Question 1

The managerial accountant at the Organic Food Shoppe used the indirect method to prepare the Statement of Cash Flows and reported the following data:  
The managerial accountant is required to determine the amount of free cash flow at the company.Calculate the free cash flow at the company and list at least three ways the company can use the free cash flow at the business.

Accepted Answer

The answer of The managerial accountant at the Organic Food...

Question 2

The ________ section in a statement of cash flows using the direct method of cash flows is not the same compared to the indirect method of cash flows on the statement of cash flows.
A)operating activities
B)financing activities
C)investing activities
D)none of the above

Accepted Answer

The operating activities section in a statement of cash flows using the direct method of cash flows is different from the same section in the indirect method. In the direct method, this section reports actual cash receipts and payments related to operating activities, whereas in the indirect method, this section adjusts net income for changes in non-cash working capital items to arrive at the cash flows from operating activities. The investing and financing activities sections are the same under both methods.

Question 3

Using the direct method to prepare the statement of cash flows,cash payments to supplies is computed as
A)interest expense minus the decrease in accounts payable.
B)interest expense minus the decrease in merchandise inventory.
C)purchases minus the increase in accounts payable.
D)interest expense minus the increase in merchandise inventory.

Accepted Answer

Cash payments to supplies can be computed using the formula purchases minus the increase in accounts payable. This is because purchases represent the total amount of goods purchased during the period and the increase in accounts payable indicates that some portion of these purchases were made on credit and not paid in cash. Therefore, to determine the actual cash payments made to suppliers, we need to adjust for the change in accounts payable.

Question 4

When a company uses the direct method to present the statement of cash flows,cash received from the sale of treasury stock increases the amount of net cash provided by investing activities.

Accepted Answer

Cash received from the sale of treasury stock is reported as a financing activity, not an investing activity, under the direct method of presenting the statement of cash flows. Therefore, it does not affect the amount of net cash provided by investing activities.

Question 5

Using the direct method to prepare the statement of cash flows,how would the amount of cash payments to employees categorized on the statement of cash flows?
A)Cash payments to employees would be equal to salary expense plus the beginning balance in salaries payable.
B)Cash payments to employees would be equal to salary expense plus the ending balance in salaries payable.
C)Cash payments to employees would be equal to salary expense plus the decrease in salaries payable.
D)Cash payments to employees would be equal to salary expense plus the increase in salaries payable.

Accepted Answer

The cash payments to employees would be equal to salary expense plus the decrease in salaries payable. This is because the decrease in salaries payable represents a decrease in the amount of money the company owes to its employees, and therefore, a decrease in the amount of cash that the company needs to pay out to its employees. Therefore, this decrease in salaries payable should be added to the company's salary expense to calculate the amount of cash payments to employees during the period.

Question 6

Which of the following would appear on a statement of cash flows prepared using the direct method?
A)Cash payments for salaries would appear on the statement.
B)A loss of the sale of equipment would appear on the statement.
C)Amortization expenses would appear on the statement.
D)Depreciation expenses would appear on the statement.

Accepted Answer

The direct method of preparing a statement of cash flows shows actual cash transactions for items such as cash payments for salaries. The loss on the sale of equipment would be reported in the investing section, and amortization and depreciation expenses would be reported in the operating section using the indirect method.

Question 7

Under the direct method of cash flow,which of the following is not included in the statement of cash flows?
A)Changes in accounts payable
B)Changes in accounts receivable
C)Changes in depreciation
D)Changes in inventory

Accepted Answer

Changes in depreciation are not included in the direct method of cash flow because depreciation is a non-cash expense, meaning it does not involve any actual cash transactions. The direct method focuses on cash inflows and outflows, so only actual cash transactions with third parties are included. Changes in accounts payable, accounts receivable, and inventory are all included because these accounts involve actual cash movements in and out of the business.

Question 8

The direct method of presenting the financing activities section of the statement of cash flows reconciles net income to net cash provided by financing activities.

Accepted Answer

The direct method of presenting the financing activities section of the statement of cash flows reconciles changes in liability and equity accounts from beginning to end of the period, rather than reconciling net income to net cash provided by financing activities.

Question 9

Under the direct method of cash flow to prepare the statement of cash flows,which of the following is not included in the statement of cash flows?
A)Changes in accounts receivable
B)Changes in depreciation
C)Changes in accounts payable
D)Changes in interest expense

Accepted Answer

The direct method of cash flow only includes items that directly affect cash transactions, such as changes in accounts receivable, accounts payable, and interest expense. Depreciation is a non-cash expense and is therefore not included in the statement of cash flows prepared under the direct method.

Question 10

All of the following are categories in the operating activities section using the direct method in the statement of cash flows except
A)changes in amortization
B)changes in accounts receivable
C)changes in inventory
D)changes in accounts payable

Accepted Answer

Changes in amortization would fall under the investing activities section, not the operating activities section, using the direct method in the statement of cash flows.

Question 11

When a company uses the direct method to present the statement of cash flows,depreciation expense must be added to net income to reconcile to net cash provided by operating activities.

Accepted Answer

In the direct method, cash receipts and cash payments from operating activities are listed directly, so there is no need to adjust net income for non-cash items like depreciation expense.

Question 12

A company's income statement reports $30,000 depreciation expenses during the period.Using the direct method to prepare the statement of cash flows,how would the depreciation expense be reported on the statement of cash flows?
A)Depreciation expense would be an addition under investing activities.
B)Depreciation expense would be an addition under financing activities.
C)Depreciation expense would be a deduction under operating activities.
D)Depreciation expense would not be reported on the statement of cash flows.

Accepted Answer

Depreciation expense is a non-cash charge and does not affect cash flow; therefore, it is not reported on the statement of cash flows when using the direct method.

