Question 1

When using the indirect method, the gain from selling a long-term investment is recognized in which of the following?

Accepted Answer

A)   In the operating activity section and the investing activity section of the statement of cash flows.
B)   In the financing activity section of the statement of cash flows.
C)   In the noncash investing or financing activity supplemental section of the statement of cash flows.
D)   Gains are not recognized in the statement of cash flows under the indirect method.

Question 2

The statement of cash flows

Accepted Answer

A)   along with the balance sheet and income statement is prepared on the accrual basis.
B)   along with the balance sheet and statement of retained earnings is dated as of a specific year end date.
C)   along with the balance sheet is used to analyze liquidity.
D)   ties the balance sheet to the statement of retained earnings.

Question 3

Use the following codes to indicate how the cash flow effect, if any, of each transaction would be reported on a statement of cash flows if the operating activities section is prepared using the direct method.
-Paid interest on bonds.

Accepted Answer

A)  Inflow from operating activity
B)  Outflow from operating activity
C)  Inflow from investing activity
D)  Outflow from investing activity
E)  Inflow from financing activityF) Outflow from financing activityG) Noncash investing and financing activityH) Not reported on statement of cash flows

Question 4

Use the following codes to indicate how the cash flow effect, if any, of each transaction would be reported on a statement of cash flows if the operating activities section is prepared using the direct method.
-Declared cash dividends.

Accepted Answer

A)  Inflow from operating activity
B)  Outflow from operating activity
C)  Inflow from investing activity
D)  Outflow from investing activity
E)  Inflow from financing activityF) Outflow from financing activityG) Noncash investing and financing activityH) Not reported on statement of cash flows

Question 5

Eduardo's Texas Cantina had the following results for December 31, 2015 and 2016, respectively:  What was the amount of cash flows from investing activities for 2016?

Accepted Answer

A)   Cash inflow of $378,000
B)   Cash outflow of $378,000
C)   Cash outflow of $7,000
D)   Cash outflow of $391,000

Question 6

A company generated $1,830,000 from its operating activities and spent $1,200,000 on additions to its plant and equipment during the year. The total amount of debt that matures in the next five years is $900,000. Compute the company's cash flow adequacy ratio for the year.

Accepted Answer

Cash flow adequacy = Cash from...

Question 7

Most experts now agree that there has been a tendency to rely far too heavily on net income and its companion,
earnings per share, and in many cases to ignore a company's cash flows.

Accepted Answer

The answer of Most experts now agree that there has...

Question 8

When using the direct method, how is the retirement of bonds payable at their maturity date shown on the statement of cash flows?

Accepted Answer

A)   Operating activity
B)   Investing activity
C)   Financing activity
D)   Noncash investing and financing activity

Question 9

Under the indirect method , instead of reporting cash receipts and payments, net income is reconciled with net cash from operating activities.

Accepted Answer

A) True 
 B)False

Question 10

Depreciation is a noncash expense that is added back to net income in determining cash provided from operating activities under the indirect method.

Accepted Answer

A) True 
 B)False

Question 11

If the balance of accounts receivable decreases during the year, then cash collections will
____________________________ sales on account for the period.

Accepted Answer

The answer of If the balance of accounts receivable decreases...

Question 12

When using the direct method, how is the sale of long-term investments for cash reported on the statement of cash flows?

Accepted Answer

A)   Operating activity
B)   Investing activity
C)   Financing activity
D)   Noncash investing and financing activity

Question 13

Which of the following is not an operating activity?

Accepted Answer

A)   Cash collections from credit customers.
B)   Cash payments for operating expenses.
C)   Cash receipts for interest earned.
D)   Cash payments for dividends to stockholders.

Question 14

In 2015, Valencia Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000. In its statement of cash flows for 2015, Valencia should report the following with respect to the above transactions:

Accepted Answer

A)   $363,000 cash used by operating activities; $182,000 cash provided by financing activities.
B)   $181,000 net cash used by investing activities.
C)   $181,000 net cash used by investing activities; $27,000 net cash provided by operating activities.
D)   $363,000 net cash used by investing activities.

Question 15

Net income was $ 61,000 for the year. The accumulated depreciation balance increased by $14,000 over the year.
There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $47,000.

