Question 1

Selling stocks of other companies for cash would result in:
A)an increase of cash flow from investing activities.
B)a decrease of cash flow from investing activities.
C)an increase of cash flow from financing activities.
D)a decrease of cash flow from financing activities.

Accepted Answer

Selling stocks of other companies is considered an investing activity, and it results in an increase of cash flow from investing activities.

Question 2

Payments of cash dividends to stockholders would result in:
A)a decrease of cash flow from operating activities.
B)a decrease of cash flow from investing activities.
C)an increase of cash flow from financing activities.
D)a decrease of cash flow from financing activities.

Accepted Answer

Payments of cash dividends to stockholders are classified as financing activities in cash flow statements. Therefore, paying dividends would result in a decrease in cash flow from financing activities.

Question 3

Loaning cash to borrowers would result in:
A)an increase of cash flow from investing activities.
B)a decrease of cash flow from investing activities.
C)an increase of cash flow from financing activities.
D)a decrease of cash flow from financing activities.

Accepted Answer

Loaning cash to borrowers is considered an investing activity, and it results in a cash outflow, thus decreasing cash flow from investing activities.

Question 4

Activities that increase and decrease as a result of selling a company's stock are:
A)marketing activities.
B)operating activities.
C)investing activities.
D)financing activities.

Accepted Answer

Selling a company's stock is considered a financing activity as it involves obtaining funds from external sources. The cash received from selling the stocks increases the financing activities of the company.

Question 5

The accuracy of the statement of cash flows,regardless of method used,can be verified by computing the change in the balance of:
A)cash.
B)equity.
C)revenue.
D)liabilities.

Accepted Answer

The statement of cash flows is a reconciliation of the beginning and ending balances of cash. Therefore, the accuracy of the statement can be verified by computing the change in the balance of cash.

Question 6

Cash generated from operating activities may be computed by using:
A)the indirect method.
B)the direct method.
C)either the direct or indirect method.
D)the combination method.

Accepted Answer

Cash generated from operating activities can be computed using either the direct or indirect method. Both methods are accepted under accounting standards, but they approach the calculation in different ways. The direct method lists all cash receipts and payments, while the indirect method starts with net income and adjusts for non-cash transactions and changes in working capital.

Question 7

The sale of plant and equipment for cash would result in:
A)an increase in cash from investing activities.
B)a decrease in cash from investing activities.
C)an increase added to net income from operations.
D)a decrease subtracted from net income from operations.

Accepted Answer

The sale of plant and equipment for cash is an investing activity, and it will increase cash as well. Therefore, it will result in an increase in cash from investing activities.

Question 8

Activities that pay and collect interest on loans are:
A)financing and investing activities.
B)operating and financing activities.
C)operating and investing activities.
D)marketing activities.

Accepted Answer

Activities that pay and collect interest on loans are classified as operating activities because they are part of the day-to-day operations that generate revenue for the business. Investing activities involve the purchase and sale of long-term assets and investments not related to the core operations.

Question 9

Carolina Company sold a machine for $12,000 cash,which had an original cost of $19,000 and accumulated depreciation of $6,000.The amount of cash provided by this sale is:
A)$12,000.
B)$13,000.
C)$18,000.
D)$19,000.

Accepted Answer

The cash provided by the sale is equal to the selling price of the machine, which is $12,000. The original cost and accumulated depreciation are irrelevant to determining the cash provided by the sale.

Question 10

Transactions dealing with the exchange of cash between the firm and its owners (stockholders)and creditors are called:
A)planning activities.
B)financing activities.
C)investing activities.
D)operating activities.

Accepted Answer

Financing activities involve transactions where cash is exchanged between the company and its owners or creditors. Examples of these activities include issuing stocks, repurchasing stocks, borrowing money, repaying debts, and paying dividends to stockholders. Planning activities involve analyzing data and determining strategies to achieve business goals. Investing activities involve the purchase or sale of long-term assets like property, plant, and equipment. Operating activities involve transactions related to the day-to-day operations of the business like sales, purchases, and expenses.

Question 11

An increase in long-term note payable would mean:
A)an increase of cash flow from investing activities.
B)a decrease of cash flow from investing activities.
C)an increase of cash flow from financing activities.
D)a decrease of cash flow from financing activities.

Accepted Answer

Long-term notes payable represent borrowing that is classified as financing activities. Therefore, an increase in long-term notes payable would mean an increase in cash flow from financing activities.

Question 12

Issuance of common stock for cash would result in:
A)an increase of cash flow from operating activities.
B)a decrease of cash flow from investing activities.
C)an increase of cash flow from financing activities.
D)an increase of cash flow from investing activities.

Accepted Answer

Issuance of common stock for cash is a financing activity, as it involves raising funds from external sources. Therefore, it results in an increase of cash flow from financing activities.

Question 13

The board of directors is considering approving a plant expansion which will require a sizable advance payment to take place early this year.How will this decision affect the period's cash flows from investing-direct method?
A)It will increase this period's cash flows from investing.
B)It will decrease this period's cash flows from investing.
C)It will not affect this period's cash flows from investing.
D)This is not listed in the statement of cash flows.

