Question 1

In determining cash flows from operations under the indirect method, the adjustments to convert net income to cash flow from operations generally involve ____ credit changes in operating working capital accounts, such as accounts receivable, inventories, or accounts payable.

Accepted Answer

A)  adding
B)  subtracting
C)  multiplying
D)  dividing
E)  cannot be determined from the information provided

Question 2

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations under the indirect method depends on the nature of its operations.Service firms will likely show a small amount of

Accepted Answer

A)  subtraction from net income for capital expenditures.
B)  addback to net income for capital expenditures.
C)  subtraction from net income for depreciation expense.
D)  addback to net income for depreciation expense.
E)  addback to retained earnings for depreciation expense.

Question 3

In preparing a T-account work sheet, a master T-account for cash appears at the top of the work sheet.This master T-account has three sections, labeled

Accepted Answer

A)  Operations, Investing, and Financing.
B)  Working Capital, Investing, and Financing.
C)  Operations, Working Capital, and Financing
D)  Operations, Working Capital, and Investing
E)  Operations, Exchanges, and Investing

Question 4

In theprocedure for preparing the statement of cash flows using a T-account work sheet, a master T-account for _____ appears at the top of the work sheet.

Accepted Answer

A)  cash
B)  working capital
C)  financing
D)  operations
E)  net income

Question 5

In determining cash flows from operations, which method starts with net income, then add noncash expenses and subtracts noncash revenues?

Accepted Answer

A)  direct method
B)  fixed method
C)  indirect method
D)  funds flow method
E)  variable method

Question 6

Which method of preparing the statement of cash flows starts with the total for net income and removes the effects of gains and losses from nonoperating transactions, and then adds or subtracts balance sheet changes involving operating accounts?

Accepted Answer

A)  direct method
B)  fixed method
C)  indirect method
D)  funds flow method
E)  variable method

Question 7

Net income for a particular period will likely differ from cash flow from operations for the same period.

Accepted Answer

A) True 
 B)False

Question 8

Zanies Corporation reports its income from investments under the equity method and recognized income of $15,000 from its investment in Travis Company during the current year.Travis declared no dividends during the current year.On Daniels' statement of cash flows the $15,000 would

Accepted Answer

A)  be shown as cash from investing activities.
B)  be shown as an addition to net income in the reconciliation of net income to cash from operations.
C)  be shown as a deduction from net income in the reconciliation of net income to cash from operations.
D)  not be shown.
E)  None of these answers is correct.

Question 9

The effect of patent amortization on cash flow is conceptually identical to that of

Accepted Answer

A)  common stock.
B)  preferred stock.
C)  depreciation.
D)  research and development.
E)  treasury stock.

Question 10

During Year 3, investors in bonds of Kline Corporation exercised their option to convert their debt securities into shares of common stock.The entry made in the accounting records to record the conversion is as follows: 
Bonds Payable ...................................3,000
Common Stock ....................................1,000
Additional Paid-in Capital ............................2,000
The transaction requires

Accepted Answer

A)  inclusion in the statement of cash flows as an operating activity, only.
B)  inclusion in the statement of cash flows as an investing activity, only.
C)  inclusion in the statement of cash flows as a financing activity, only.
D)  disclosure in a supplementary schedule or notes to the financial statements.
E)  disclosure in managements' discussion and analysis.

Question 11

In determining cash flows from operations under the indirect method, the adjustments to convert net income to cash flow from operations generally involve ____ debit changes in operating working capital accounts.

Accepted Answer

A)  adding
B)  subtracting
C)  multiplying
D)  dividing
E)  cannot be determined from the information provided

Question 12

What method starts with the components of income, the individual revenues and expenses, but not gains and losses, then adds or subtracts the same balance sheet changes involving the same operating accounts? Take an income statement line, then list next to it, horizontally, additions and subtractions.

Accepted Answer

A)  direct method for calculating the cash flows from investing.
B)  indirect method for calculating the cash flows from investing.
C)  indirect method for calculating the cash flows from financing.
D)  direct method for calculating the cash flows from operations.
E)  indirect method for calculating the cash flows from operations.