Accepted Answer

A) True 
 B)False

Question 16

Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method.
-Increased the accounts receivable balance.

Accepted Answer

A)  Operating activity-add to net income
B)  Operating activity-deduct from net income
C)  Inflow from investing activity
D)  Outflow from investing activity
E)  Inflow from financing activityF) Outflow from financing activityG) Noncash investing and financing activityH) Not reported on statement of cash flows

Question 17

Which of the following financing activities results in a cash inflow?

Accepted Answer

A)   Buying treasury stock
B)   Issuing bonds
C)   Repaying a bank loan
D)   Paying cash dividends

Question 18

Upon review of Jerry's Canoe Gallery statement of cash flows, the following was noted:  From this information, the most likely explanation is that Jerry is

Accepted Answer

A)   using cash from operations and selling long-term assets to pay back debt.
B)   using cash from operations and borrowing to purchase long-term assets.
C)   using its profits to expand growth.
D)   using cash from investors to provide for operations.

Question 19

Cash equivalents are reported in the Operating Activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 20

For each of the following items, indicate whether it would appear on a statement of cash flows prepared using the Direct method a or the Indirect method b.
-Increase in accounts receivable

Accepted Answer

A)  Direct
B)  Indirect

Exam 12: The Statement of Cash Flows

A company generated $1,830,000 from its operating activities and spent $1,200,000 on additions to its plant and equipment during the year. The total amount of debt that matures in the next five years is $900,000. Compute the company's cash flow adequacy ratio for the year.

Correct AnswerverifiedCash flow adequacy = Cash from...View AnswerShow Answer

Most experts now agree that there has been a tendency to rely far too heavily on net income and its companion, earnings per share, and in many cases to ignore a company's cash flows.

Correct AnswerverifiedShow Answer

Cash equivalents are reported in the Operating Activities section of the statement of cash flows.

Correct AnswerverifiedShow Answer

When using the direct method, how is the sale of long-term investments for cash reported on the statement of cash flows?

Correct AnswerverifiedShow Answer

Under the indirect method , instead of reporting cash receipts and payments, net income is reconciled with net cash from operating activities.

Correct AnswerverifiedShow Answer

Use the following codes to indicate how the cash flow effect, if any, of each transaction would be reported on a statement of cash flows if the operating activities section is prepared using the direct method. -Declared cash dividends.

Correct AnswerverifiedShow Answer

In 2015, Valencia Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000. In its statement of cash flows for 2015, Valencia should report the following with respect to the above transactions:

Correct AnswerverifiedShow Answer

If the balance of accounts receivable decreases during the year, then cash collections will ____________________________ sales on account for the period.

Correct AnswerverifiedShow Answer

For each of the following items, indicate whether it would appear on a statement of cash flows prepared using the Direct method a or the Indirect method b. -Increase in accounts receivable

Correct AnswerverifiedShow Answer

Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method. -Increased the accounts receivable balance.

Correct AnswerverifiedShow Answer

Upon review of Jerry's Canoe Gallery statement of cash flows, the following was noted: From this information, the most likely explanation is that Jerry is

Correct AnswerverifiedShow Answer

Which of the following financing activities results in a cash inflow?

Correct AnswerverifiedShow Answer

Net income was $ 61,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $47,000.

Correct AnswerverifiedShow Answer

Use the following codes to indicate how the cash flow effect, if any, of each transaction would be reported on a statement of cash flows if the operating activities section is prepared using the direct method. -Paid interest on bonds.

Correct AnswerverifiedShow Answer

When using the direct method, how is the retirement of bonds payable at their maturity date shown on the statement of cash flows?

Correct AnswerverifiedShow Answer

Depreciation is a noncash expense that is added back to net income in determining cash provided from operating activities under the indirect method.

Correct AnswerverifiedShow Answer

The statement of cash flows

Correct AnswerverifiedShow Answer

When using the indirect method, the gain from selling a long-term investment is recognized in which of the following?

Correct AnswerverifiedShow Answer

Which of the following is not an operating activity?

Correct AnswerverifiedShow Answer

Eduardo's Texas Cantina had the following results for December 31, 2015 and 2016, respectively: What was the amount of cash flows from investing activities for 2016?

Correct AnswerverifiedShow Answer

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Cash flow adequacy = Cash from...
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