) Paying dividends
B) Issuing shares
C) Paying off loans
D) Buying land
E) Borrowing money

Question 21

Operating cash flows under the indirect method starts with the net income for the period from the income statement.

Question 22

The operating section of a cash flow statement using the indirect method is prepared differently from the operating section of a cash flow statement using the direct method.

Question 23

Identify the three business activities on the cash flow statement and which type of accounts are affected by the cash flows of each.

Question 24

If $10,000 was generated from operations, $4,000 was used for investing activities, and $6,000 was generated from financing activities, how much would the cash balance increase?

Question 25

What is the difference when comparing net cash provided by operations using the direct method versus indirect method. Explain why this difference exists.

Question 26

The indirect method of formatting a cash flow statement starts with __________.

Question 27

In order to prepare a cash flow statement using the indirect method, you need the income statement only.

Question 28

Changes in the long-term assets and long-term liabilities accounts must be analyzed to determine how they are presented in the operating section of a cash flow statement.

Question 29

Which would be added back to net income in the operating section of an indirect cash flow statement?

A) A decrease in accounts payable
B) Depreciation
C) An increase in accounts receivable
D) An increase in inventory
E) A gain on the sale of a vehicle

Question 30

A transaction acquiring land by issuing a note for the full purchase price would not appear on the cash flow statement because no cash was involved, but it may be disclosed in a separate section.

Question 31

A transaction that exchanged a building for shares of stock would be an investing activity and would appear on the cash flow statement.

Question 32

What type of accounts do investing cash flows affect?

Question 33

What type of business activity would issuing stock be classified as on the cash flow statement?

Question 34

In order to be successful over the long run, the main source of a company's cash must come from __________.

Question 35

Even though depreciation, depletion, and amortization are expenses, they are considered non-cash transactions and must be subtracted from net income in the operating activities section of an indirect method cash flow statement.

Question 36

What are the similarities between the direct and indirect methods?

Question 37

The sum of the net increases/decreases in the operating, investing, and financing sections of the cash flow statement is equal to the change in cash over the period.

Question 38

Most businesses prefer to use the indirect method of formatting a cash flow statement.

Question 39

What type of accounts do financing activities affect?

Question 40

Identify the two formats for operating activities on the cash flow statement and explain the difference(s).

Question 41

Under the indirect method of cash flow, which of the following adjustments would NOT be made to net income when computing cash from operating activities?

A) Adding an increase in accounts payable
B) Adding depreciation expense
C) Adding a decrease in accounts payable
D) Subtracting the gain on sale of land
E) Proceeds from the sale of a long-lived asset

Question 42

Changes in long-term liabilities belong in the __________ section of a cash flow statement using the indirect method.

Question 43

Which of the following is NOT a source of cash?

A) An increase in accounts payable
B) A decrease in accounts receivable
C) A decrease in notes payable
D) The sale of common shares
E) Collecting notes receivable

Question 44

Acquisitions and sales of long-term assets belong in the __________ section of a cash flow statement using the indirect method.

Question 45

Which would be subtracted from net income in the operating section of an indirect cash flow statement?

A) An increase in notes payable
B) A decrease in prepaid expenses
C) An increase in sales tax payable
D) An increase in inventory
E) A decrease in accounts receivable

Question 46

Losses on the sale of long-term assets are __________ to __________ activities.

Question 47

Cash receipts from the sale of long-term assets, such as equipment and vehicles, are __________ to __________ activities.

Question 48

Making a loan to another company is an example of a cash outflow from __________ activities.

Question 49

Business transactions that do NOT involve the payment or receipt of cash are considered to be __________ transactions.

Question 50

An example of a cash outflow from financing activities is:

A) paying dividends in cash.
B) buying additional inventory.
C) selling land.
D) collecting notes receivable.
E) loss on the sale of vehicle.

Question 51

When preparing the cash flow statement by the indirect method, if current liabilities increase, the difference is __________ to net income.

Question 52

Which would NOT be subtracted from net income in the operating section of an indirect cash flow statement?

A) An increase in prepaid expenses
B) An increase in accounts payable
C) A decrease in accounts payable
D) An increase in notes receivable
E) An decrease in inventory

Question 53

In the indirect method of cash flows, a decrease in inventory would be __________ to net income.

