Question 1

Which of the following statements about the statement of cash flows is not correct?

Accepted Answer

A)  It does not replace the income statement.
B)  It provides details as to how cash changed during a period.
C)  It provides information about cash receipts and cash payments over a period of time.
D)  It measures profitability.E) A) and B)
F) C) and D)

Question 2

Marion Manufacturing had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.  What is the net cash flows provided by (used in) financing activities?

Accepted Answer

A)  $310,000
B)  $205,000
C)  $305,000
D)  $245,000E) A) and D)
F) A) and C)

Question 3

The difference between net income and cash flow may be due to all of the following except:

Accepted Answer

A)  use of the direct method of presenting cash flows from operating activities.
B)  the company being brand new.
C)  fraudulent financial reporting.
D)  seasonal variations in a company's operating activities.E) C) and D)
F) B) and D)

Question 4

The following information is taken from the income statement of Olympic,Inc.:  Based on this information,what is the amount of net cash flow provided by operating activities?

Accepted Answer

A)  $447,000
B)  $420,000
C)  $438,000
D)  $402,000E) A) and C)
F) C) and D)

Question 5

Which of the following statements about the calculation of cash flows from operating activities under the direct method is correct?

Accepted Answer

A)  When the direct method is used,each revenue and expense account on the income statement is individually examined to calculate the cash flows from operating activities.
B)  Noncash revenues and expenses must be included in cash flows from operating activities when preparing a statement of cash flows using the direct method.
C)  Depreciation is reported as a cash inflow in the cash flows from operating activities when the direct method is used.
D)  A loss on the sale of a long-term asset is subtracted in the cash flows from operating activities when the direct method is used.E) B) and C)
F) B) and D)

Question 6

If operating cash flows are calculated using the indirect method,which of the choices below correctly states the direction of adjustments to convert net income into net cash provided by or used in operations?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  Option DE) B) and C)
F) A) and D)

Question 7

Which of the following represent cash outflows from financing activities?

Accepted Answer

A)  Distributing a stock dividend.
B)  Paying a bond's face value at maturity.
C)  Issuing long-term bonds at a discount.
D)  Paying interest on promissory notes.E) All of the above
F) A) and B)

Question 8

Cash flows from investing activities include cash:

Accepted Answer

A)  inflows and outflows reflecting revenues and expenses reported on the income statement.
B)  inflows from the issuance of bonds.
C)  inflows from the sale of long-term investments.
D)  inflows from the sale of a company's own stock to its stockholders.E) B) and D)
F) C) and D)

Question 9

Consider the following information:
  Required:
Use the indirect method to compute the amount of net cash flows provided by (used in)operating activities.

Accepted Answer

Net income $1,500,000
Adjustments to rec...

Question 10

Skinner Butte,Inc.had the following information:  What is Skinner Butte's net cash provided by operating activities?

Accepted Answer

A)  $35,000
B)  $37,000
C)  $43,000
D)  $46,600E) B) and C)
F) A) and D)

Question 11

Which of the following items would be reported on a statement of cash flows using the indirect method,but not on a statement prepared using the direct method?

Accepted Answer

A)  Cash paid for dividends.
B)  Cash received from stock issuances.
C)  Depreciation expense.
D)  Cash paid for purchase of treasury stock.E) A) and C)
F) B) and C)

Question 12

Cleveland Company paid cash to purchase equipment costing $957,600 this year.Also this year,the company sold for $196,000 cash,equipment that originally cost $644,000 five years ago.How should these transactions be listed in the statement of cash flows?

Accepted Answer

A)  Braden can combine the transactions and show a decrease to cash for $313,600.
B)  Braden can combine the transactions and show a decrease to cash for $761,600.
C)  The purchases and the sales of equipment must be shown separately as a decrease to cash for $1,601,600 (purchase) and an increase of $196,000 (sale) .
D)  The purchases and the sales of equipment must be shown separately as a decrease to cash for $957,600 (purchase) and an increase of $196,000 (sale) .E) None of the above
F) B) and C)

Question 13

Cash and cash equivalents include assets that:

Accepted Answer

A)  have stable long-term value.
B)  are short-term,highly liquid,and purchased by the entity within three months of maturity.
C)  consistently grow in value over the long run.
D)  are expected to be used up within a year.E) B) and C)
F) A) and B)

Question 14

Accrual-basis accounting is superior to cash-basis accounting in that:

Accepted Answer

A)  it provides a better measure of profitability.
B)  a statement of cash flows is not needed.
C)  the cash balance reported will be greater.
D)  there is only one method of preparing the operating activities of the statement of cash flows.E) B) and C)
F) All of the above

Question 15

If a company's Cost of Goods Sold is $158,000 for the period,beginning and ending Inventory balances are $18,000 and $13,000,respectively,and the beginning and ending Accounts Payable balances are $19,000 and $7,500,respectively,what is the amount of the cash paid to suppliers?