Accepted Answer

A plant expansion that requires a sizable advance payment is considered a capital expenditure, which is classified under cash flows from investing activities. Making such a payment will result in cash outflow, thereby decreasing this period's cash flows from investing.

Question 14

The board of directors is considering approving a declaration and payment of dividends for the second quarter of the year.How will this decision affect the period's cash flows from operations-indirect method?
A)It will increase this period's cash flows from operations.
B)It will decrease this period's cash flows from operations.
C)It will not affect this period's cash flows from operations.
D)This does not affect cash flows from operations.

Accepted Answer

The answer of The board of directors is considering approving...

Question 15

The section of the statement of cash flows from investing activities includes:
A)buying debts or stocks of other companies.
B)collecting loans and/or interest.
C)cash purchases of equipment.
D)All of the above.

Accepted Answer

The section of the statement of cash flows from investing activities includes all of the above activities, which are buying debts or stocks of other companies, collecting loans and/or interest, and cash purchases of equipment.

Question 16

If $12,000 was generated from operations,$6,000 was used for investing activities,and $4,000 was provided by financing activities,the cash balance would:
A)increase by $14,000.
B)decrease by $20,000.
C)increase by $10,000.
D)increase by $2,000.

Accepted Answer

The cash balance would increase by $10,000 as the $12,000 generated from operations exceeds the $6,000 used for investing activities and $4,000 provided by financing activities. Therefore, the net cash inflow is $12,000 - $6,000 + $4,000 = $10,000.

Question 17

Of the following items,which is not classified as an investing activity on the statement of cash flows?
A)Sale of a plant asset for cash
B)Purchasing land
C)Collecting loans
D)Selling goods and services

Accepted Answer

Selling goods and services is classified as an operating activity on the statement of cash flows, not an investing activity. Investing activities involve the purchase or sale of long-term assets, such as property, plant, and equipment, or investments in securities. A sale of a plant asset for cash (A) is an investing activity, while purchasing land (B) is also an investing activity. Collecting loans (C) can be either an investing or operating activity depending on the nature of the loan.

Question 18

Cash flows from financing activities would include:
A)issuance of long-term notes.
B)cash purchase of stocks and bonds.
C)cash from sale of stock investments.
D)All of these answers are correct.

Accepted Answer

Cash flows from financing activities include any activities related to long-term borrowing or the issuance of stock. Choice A specifically references the issuance of long-term notes, which is a financing activity. Choices B and C are incorrect because they are related to cash flows from investing activities, not financing activities.

Question 19

Which of the following is a cash outflow from a financing activity?
A)A purchase inventory
B)A purchase of treasury stock
C)A payment to buy property
D)A loan made to a third party

Accepted Answer

A purchase of treasury stock is a cash outflow from a financing activity as it involves the company buying back its own shares from the market, which reduces the amount of equity in the business. Purchasing inventory (A) is a cash outflow from operating activities as it is related to the day-to-day operations of the business. A payment to buy property (C) is a cash outflow from investing activities as it involves the purchase of a long-term asset. A loan made to a third party (D) is a cash outflow from financing activities, but it does not involve the company's own cash, as it is providing financing to someone else.

Question 20

A sale of fixed assets for cash is a(n):
A)managing activity.
B)investing activity.
C)financing activity.
D)operating activity.

Accepted Answer

Selling fixed assets for cash is considered an investing activity because it relates to the purchase or sale of long-term assets. Investing activities include acquiring or disposing of long-term assets, such as property, plant, and equipment.

Quiz 21: Statement of Cash Flows

Selling stocks of other companies for cash would result in:

Payments of cash dividends to stockholders would result in:

Loaning cash to borrowers would result in:

Activities that increase and decrease as a result of selling a company's stock are:

The accuracy of the statement of cash flows,regardless of method used,can be verified by computing the change in the balance of:

Cash generated from operating activities may be computed by using:

The sale of plant and equipment for cash would result in:

Activities that pay and collect interest on loans are:

Carolina Company sold a machine for $12,000 cash,which had an original cost of $19,000 and accumulated depreciation of $6,000.The amount of cash provided by this sale is:

Transactions dealing with the exchange of cash between the firm and its owners (stockholders) and creditors are called:

An increase in long-term note payable would mean:

Issuance of common stock for cash would result in:

The board of directors is considering approving a plant expansion which will require a sizable advance payment to take place early this year.How will this decision affect the period's cash flows from investing-direct method?

The board of directors is considering approving a declaration and payment of dividends for the second quarter of the year.How will this decision affect the period's cash flows from operations-indirect method?

The section of the statement of cash flows from investing activities includes:

If $12,000 was generated from operations,$6,000 was used for investing activities,and $4,000 was provided by financing activities,the cash balance would:

Of the following items,which is not classified as an investing activity on the statement of cash flows?

Cash flows from financing activities would include:

Which of the following is a cash outflow from a financing activity?

A sale of fixed assets for cash is a(n) :