Question 1

If Accounts Receivable decreased during the year, then cash collections must have been ____________________ than sales on account for the period.

Accepted Answer

The answer of If Accounts Receivable decreased during the year,...

Question 2

Beginning equipment minus equipment sold and minus ending equipment equals ____________________.

Accepted Answer

The answer of Beginning equipment minus equipment sold and minus...

Question 3

When a company sells its own common stock, it is a(n) ____________________ activity on the statement of cash flows.

Accepted Answer

The answer of When a company sells its own common...

Question 4

Which of the following statements is not true? The information in the statement of cash flows helps investors, creditors and others
A)assess a company's ability to produce future cash inflows.
B)judge a company's ability to meet it obligations and pay dividends.
C)estimate the company's needs for external financing.
D)show the inflows and outflow of net income on the accrual basis.

Accepted Answer

The statement of cash flows does not show the inflows and outflows of net income on the accrual basis. Instead, it shows the inflows and outflows of actual cash during the period.

Question 5

If the balance of wages payable increases during the year, then the ____________________ for the period will be greater than the actual cash wages paid in the period.

Accepted Answer

The answer of If the balance of wages payable increases...

Question 6

If the balance of prepaid insurance was the same on January 1, 2019, and December 31, 2019, then the insurance expense must have been ____________________ the cash payments made for insurance during the year.

Accepted Answer

The answer of If the balance of prepaid insurance was...

Question 7

A company reported net income of $150,000 for the current year, but its cash balance decreased by $40,000. Which financial statement should management refer to for an explanation of this situation?
A)Balance Sheet
B)Income Statement
C)Statement of retained Earnings
D)Statement of Cash Flows

Accepted Answer

The statement of cash flows explains changes in a company's cash balance over a period of time. It identifies whether the company has generated or used cash from its operating, investing, and financing activities. The net income reported on the income statement does not directly reflect changes in cash balance, so the statement of cash flows is the best option for understanding why the company's cash balance decreased despite reporting net income.

Question 8

A company reported net income for the current year. Which of the following business transactions would cause its cash from operating activities to be higher than its net income?
A)Cash dividends were paid to stockholders during the year.
B)Depreciation expense was recorded for the year.
C)A bank loan was repaid during the year.
D)Equipment was purchased for cash during the year.

Accepted Answer

Depreciation expense is a non-cash expense that is added back to net income in the indirect method of preparing the statement of cash flows, so it would increase cash from operating activities. Choices A, C, and D all involve cash outflows that would reduce cash from operating activities.

Question 9

____________________ represents the cash flow that a company is able to generate after considering the maintenance or expansion of its assets (capital expenditures) and payment of dividends.

Accepted Answer

The answer of ____________________ represents the cash flow that a...

Question 10

Which of the following statements is false?
A)A balance sheet reports a company's cash balance at a specific date.
B)An income statement reports the amounts of revenue and expense on an accrual basis.
C)A statement of retained earnings reports the amount of cash received from operating activities and the amount of cash paid for dividends.
D)A statement of cash flows explains the changes in cash from operating, investing, and financing activities.

Accepted Answer

A statement of retained earnings reports the changes in retained earnings, including net income, dividends, and any prior period adjustments. It does not report the amounts of cash received from operating activities or the amount of cash paid for dividends.

Question 11

Which of the following statements regarding the statement of cash flows is true?
A)The statement of cash flows analyzes the changes in consecutive balance sheets in conjunction with the income statement.
B)The statement of cash flows is organized to present classifications for total cash inflows and cash outflows.
C)The statement of cash flows analyzes only the changes in current assets and current liabilities.
D)The statement of cash flows is an optional financial statement.

Accepted Answer

The answer of Which of the following statements regarding the...

Question 12

A decrease in retained earnings represents dividends that were ____________________ during the period, not necessarily those that were paid.

Accepted Answer

The answer of A decrease in retained earnings represents dividends...

Question 13

The use of a ______________ provides a means of systematically analyzing changes in the balance sheet amounts, along with the information from the income statement and any additional information, to produce the statement of cash flows.

Accepted Answer

The answer of The use of a ______________ provides a...

Question 14

Under the ____________________ method of preparing a statement of cash flows, the net cash flow from operating activities is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments, and all accruals of future operating cash receipts or payments.

Accepted Answer

The answer of Under the ____________________ method of preparing a...

Question 15

A(n) ____________________ occurs when the cash received from selling an item of property, plant, and equipment is greater than the book value of the asset sold. It is also shown in the operating activities section of the statement of cash flows prepared using the indirect method.

Accepted Answer

The answer of A(n) ____________________ occurs when the cash received...

Question 16

Under the indirect method, a gain from the sale of land is subtracted from ___________ in the operating activities section of the statement of cash flows.

Accepted Answer

The answer of Under the indirect method, a gain from...

Question 17

The primary purpose of the statement of cash flows is to provide information about
A)the financial position of the company.
B)the profitability of the company.
C)the investing and financing activities of the company.
D)the cash inflows and outflows of the company.

Accepted Answer

The statement of cash flows shows the cash inflows and outflows of the company during the period, including operating, financing, and investing activities. It helps users to understand the cash position of the company and its ability to pay its obligations, invest in new opportunities, and generate future cash flows. Therefore, choice D is the correct answer.

Question 18

A company reported a net loss of $30,000 for the current year, yet its cash balance increased during the year. Which financial statement should management refer to for an explanation of this situation?
A)Balance Sheet
B)Income Statement
C)Statement of Retained Earnings
D)Statement of Cash Flows

Accepted Answer

The Statement of Cash Flows shows the inflows and outflows of cash during the period, including operating, investing, and financing activities. It will show if there were any non-cash expenses, such as depreciation, that affected the net loss in the Income Statement, but did not affect the cash balance. Additionally, it will show how changes in accounts receivable, accounts payable, and inventory affected the cash balance. Therefore, the Statement of Cash Flows is the best choice for explaining how the cash balance increased despite a net loss.

Question 19

If an analysis of the balance sheet shows that Accounts Payable increased during the period, then the increase would have to be _______________ to net income to convert net income to cash.

Accepted Answer

The answer of If an analysis of the balance sheet...

Question 20

The indirect method of preparing a statement of cash flows begins with net income and then adjusts it for noncash items to produce net cash flow from ____________________.

Accepted Answer

The answer of The indirect method of preparing a statement...

Quiz 11: The Statement Of Cash Flows

If Accounts Receivable decreased during the year, then cash collections must have been ____________________ than sales on account for the period.

Beginning equipment minus equipment sold and minus ending equipment equals ____________________.

When a company sells its own common stock, it is a(n) ____________________ activity on the statement of cash flows.

Which of the following statements is not true? The information in the statement of cash flows helps investors, creditors and others

If the balance of wages payable increases during the year, then the ____________________ for the period will be greater than the actual cash wages paid in the period.

If the balance of prepaid insurance was the same on January 1, 2019, and December 31, 2019, then the insurance expense must have been ____________________ the cash payments made for insurance during the year.

A company reported net income of $150,000 for the current year, but its cash balance decreased by $40,000. Which financial statement should management refer to for an explanation of this situation?

A company reported net income for the current year. Which of the following business transactions would cause its cash from operating activities to be higher than its net income?

____________________ represents the cash flow that a company is able to generate after considering the maintenance or expansion of its assets (capital expenditures) and payment of dividends.

Which of the following statements is false?

Which of the following statements regarding the statement of cash flows is true?