Question 1

Which of the following can be found on the statement of cash flows?
A) cash flows from operating activities
B) total assets
C) total changes in stockholders' equity
D) changes in retained earnings

Accepted Answer

The statement of cash flows includes cash flows from operating activities, detailing how much cash is generated from the company's regular business operations. Choices B, C, and D refer to information typically found on the balance sheet and the statement of retained earnings, not the statement of cash flows.

Question 2

Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows?
A) retirement of bond payable
B) acquisition of treasury stock
C) declaration of stock dividends
D) issuance of long-term debt

Accepted Answer

Issuance of long-term debt represents an inflow of cash as the company is receiving cash by issuing debt. The other options represent outflows of cash - retirement of bond payable means the company is paying off its debt, acquisition of treasury stock means the company is buying back its own stock using cash, and declaration of stock dividends means the company is distributing cash to shareholders.

Question 3

Under the direct method of preparing a statement of cash flows,the gain on the sale of land is not adjusted or reported as part of cash flows from operating activities.

Accepted Answer

Under the direct method, the gain on the sale of land is reported as part of cash flows from investing activities, not operating activities.

Question 4

On the statement of cash flows,the cash flows from operating activities section would include
A) receipts from the issuance of capital stock
B) receipts from the sale of investments
C) payments for the acquisition of investments
D) cash receipts from sales activities

Accepted Answer

The cash flows from operating activities section of the statement of cash flows includes cash receipts and payments related to a company's primary business activities, such as sales and expenses. Therefore, the cash receipts from sales activities would be included in this section. Receipts from the issuance of capital stock and the sale of investments would be included in the financing activities section, while payments for the acquisition of investments would be included in the investing activities section.

Question 5

The manner of reporting cash flows from investing and financing activities will be different under the direct method as compared to the indirect method.

Accepted Answer

The direct and indirect methods differ only in the reporting of cash flows from operating activities; the reporting of cash flows from investing and financing activities is the same under both methods.

Question 6

Which of the following would not be found in a schedule of noncash investing and financing activities,reported at the end of a statement of cash flows?
A) equipment acquired in exchange for a note payable
B) bonds payable exchanged for capital stock
C) purchase of treasury stock
D) capital stock issued to acquire fixed assets

Accepted Answer

A schedule of noncash investing and financing activities reports transactions that did not involve the transfer of cash, but rather the exchange of other assets or liabilities. Choices A, B, and D all involve exchanges of one asset or liability for another, which would be reported in this schedule. However, the purchase of treasury stock involves the use of cash to buy back the company's own stock, which would be reported under the operating activities section of the statement of cash flows.

Question 7

A ten-year bond was issued at par for $250,000 cash.This transaction should be shown on a statement of cash flows under
A) investing activities
B) financing activities
C) noncash investing and financing activities
D) operating activities

Accepted Answer

The issuance of a bond is a financing activity because it involves raising funds through borrowing. The cash received from the issuance of the bond is shown as an inflow in the financing section of the statement of cash flows.

Question 8

There is no difference in the investing and financing sections of the statement of cash flows using the indirect and direct method.

Accepted Answer

The indirect and direct methods differ only in the presentation of the cash flows from operating activities; the investing and financing sections are presented in the same way under both methods.

Question 9

To determine cash payments for income taxes for the statement of cash flows using the direct method,an increase in income taxes payable is added to the income tax expense.

Accepted Answer

To determine cash payments for income taxes for the statement of cash flows using the direct method, an increase in income taxes payable would be subtracted from the income tax expense, not added, to reflect the portion of the expense not yet paid in cash.

Question 10

Sales reported on the income statement were $372,000.The accounts receivable balance declined $4,500 over the year.The amount of cash received from customers was $367,500.

Accepted Answer

Sales reported on the income statement ($372,000) are not necessarily equal to the amount of cash received from customers ($367,500) as there could be instances of credit sales. The accounts receivable balance declining by $4,500 suggests that some customers may have paid their outstanding balance during the year but not necessarily all of them.

Question 11

To determine cash payments for operating expenses for the statement of cash flows using the direct method,a decrease in prepaid expenses is added to operating expenses other than depreciation.

Accepted Answer

When using the direct method to determine cash payments for operating expenses, a decrease in prepaid expenses is subtracted from operating expenses other than depreciation, because the decrease indicates that the expense was recognized in the income statement without an actual cash outflow during the period.

Question 12

Cash paid for preferred stock dividends should be shown on the statement of cash flows under
A) investing activities
B) financing activities
C) noncash investing and financing activities
D) operating activities

Accepted Answer

Preferred stock dividends are paid to investors as a return on their investment in the company and are therefore a financing activity. They are not related to the company's operations or investments, so they would not be classified as operating or investing activities. Noncash investing and financing activities involve transactions that do not involve the actual transfer of cash, such as exchanging stock for assets, so this would not be an appropriate classification for cash paid for preferred stock dividends.