Question 13

When a company uses the direct method to present the statement of cash flows,the payment of cash dividends reduces the amount of net cash provided by operating activities.

Accepted Answer

In the direct method of presenting the statement of cash flows, the payment of cash dividends is classified under financing activities, not operating activities.

Question 14

Using the direct method to prepare the statement of cash flows,cash payments for merchandise inventory is categorized on the statement of cash flows as
A)a cash payment in the operating activities section on the statement of cash flows.
B)a cash receipt in the operating activities section on the statement of cash flows.
C)a cash payment in the investing activities section on the statement of cash flows.
D)a cash receipt in the investing activities section on the statement of cash flows.

Accepted Answer

Cash payments for merchandise inventory are part of a company's regular operating activities related to the purchase of inventory for resale. Therefore, it is categorized as a cash payment in the operating activities section on the statement of cash flows.

Question 15

The direct method lists the receipt and payment of cash for specific operating activities.

Accepted Answer

The direct method of reporting cash flows from operating activities lists the major categories of operating cash receipts and payments, such as cash received from customers and cash paid to suppliers. It provides a more detailed and useful information to financial statement users.

Question 16

Under the direct method of cash flow,which of the following is not included in the statement of cash flows?
A)Changes in accounts receivable
B)Changes in accounts payable
C)Changes in inventories
D)Changes in amortization

Accepted Answer

Changes in amortization are not included in the statement of cash flows under the direct method because it is a non-cash expense. The direct method only takes into account actual cash received from customers and paid to suppliers. Changes in accounts receivable, accounts payable, and inventories are all included in the statement of cash flows because they are directly related to the cash inflows and outflows of the business operations.

Question 17

When a company uses the direct method to present the statement of cash flows,cash received from the sale of a long-term asset increases the amount of net cash provided by investing activities.

Accepted Answer

Under the direct method of presenting the statement of cash flows, cash received from the sale of a long-term asset is reported as an inflow in the investing activities section, thereby increasing the net cash provided by investing activities.

Question 18

Which of the following would not appear on a statement of cash flows prepared using the direct method?
A)Cash receipts from customers
B)Cash payments for insurance
C)Depreciation expense
D)Cash payments for salaries and wages

Accepted Answer

Depreciation expense would not appear on a statement of cash flows prepared using the direct method as it is a non-cash expense. The direct method only reports actual cash inflows and outflows. Cash receipts from customers (A), cash payments for insurance (B), and cash payments for salaries and wages (D) would all appear on a statement of cash flows prepared using the direct method as they represent actual cash inflows and outflows.

Question 19

Which of the following would appear on a statement of cash flows prepared using the direct method?
A)Interest received on a loan would appear on the statement of cash flows.
B)Collections from customers would appear on the statement of cash flows.
C)Cash payment of dividends would appear on the statement of cash flows.
D)All of the above would appear on the statement of cash flows.

Accepted Answer

The direct method of preparing the statement of cash flows shows the actual cash inflows and outflows during a period of time. Therefore, all three options mentioned in the question would appear on the statement of cash flows prepared using the direct method. Option A would appear as an inflow of cash, option B would appear as an inflow of cash, and option C would appear as an outflow of cash.

Question 20

The managerial accountant at the Holiday Musical Academy is required to complete the statement of cash flows.The managerial accountant is required to determine the amount of money the company used to purchase property,plant,and equipment (PP&E)during the year.The balance of PP&E at the beginning of the year is $1,850,000 and the balance of PP&E at the end of the year is $2,950,000.The managerial accountant reviewed the general journal and noticed that the original cost of equipment sold during the year was $20,000.
Using the following information,calculate the amount of cash the company paid in cash to purchase new property,plant,and equipment during the year:

A)$20,000
B)$1,850,000
C)$1,120,250
D)$2,950,250

Accepted Answer

C)$2,950,250 + $20,000 - $1,850,000 = $1,120,250

Quiz 13: Statement of Cash Flows

The ________ section in a statement of cash flows using the direct method of cash flows is not the same compared to the indirect method of cash flows on the statement of cash flows.

Using the direct method to prepare the statement of cash flows,cash payments to supplies is computed as

When a company uses the direct method to present the statement of cash flows,cash received from the sale of treasury stock increases the amount of net cash provided by investing activities.

Using the direct method to prepare the statement of cash flows,how would the amount of cash payments to employees categorized on the statement of cash flows?

Which of the following would appear on a statement of cash flows prepared using the direct method?

Under the direct method of cash flow,which of the following is not included in the statement of cash flows?

The direct method of presenting the financing activities section of the statement of cash flows reconciles net income to net cash provided by financing activities.

Under the direct method of cash flow to prepare the statement of cash flows,which of the following is not included in the statement of cash flows?

All of the following are categories in the operating activities section using the direct method in the statement of cash flows except

When a company uses the direct method to present the statement of cash flows,depreciation expense must be added to net income to reconcile to net cash provided by operating activities.

A company's income statement reports $30,000 depreciation expenses during the period.Using the direct method to prepare the statement of cash flows,how would the depreciation expense be reported on the statement of cash flows?

When a company uses the direct method to present the statement of cash flows,the payment of cash dividends reduces the amount of net cash provided by operating activities.

Using the direct method to prepare the statement of cash flows,cash payments for merchandise inventory is categorized on the statement of cash flows as

The direct method lists the receipt and payment of cash for specific operating activities.

Under the direct method of cash flow,which of the following is not included in the statement of cash flows?

When a company uses the direct method to present the statement of cash flows,cash received from the sale of a long-term asset increases the amount of net cash provided by investing activities.

Which of the following would not appear on a statement of cash flows prepared using the direct method?

Which of the following would appear on a statement of cash flows prepared using the direct method?