Question 54

The cost of purchasing long-term assets, such as buildings and land, are __________ from __________.

Question 55

Gains on the sale of long-term assets are __________ from __________ activities.

Question 56

Under the indirect method, which of the following is NOT a proper adjustment to net income under operating activities?

A) Adding a decrease in inventory
B) Subtracting an increase in salaries payable
C) Deducting an increase in prepaid expenses
D) Subtracting a gain on the sale of equipment
E) Adding a decrease in accounts receivable

Question 57

A decrease in prepaid insurance would be __________ to net income in the operating section of a cash flow statement using the indirect method.

Question 58

A cash flow statement would NOT disclose:

A) stock dividends declared.
B) bonds payable issued.
C) purchase of treasury shares.
D) capital shares issued.
E) payment of dividends.

Question 59

Of the following, which is NOT classified as an investing activity on the cash flow statement?

A) Sale of equipment for cash
B) Purchasing land
C) Collecting the principal on loans
D) Selling goods and services
E) Buying computer equipment

Question 60

An example of a cash inflow from financing activities is:

A) collecting money owed by customers.
B) issuing preferred shares.
C) selling a piece of equipment.
D) paying off a bond.
E) an increase in accounts payable.

Question 61

Gains and losses on the sale of plant, property, and equipment are ignored in the direct method of preparing a cash flow statement.

Question 62

If $10,000 was generated from operations (indirect method), $4,000 was used for investing activities, and $6,000 was generated from financing activities, the cash balance __________.

Question 63

An increase in long-term mortgage payable would mean an increase in cash flow from __________ activities.

Question 64

Amanda Industries reported net income of $52,000; depreciation expenses of $13,000; a gain on a land sale of $3,000; and a decrease in accounts receivable of $1,500. Under the indirect method, net cash flows from operations is __________.

Question 65

The Accounts Receivable balance has decreased during the year. How would this affect the cash flow statement operations section under the indirect method?

Question 66

Accounts receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year. Income reported on the income statement for the year was $300,000. The cash flow from operating activities on the cash flow statement using the indirect method is __________.

Question 67

Activities that increase and decrease as a result of selling a company's shares are __________ activities.

Question 68

The Accounts Payable balance has decreased during the year. How would this affect the cash flow statement operations section under the indirect method?

Question 69

All current assets EXCEPT __________ are adjusted to net income in the operating section of an indirect cash flow statement.

Question 70

The Supplies balance has decreased during the year. How would this affect the cash flow statement operations section under the indirect method?

Question 71

Fine Furniture Company had net income of $50,000. Accounts receivable increased by $30,000; inventory decreased by $20,000; amounts payable increased by $4,000; and salaries payable decreased by $1,000. The amount of cash flow from continuing operating activities under the indirect method is __________.

Question 72

The records of Ashley Boutique showed a net loss of $30,000; depreciation expense of $25,000; and an increase in supplies on hand of $5,000. The amount of net cash flow from operating activities using the indirect method is __________.

Question 73

Transactions involving the purchase and sale of long-term assets, lending money, and collecting the principal on loans are called __________ activities.

Question 74

Isaiah Corporation's Accounts Receivable increased by $35,000 and its Accounts Payable decreased by $18,000. What is the net effect on cash from operations under the indirect method?

Question 75

Big Toy's records show net income of $30,000; depreciation expense of $10,000; and cash dividends paid of $5,000. The cash flow from operating activities on the cash flow statement using the indirect method is __________.

Question 76

Why do gains and losses need to be removed from net income on the cash flow statement?

Question 77

Payments to suppliers include items such as employee compensation, interest, and income taxes.

Question 78

Casey Company reported net income of $35,000; depreciation expenses of $20,000; an increase in accounts payable of $2,000; and an increase in current notes receivable of $3,000. Net cash flows from operating activities under the indirect method is __________.

Question 79

One formula for determining cash collections from customers is to take Sales plus the increase in Accounts Receivable.

Question 80

In the direct method, each line of the income statement is converted from the accrual basis to cash basis.