Question 1

Activities that affect long-term liabilities and stockholders' equity are:
A)investing activities.
B)operating activities.
C)financing activities.
D)noncash investing and financing activities.

Accepted Answer

Long-term liabilities and stockholders' equity are primarily affected by financing activities, such as borrowing or repaying debt, issuing or buying back stocks, and paying dividends to shareholders. Operating activities may also have an impact on these items, but to a lesser extent. Investing activities and noncash investing and financing activities are more related to changes in assets and their financing, rather than liabilities and equity.

Question 2

1.1.is:
A)deducted from net income to determine net cash provided by operating activities.
B)reported in the investing activities section.
C)not reported.
D)added to net income to determine net cash provided by operating activities.

Accepted Answer

Depreciation is a non-cash expense and is added back to net income in the operating activities section of the cash flow statement to determine net cash provided by operating activities.

Question 3

Cash receipts from financing activities do NOT include:
A)issuing stock for cash.
B)selling treasury stock.
C)purchase of treasury stock.
D)borrowing on long-term notes payable.

Accepted Answer

Cash receipts from financing activities include issuing stock for cash, selling treasury stock and borrowing on long-term notes payable. However, the purchase of treasury stock results in cash outflows and is therefore not included in cash receipts from financing activities.

Question 4

Naraval Corporation sold used equipment with a book value of $31,000 for $27,000. The indirect method statement of cash flows will reflect:
A)an addition of $27,000 in the investing activities section and an addition of $4,000 in the operating activities section.
B)an addition of $27,000 in the investing activities section and a deduction of $4,000 in the operating activities section.
C)an addition of $31,000 in the investing activities section and an addition of $4,000 in the operating activities section.
D)an addition of $31,000 in the investing activities section and a deduction of $4,000 in the operating activities section.

Accepted Answer

The answer of Naraval Corporation sold used equipment with a...

Question 5

Phoenix Rising Corporation sold an unused building for $177,000. The building's book value on the date of sale was $172,000. How will this transaction appear in a statement of cash flows prepared using the indirect method?
A)A $172,000 increase in investing activities and $5,000 increase in operating activities
B)A $177,000 increase in investing activities and $5,000 increase in operating activities
C)A $177,000 increase in investing activities and $5,000 decrease in operating activities
D)A $172,000 increase in investing activities and $5,000 decrease in operating activities

Accepted Answer

The answer of Phoenix Rising Corporation sold an unused building...

Question 6

Which of the following transactions would be recorded on the schedule of noncash investing and financing activities ?
A)Issuance of common stock for cash
B)Issuance of common stock for land
C)Payment of dividends on common stock
D)Purchase of treasury stock

Accepted Answer

The issuance of common stock for land involves a noncash transaction, which would be recorded on the schedule of noncash investing and financing activities. The other transactions listed all involve cash transactions and would not be recorded on this schedule.

Question 7

Cash receipts from investing activities include:
A)issuing stock for cash.
B)selling treasury stock.
C)acquisition of plant assets.
D)sale of plant assets.

Accepted Answer

Cash receipts from investing activities refer to transactions involving the purchase or sale of long-term assets or investments. The sale of plant assets is an example of cash receipts from investing activities, as it results in cash inflows for the company. Choices A and B are examples of cash receipts from financing activities, while choice C is an example of cash payments for investing activities.

Question 8

Yanks Company acquired a building by issuing common stock with a market value of $490,000. This transaction would be recorded on the statement of cash flows as a(n):
A)investing activity.
B)operating activity.
C)financing activity.
D)noncash investing and financing activity on a separate schedule on the statement of cash flows.

Accepted Answer

This transaction involves acquiring an asset (building) by issuing stock, which does not involve cash. Therefore, it is reported as a noncash investing and financing activity on a separate schedule in the statement of cash flows.

Question 9

Tryout Corporation's balance in its land account, which represented one piece of land, was $100,000. During the year, the piece of land was sold for $165,000. The amount reported in the investing activities section of the statement of cash flows would be:
A)$100,000.
B)$165,000.
C)$ 65,000.
D)none of the above.

