Question 1

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...

Question 2

If the balance of prepaid insurance was the same on January 1, 2014, and December 31, 2014, 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 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

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

Accepted Answer

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

Question 5

MATCHING
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. (Choices may be used more than once.)
a.Inflow from operating activity
b.Outflow from operating activity
c.Inflow from investing activity
d.Outflow from investing activity
e.Inflow from financing activity
f.Outflow from financing activity
g.Noncash investing and financing activity
h.Not reported on statement of cash flows
-Issued long term mortgage to acquire land and a building.

Accepted Answer

Issuing a long-term mortgage to acquire land and a building is a noncash investing and financing activity, so it is reported as such on the statement of cash flows.

Question 6

MATCHING
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. (Choices may be used more than once.)
a.Inflow from operating activity
b.Outflow from operating activity
c.Inflow from investing activity
d.Outflow from investing activity
e.Inflow from financing activity
f.Outflow from financing activity
g.Noncash investing and financing activity
h.Not reported on statement of cash flows
-Purchased truck for cash.

Accepted Answer

Purchasing a truck for cash is considered an outflow from investing activities because it involves acquiring a long-term asset, which falls under the investing activities category in the statement of cash flows.

Question 7

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 8

____________________ 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 9

MATCHING
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. (Choices may be used more than once.)
a.Inflow from operating activity
b.Outflow from operating activity
c.Inflow from investing activity
d.Outflow from investing activity
e.Inflow from financing activity
f.Outflow from financing activity
g.Noncash investing and financing activity
h.Not reported on statement of cash flows
-Paid employee insurance expense.

Accepted Answer

The payment of employee insurance expense would be reported as an outflow from operating activities on the statement of cash flows prepared using the direct method.

Question 10

MATCHING
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. (Choices may be used more than once.)
a.Inflow from operating activity
b.Outflow from operating activity
c.Inflow from investing activity
d.Outflow from investing activity
e.Inflow from financing activity
f.Outflow from financing activity
g.Noncash investing and financing activity
h.Not reported on statement of cash flows
-Declared stock dividends.

Accepted Answer

Declaring stock dividends does not result in a cash flow, so it is not reported on the statement of cash flows using the direct method.

Question 11

MATCHING
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. (Choices may be used more than once.)
a.Inflow from operating activity
b.Outflow from operating activity
c.Inflow from investing activity
d.Outflow from investing activity
e.Inflow from financing activity
f.Outflow from financing activity
g.Noncash investing and financing activity
h.Not reported on statement of cash flows
-Sold common stock for cash.

Accepted Answer

Selling common stock for cash is an inflow from financing activity, as it results in an increase in the company's cash from the issuance of equity securities.

Question 12

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 from...

Question 13

MATCHING
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. (Choices may be used more than once.)
a.Inflow from operating activity
b.Outflow from operating activity
c.Inflow from investing activity
d.Outflow from investing activity
e.Inflow from financing activity
f.Outflow from financing activity
g.Noncash investing and financing activity
h.Not reported on statement of cash flows
-Received payments from accounts receivable.

Accepted Answer

Received payments from accounts receivable is an inflow from operating activity as it is related to the primary revenue-generating activities of the business.

Question 14

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 15

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 16

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 17

MATCHING
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. (Choices may be used more than once.)
a.Inflow from operating activity
b.Outflow from operating activity
c.Inflow from investing activity
d.Outflow from investing activity
e.Inflow from financing activity
f.Outflow from financing activity
g.Noncash investing and financing activity
h.Not reported on statement of cash flows
-Repaid a long-term bonds payable.

Accepted Answer

Repaying a long-term bonds payable is considered an outflow from financing activities because it involves paying back money that was borrowed, which is a financing activity.

Question 18

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 19

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 20

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...

Quiz 11: The Statement of Cash Flows