Question 13

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations depends on the nature of its operations. Firms that grow or diversify by acquiring minority ownership positions in other businesses will often show a

Accepted Answer

A)  addition to retained earnings for distributed earnings.
B)  addition to net income for distributed earnings.
C)  subtraction from net income for equity in undistributed earnings.
D)  addition to net income for equity in undistributed earnings.
E)  subtraction from net income for distributed earnings.

Question 14

Firms engage in transactions involving derivatives.For the most part, the complex parts of these transactions occur _____, but those transactions do _____ until, possibly, their settlement.

Accepted Answer

A)  after the firm has acquired the derivative; not affect cash flows
B)  before the firm has acquired the derivative; not affect cash flows
C)  when the firm has acquired the derivative; not affect cash flows
D)  after the firm has acquired the derivative; not affect net income
E)  before the firm has acquired the derivative; not affect net income

Question 15

The balance sheet portrays the effects of a firm's investing and financing decisions.In analyzing these decisions, what two principles guide financing decisions?

Accepted Answer

BALANCE SHEET RELATIONS
The balance shee...

Question 16

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for securities available for sale and cash flow hedges?

Accepted Answer

A)  Realized gains and losses appear in Retained Earnings.Unrealized gains and losses appear in net income.
B)  Realized gains and losses appear in Other Comprehensive Income.Unrealized gains and losses appear in net income.
C)  Realized gains and losses appear Shareholders' equity.Unrealized gains and losses appear in Other Comprehensive Income.
D)  Realized gains and losses appear in Retained Earnings.Unrealized gains and losses appear in Other Comprehensive Income.
E)  Realized gains and losses appear in net income.Unrealized gains and losses appear in Other Comprehensive Income.

Question 17

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations between cash flows from operating, investing, and financing activities.When a product matures,

Accepted Answer

A)  operations generate positive cash flow, enough to finance expenditures on property, plant, and equipment.
B)  firms use the excess cash flow to repay borrowing from the introduction and growth phases and to begin paying dividends to shareholders.
C)  capital expenditures usually maintain, rather than increase, productive capacity.
D)  all of the above
E)  none of the above

Question 18

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations under the indirect method depends on the nature of its operations Firms that grow or diversify by acquiring minority ownership positions in other businesses will often show

Accepted Answer

A)  an addition to net income for equity in undistributed earnings.
B)  a subtraction from net income for equity in undistributed earnings.
C)  an addition to net income for equity in distributed earnings.
D)  a subtraction from net income for equity in distributed earnings.
E)  a subtraction from retained earnings for equity in undistributed earnings.

Question 19

The cash flow from operations section shows an addition for the increase in the current asset accounts in an amount equal to the firm's expenditure to acquire a derivative.

Accepted Answer

A) True 
 B)False

Question 20

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities.

Accepted Answer

A) True 
 B)False

Exam 16: Statement of Cash Flows: Another Look

In determining cash flows from operations under the indirect method, the adjustments to convert net income to cash flow from operations generally involve ____ debit changes in operating working capital accounts.

Correct Answer
verified

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations between cash flows from operating, investing, and financing activities.When a product matures,

Correct Answer
verified

The balance sheet portrays the effects of a firm's investing and financing decisions.In analyzing these decisions, what two principles guide financing decisions?

Correct Answer
verified
BALANCE SHEET RELATIONS
The balance shee...
View Answer

Which method of preparing the statement of cash flows starts with the total for net income and removes the effects of gains and losses from nonoperating transactions, and then adds or subtracts balance sheet changes involving operating accounts?

Correct Answer
verified

The effect of patent amortization on cash flow is conceptually identical to that of

Correct Answer
verified

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations depends on the nature of its operations. Firms that grow or diversify by acquiring minority ownership positions in other businesses will often show a

Correct Answer
verified

In theprocedure for preparing the statement of cash flows using a T-account work sheet, a master T-account for _____ appears at the top of the work sheet.

Correct Answer
verified

Correct Answer
verified

In determining cash flows from operations under the indirect method, the adjustments to convert net income to cash flow from operations generally involve ____ credit changes in operating working capital accounts, such as accounts receivable, inventories, or accounts payable.

Correct Answer
verified

Correct Answer
verified

Net income for a particular period will likely differ from cash flow from operations for the same period.