Accepted Answer

The amount reported in the investing activities section of the statement of cash flows is the cash received from the sale of the land, which is $165,000.

Question 10

Cash payments from investing activities do NOT include:
A)issuing stock for cash.
B)acquisition of plant assets.
C)making loans to others.
D)purchase of long-term investments that are not cash equivalents.

Accepted Answer

Cash payments from investing activities only include the purchase of long-term assets such as property, plant, and equipment, investments in other companies, and loans made to others. Issuing stock for cash is a financing activity.

Question 11

On a statement of cash flows prepared using the indirect method, an increase in Accounts Receivable during the period is:
A)added to net income to determine net cash provided by investing activities.
B)deducted from net income to determine net cash provided by investing activities.
C)deducted from net income to determine net cash provided by operating activities.
D)added to net income to determine net cash provided by operating activities.

Accepted Answer

An increase in Accounts Receivable during the period indicates that the company has not received cash for sales made during the period. This change is related to the company's operating activities, so it should be reported as an adjustment to net income in the operating section of the statement of cash flows. Therefore, it should be deducted from net income to determine net cash provided by operating activities.

Question 12

On a statement of cash flows prepared using the indirect method, an increase in Accounts Payable during the period is:
A)deducted from net income to determine net cash provided by operating activities.
B)added to net income to determine net cash provided by financing activities.
C)added to net income to determine net cash provided by operating activities.
D)deducted from net income to determine net cash provided by financing activities.

Accepted Answer

An increase in Accounts Payable indicates that expenses have been incurred but not yet paid, which means cash has not been used. Therefore, it is added back to net income in the operating activities section of the cash flow statement.

Question 13

Cash payments from financing activities include:
A)issuing stock for cash.
B)selling treasury stock.
C)acquisition of plant assets.
D)payment of dividends.

Accepted Answer

The answer of Cash payments from financing activities include:
A)issuing stock...

Question 14

Hubble Corporation, which uses the indirect method to prepare its statement of cash flows, sold used equipment for cash. Which statement regarding this sale is TRUE?
A)The cash from operating activities will be greater if the direct method is used to prepare the statement of cash flows.
B)The effect on cash from operating activities depends on whether there was a gain or loss on sale.
C)The cash from operating activities will be less if the direct, rather than indirect, method is used to prepare the statement of cash flows.
D)The cash from operating activities will not be reported if the indirect method is used to prepare the statement of cash flows.

Accepted Answer

The effect on cash from operating activities depends on whether there was a gain or loss on the sale. If there was a gain, it should be deducted from net income to arrive at net cash provided by operating activities; if there was a loss, it should be added back to net income to arrive at net cash provided by operating activities. The choice of using the direct or indirect method does not affect the treatment of a gain or loss on sale of equipment.

Question 15

Activities that affect long-term assets are:
A)investing activities.
B)operating activities.
C)financing activities.
D)noncash investing and financing activities.

Accepted Answer

Investing activities are those activities that involve the purchase or sale of long-term assets, such as property, plant, and equipment, and investments in other companies. These activities have a significant impact on a company's long-term growth and profitability.

Question 16

The following data is provided for last year. Net income was $30,000. Current assets (other than cash)increased by $12,000 and current liabilities increased by $8,000. Under the indirect method, the cash flows from operating activities would be:
A)$34,000.
B)$10,000.
C)$30,000.
D)$26,000.

Accepted Answer

The cash flows from operating activities under the indirect method can be calculated as:
Net income + Depreciation and amortization - Increase in current assets (other than cash) + Increase in current liabilities
= $30,000 + Depreciation and amortization - $12,000 + $8,000
Since no depreciation or amortization is given, we assume it to be zero.
Therefore, cash flows from operating activities = $30,000 - $12,000 + $8,000
= $26,000

Question 17

Thunder Corporation had a beginning balance in net plant assets of $220,000. During the year, Thunder purchased $60,000 of new plant assets. Depreciation expense for the year was $30,000, and there was a net gain on the sale of plant assets was $3,000. The ending balance in net plant assets was $170,000. The book value of the plant assets sold was:
A)$ 80,000.
B)$140,000.
C)$ 40,000.
D)none of the above.