Question 13

When using the spreadsheet (work sheet)method to analyzing noncash accounts,no order of analysis is required,but it is more efficient to start with Retained Earnings and proceed upward in the account listing.

Accepted Answer

While there is no particular order that must be followed when analyzing noncash accounts using the spreadsheet method, it is generally more efficient to start with Retained Earnings and work upward in the listing of accounts. This allows for easy calculation of prior period adjustments and ensures that any changes made to the accounts are properly reflected in the retained earnings balance.

Question 14

Preferred stock issued in exchange for land would be reported in the statement of cash flows in
A) the cash flows from financing activities section
B) the cash flows from investing activities section
C) a separate schedule
D) the cash flows from operating activities section

Accepted Answer

Exchanging preferred stock for land is a non-cash transaction and would not appear in the main sections of the cash flow statement. Instead, it is disclosed in a separate schedule or note to the financial statements.

Question 15

Cash paid to purchase long-term investments would be reported in the statement of cash flows in
A) the cash flows from operating activities section
B) the cash flows from financing activities section
C) the cash flows from investing activities section
D) a separate schedule

Accepted Answer

Cash paid to purchase long-term investments would be reported in the statement of cash flows in the cash flows from investing activities section as it represents a capital expenditure and is not related to operating or financing activities.

Question 16

Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current operations.

Accepted Answer

Free cash flow is calculated by subtracting capital expenditures, or fixed asset additions, from operating cash flow. This leaves the cash available for investments, acquisitions, dividend payments, or other corporate purposes.

Question 17

To determine cash payments for merchandise for the statement of cash flows using the direct method,a decrease in accounts payable is added to the cost of goods sold.Assume all accounts payable are owed to merchandise suppliers.

Accepted Answer

The answer of To determine cash payments for merchandise for...

Question 18

To determine cash payments for operating expenses for the statement of cash flows using the direct method,a decrease in accrued expenses is added to operating expenses other than depreciation.

Accepted Answer

Accrued expenses represent expenses that have been incurred but not yet paid. An increase in accrued expenses is added to operating expenses other than depreciation to determine cash payments for operating expenses using the direct method, whereas a decrease in accrued expenses is subtracted. Therefore, adding a decrease in accrued expenses to operating expenses would be the correct approach to determine cash payments for operating expenses.

Question 19

Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?
A) purchase of noncurrent assets
B) purchase of treasury stock
C) discarding an asset that had been fully depreciated
D) payment of cash dividends

Accepted Answer

Discarding an asset that had been fully depreciated represents a non-cash transaction and therefore would not be reported on the statement of cash flows. Choices A, B, and D all involve actual cash payments and would be reported as uses of cash.

Question 20

Which of the following is not one of the four basic financial statements?
A) balance sheet
B) statement of cash flows
C) statement of changes in financial position
D) income statement

Accepted Answer

The four basic financial statements are the balance sheet, income statement, statement of cash flows, and statement of changes in equity. The statement of changes in financial position is not one of the basic financial statements, although it may be used by some organizations.

Quiz 13: Statement of Cash Flows

Which of the following can be found on the statement of cash flows?

Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows?

Under the direct method of preparing a statement of cash flows,the gain on the sale of land is not adjusted or reported as part of cash flows from operating activities.

On the statement of cash flows,the cash flows from operating activities section would include

The manner of reporting cash flows from investing and financing activities will be different under the direct method as compared to the indirect method.

Which of the following would not be found in a schedule of noncash investing and financing activities,reported at the end of a statement of cash flows?

A ten-year bond was issued at par for $250,000 cash.This transaction should be shown on a statement of cash flows under

There is no difference in the investing and financing sections of the statement of cash flows using the indirect and direct method.

To determine cash payments for income taxes for the statement of cash flows using the direct method,an increase in income taxes payable is added to the income tax expense.

Sales reported on the income statement were $372,000.The accounts receivable balance declined $4,500 over the year.The amount of cash received from customers was $367,500.

To determine cash payments for operating expenses for the statement of cash flows using the direct method,a decrease in prepaid expenses is added to operating expenses other than depreciation.

Cash paid for preferred stock dividends should be shown on the statement of cash flows under

When using the spreadsheet (work sheet)method to analyzing noncash accounts,no order of analysis is required,but it is more efficient to start with Retained Earnings and proceed upward in the account listing.

Preferred stock issued in exchange for land would be reported in the statement of cash flows in

Cash paid to purchase long-term investments would be reported in the statement of cash flows in

Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current operations.

To determine cash payments for merchandise for the statement of cash flows using the direct method,a decrease in accounts payable is added to the cost of goods sold.Assume all accounts payable are owed to merchandise suppliers.

To determine cash payments for operating expenses for the statement of cash flows using the direct method,a decrease in accrued expenses is added to operating expenses other than depreciation.

Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

Which of the following is not one of the four basic financial statements?