Accepted Answer

A)  $157,000
B)  $163,500
C)  $164,500
D)  $151,500E) None of the above
F) All of the above

Question 16

In the decline phase,the company continues to enjoy positive operating cash flows but stops spending cash on investing activities and instead uses its cash for financing activities such as repaying lenders and returning excess cash to shareholders.

Accepted Answer

A) True 
 B)False

Question 17

A company has positive cash flow from investing and financing activities,but negative cash flow from operating activities.The likely result is:

Accepted Answer

A)  investors may not buy the company's stock because the receipt of dividends is unlikely.
B)  investors will continue to buy stock since the company's growth prospects are good.
C)  Creditors will continue to lend money to the company.
D)  Creditors will demand immediate repayment of all outstanding debt.E) A) and B)
F) All of the above

Question 18

Two years ago,Bethel,Inc.bought $80,000 in bonds from another company.This month,it sold half of those bonds for $41,280 and purchased the common stock of another company for $2,000.On the statement of cash flows for this accounting period,Bethel would report a net cash:

Accepted Answer

A)  outflow of $39,280 from investing activities.
B)  inflow of $39,280 from investing activities.
C)  inflow of $41,280 from investing activities.
D)  outflow of $41,280 from investing activities.E) B) and D)
F) B) and C)

Question 19

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following variations of the accounting equation describes the preparation of the statement of cash flows?

Accepted Answer

A)  Change in cash = Change in (Liabilities + Stockholders' equity − Noncash assets) 
B)  Change in cash = Change in (Liabilities − Stockholders' equity + Noncash assets) 
C)  Change in cash = Change in (Liabilities + Stockholders' equity + Noncash assets) 
D)  Change in cash = Change in (Liabilities − Stockholders' equity − Noncash assets) E) All of the above
F) B) and C)

Exam 12: Statement of Cash Flows

Consider the following information: Required: Use the indirect method to compute the amount of net cash flows provided by (used in)operating activities.

Correct AnswerverifiedNet income $1,500,000Adjustments to rec...View AnswerShow Answer

Which of the following represent cash outflows from financing activities?

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Which of the following items would be reported on a statement of cash flows using the indirect method,but not on a statement prepared using the direct method?

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Cash and cash equivalents include assets that:

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In the decline phase,the company continues to enjoy positive operating cash flows but stops spending cash on investing activities and instead uses its cash for financing activities such as repaying lenders and returning excess cash to shareholders.

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Which of the following statements about the calculation of cash flows from operating activities under the direct method is correct?

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Accrual-basis accounting is superior to cash-basis accounting in that:

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The difference between net income and cash flow may be due to all of the following except:

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The following information is taken from the income statement of Olympic,Inc.: Based on this information,what is the amount of net cash flow provided by operating activities?

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The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Correct AnswerverifiedShow Answer

Skinner Butte,Inc.had the following information: What is Skinner Butte's net cash provided by operating activities?

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Cleveland Company paid cash to purchase equipment costing $957,600 this year.Also this year,the company sold for $196,000 cash,equipment that originally cost $644,000 five years ago.How should these transactions be listed in the statement of cash flows?

Correct AnswerverifiedShow Answer

If operating cash flows are calculated using the indirect method,which of the choices below correctly states the direction of adjustments to convert net income into net cash provided by or used in operations?

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Marion Manufacturing had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows. What is the net cash flows provided by (used in) financing activities?

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Which of the following variations of the accounting equation describes the preparation of the statement of cash flows?

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Cash flows from investing activities include cash:

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A company has positive cash flow from investing and financing activities,but negative cash flow from operating activities.The likely result is:

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If a company's Cost of Goods Sold is $158,000 for the period,beginning and ending Inventory balances are $18,000 and $13,000,respectively,and the beginning and ending Accounts Payable balances are $19,000 and $7,500,respectively,what is the amount of the cash paid to suppliers?

Correct AnswerverifiedShow Answer

Which of the following statements about the statement of cash flows is not correct?

Correct AnswerverifiedShow Answer

Two years ago,Bethel,Inc.bought $80,000 in bonds from another company.This month,it sold half of those bonds for $41,280 and purchased the common stock of another company for $2,000.On the statement of cash flows for this accounting period,Bethel would report a net cash:

Correct AnswerverifiedShow Answer

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Net income $1,500,000
Adjustments to rec...
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