Question 1

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

Accepted Answer

The direct method of preparing a cash flow statement only focuses on cash inflows and outflows related to operating activities. Gains and losses on the sale of plant, property, and equipment are considered investing activities and are not included in the direct method. They are instead reported in the investing section of the cash flow statement using the indirect method.

Question 2

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 __________.

Accepted Answer

The answer of If $10,000 was generated from operations (indirect...

Question 3

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

Accepted Answer

The answer of An increase in long-term mortgage payable would...

Question 4

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 __________.

Accepted Answer

The answer of Amanda Industries reported net income of $52,000;...

Question 5

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

Accepted Answer

The answer of The Accounts Receivable balance has decreased during...

Question 6

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 __________.

Accepted Answer

The answer of Accounts receivable amounted to $215,000 at the...

Question 7

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

Accepted Answer

The answer of Activities that increase and decrease as a...

Question 8

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

Accepted Answer

The answer of The Accounts Payable balance has decreased during...

Question 9

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

Accepted Answer

The answer of All current assets EXCEPT __________ are adjusted...

Question 10

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

Accepted Answer

The answer of The Supplies balance has decreased during the...

Question 11

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 __________.

Accepted Answer

The answer of Fine Furniture Company had net income of...

Question 12

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 __________.

Accepted Answer

The answer of The records of Ashley Boutique showed a...

Question 13

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

Accepted Answer

The answer of Transactions involving the purchase and sale of...

Question 14

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?

Accepted Answer

The answer of Isaiah Corporation's Accounts Receivable increased by $35,000...

Question 15

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 __________.

Accepted Answer

The answer of Big Toy's records show net income of...

Question 16

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

Accepted Answer

The answer of Why do gains and losses need to...

Question 17

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

Accepted Answer

Payments to suppliers typically refer to the amounts paid for goods and services used in the production process or for direct sale, and do not include employee compensation, interest, and income taxes, which are categorized separately in financial accounting.

Question 18

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 __________.

Accepted Answer

The answer of Casey Company reported net income of $35,000;...

Question 19

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

Accepted Answer

One formula for determining cash collections from customers is to take Sales minus the increase in Accounts Receivable, not plus.

Question 20

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

Accepted Answer

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

Quiz 11: The Cash Flow Statement