Correct Answer
verified

In determining cash flows from operations, which method starts with net income, then add noncash expenses and subtracts noncash revenues?

Correct Answer
verified

Zanies Corporation reports its income from investments under the equity method and recognized income of $15,000 from its investment in Travis Company during the current year.Travis declared no dividends during the current year.On Daniels' statement of cash flows the $15,000 would

Correct Answer
verified

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for securities available for sale and cash flow hedges?

Correct Answer
verified

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations under the indirect method depends on the nature of its operations.Service firms will likely show a small amount of

Correct Answer
verified

In preparing a T-account work sheet, a master T-account for cash appears at the top of the work sheet.This master T-account has three sections, labeled

Correct Answer
verified

Correct Answer
verified

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities.

Correct Answer
verified

The cash flow from operations section shows an addition for the increase in the current asset accounts in an amount equal to the firm's expenditure to acquire a derivative.

Correct Answer
verified

Firms engage in transactions involving derivatives.For the most part, the complex parts of these transactions occur _, but those transactions do _ until, possibly, their settlement.

Correct Answer
verified

Exam 16: Statement of Cash Flows: Another Look

In determining cash flows from operations under the indirect method, the adjustments to convert net income to cash flow from operations generally involve ____ debit changes in operating working capital accounts.

Correct AnswerverifiedShow Answer

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations between cash flows from operating, investing, and financing activities.When a product matures,

Correct AnswerverifiedShow Answer

The balance sheet portrays the effects of a firm's investing and financing decisions.In analyzing these decisions, what two principles guide financing decisions?

Correct AnswerverifiedBALANCE SHEET RELATIONSThe balance shee...View AnswerShow Answer

Which method of preparing the statement of cash flows starts with the total for net income and removes the effects of gains and losses from nonoperating transactions, and then adds or subtracts balance sheet changes involving operating accounts?

Correct AnswerverifiedShow Answer

The effect of patent amortization on cash flow is conceptually identical to that of

Correct AnswerverifiedShow Answer

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations depends on the nature of its operations. Firms that grow or diversify by acquiring minority ownership positions in other businesses will often show a

Correct AnswerverifiedShow Answer

In theprocedure for preparing the statement of cash flows using a T-account work sheet, a master T-account for _____ appears at the top of the work sheet.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In determining cash flows from operations under the indirect method, the adjustments to convert net income to cash flow from operations generally involve ____ credit changes in operating working capital accounts, such as accounts receivable, inventories, or accounts payable.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Net income for a particular period will likely differ from cash flow from operations for the same period.

Correct AnswerverifiedShow Answer

In determining cash flows from operations, which method starts with net income, then add noncash expenses and subtracts noncash revenues?

Correct AnswerverifiedShow Answer

Zanies Corporation reports its income from investments under the equity method and recognized income of $15,000 from its investment in Travis Company during the current year.Travis declared no dividends during the current year.On Daniels' statement of cash flows the $15,000 would

Correct AnswerverifiedShow Answer

In U.S.GAAP, which of the following accurately describes the effects of transactions involving investments on the statement of cash flows using the fair value method for securities available for sale and cash flow hedges?

Correct AnswerverifiedShow Answer

The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations under the indirect method depends on the nature of its operations.Service firms will likely show a small amount of

Correct AnswerverifiedShow Answer

In preparing a T-account work sheet, a master T-account for cash appears at the top of the work sheet.This master T-account has three sections, labeled

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The product life-cycle concept from microeconomics and marketing provides useful insights into the relations among cash flows from operating, investing, and financing activities.

Correct AnswerverifiedShow Answer

The cash flow from operations section shows an addition for the increase in the current asset accounts in an amount equal to the firm's expenditure to acquire a derivative.

Correct AnswerverifiedShow Answer

Firms engage in transactions involving derivatives.For the most part, the complex parts of these transactions occur _____, but those transactions do _____ until, possibly, their settlement.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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BALANCE SHEET RELATIONS
The balance shee...
View Answer

Correct Answer
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Correct Answer
verified

Firms engage in transactions involving derivatives.For the most part, the complex parts of these transactions occur _, but those transactions do _ until, possibly, their settlement.

Correct Answer
verified