Accepted Answer

The answer of Thunder Corporation had a beginning balance in...

Question 18

Thunder Corporation had a beginning balance in net plant assets of $220,000. During the year, Thunder purchased $60,000 of new plant assets. Depreciation expense for the year was $30,000 and there was a net gain on the sale of plant assets was $3,000. The ending balance in net plant assets was $170,000. The cash received from the sale of the plant assets was:
A)$80,000.
B)$88,000.
C)$83,000.
D)none of the above.

Accepted Answer

The ending balance is calculated as: Beginning balance ($220,000) + Purchases ($60,000) - Depreciation ($30,000) - Book value of assets sold = Ending balance ($170,000). Solving for the book value of assets sold gives $80,000. Since there was a $3,000 gain, the cash received was $80,000 + $3,000 = $83,000.

Question 19

Tryout Corporation's balance in its land account, which represented one piece of land, was $100,000. During the year, the piece of land was sold for $165,000. The amount reported in the operating activities section of the statement of cash flows, using the indirect method, would be a(n):
A)$100,000 increase to net income.
B)$165,000 decrease to net income.
C)$ 65,000 increase to net income.
D)$ 65,000 decrease to net income.

Accepted Answer

The gain on the sale of land ($165,000 - $100,000 = $65,000) is deducted from net income in the operating activities section when using the indirect method.

Question 20

The following data is provided for last year. Net income was $210,000. Current receivables and prepaid expenses increased by $10,000 and $2,000, respectively. Current payables decreased by $8,000. Under the indirect method, the cash flows from operating activities would be:
A)$190,000.
B)$206,000.
C)$230,000.
D)$214,000.

Accepted Answer

The answer of The following data is provided for last...

Quiz 12: The Statement of Cash Flows

Activities that affect long-term liabilities and stockholders' equity are:

1.1.is:

Cash receipts from financing activities do NOT include:

Naraval Corporation sold used equipment with a book value of $31,000 for $27,000. The indirect method statement of cash flows will reflect:

Phoenix Rising Corporation sold an unused building for $177,000. The building's book value on the date of sale was $172,000. How will this transaction appear in a statement of cash flows prepared using the indirect method?

Which of the following transactions would be recorded on the schedule of noncash investing and financing activities ?

Cash receipts from investing activities include:

Yanks Company acquired a building by issuing common stock with a market value of $490,000. This transaction would be recorded on the statement of cash flows as a(n) :

Tryout Corporation's balance in its land account, which represented one piece of land, was $100,000. During the year, the piece of land was sold for $165,000. The amount reported in the investing activities section of the statement of cash flows would be:

Cash payments from investing activities do NOT include:

On a statement of cash flows prepared using the indirect method, an increase in Accounts Receivable during the period is:

On a statement of cash flows prepared using the indirect method, an increase in Accounts Payable during the period is:

Cash payments from financing activities include:

Hubble Corporation, which uses the indirect method to prepare its statement of cash flows, sold used equipment for cash. Which statement regarding this sale is TRUE?

Activities that affect long-term assets are:

The following data is provided for last year. Net income was $30,000. Current assets (other than cash) increased by $12,000 and current liabilities increased by $8,000. Under the indirect method, the cash flows from operating activities would be:

Tryout Corporation's balance in its land account, which represented one piece of land, was $100,000. During the year, the piece of land was sold for $165,000. The amount reported in the operating activities section of the statement of cash flows, using the indirect method, would be a(n) :

The following data is provided for last year. Net income was $210,000. Current receivables and prepaid expenses increased by $10,000 and $2,000, respectively. Current payables decreased by $8,000. Under the indirect method, the cash flows from operating activities would be: