Question 1

Nelson Company collected the following data in its accounting records in 20B: No new equipment was purchased during the year.What was the cash inflow from the sale of equipment in 20B?
A)$600.
B)$900.
C)$1,000.
D)$3,900.

Accepted Answer

The answer of Nelson Company collected the following data in...

Question 2

When the statement of cash flows is prepared in conformity with IFRS there is only one acceptable way to measure and report cash flows from operating activities.

Accepted Answer

While IFRS provides guidance on how to prepare and present the statement of cash flows, there may be different acceptable ways to measure and report cash flows from operating activities, as long as they are consistent with IFRS principles and guidelines.

Question 3

A company acquired some land (independently appraised at $12,000)and paid for it by issuing 1,000 shares of its common shares (par $10 per share; no market price was quoted).How should this be reported on the statement of cash flows?
A)Report $12,000 as inflow and outflow of cash.
B)Report $12,000 as an inflow of cash.
C)Should not be reported on the statement of cash flows.
D)Report on a schedule of significant noncash transactions if it is material.

Accepted Answer

The acquisition of land through the issuance of common shares is a significant noncash transaction and should be reported on a schedule of significant noncash transactions, if material. Therefore, option D is the best choice. Reporting $12,000 as an inflow or outflow of cash would be incorrect since there was no actual cash inflow or outflow. Option C is also incorrect, as even though no actual cash was involved, the transaction is still significant and should be disclosed.

Question 4

In the years 2005-2008,B Co.'s capital acquisitions ratio was 2.74 and from 2009-2012,it was 1.24.From 2009-2012,R Co.'s ratio was .30.Which of the following statements about B Co.'s capital acquisitions ratio is correct?
A)B Co.'s capital acquisitions ratio is relatively low and indicates inability to finance property,plant and equipment with cash flow from operations.
B)It appears that R Co.is more aggressive about investing in additional property,plant and equipment than is B Co.
C)B Co.'s ratio has improved in the period 2009-2012.
D)It appears that B Co.is more aggressive about investing in additional property,plant and equipment than is R Co.

Accepted Answer

B Co.'s capital acquisitions ratio is relatively low and indicates inability to finance property,plant and equipment with cash flow from operations.

Question 5

The statement of cash flows is dated exactly like the income statement but unlike the statement of financial position.

Accepted Answer

The statement of cash flows is dated exactly like the income statement, typically covering a period of one year, while the statement of financial position (balance sheet) is dated as of a specific point in time (such as the end of a fiscal year).

Question 6

When a cash dividend is paid,the cash outflow is classified as an operating activity.

Accepted Answer

The answer of When a cash dividend is paid,the cash...

Question 7

If there is a change in cash,there will be a change in one or more noncash accounts.

Accepted Answer

This is because cash is part of the balance sheet, and any changes in cash will affect the overall balance sheet equation, which must always be balanced, so other accounts must adjust accordingly. For example, if cash increases, there could be an increase in accounts receivable, inventory or investments. Conversely, if cash decreases, there could be a decrease in accounts payable, long-term debt or retained earnings, among other possibilities.

Question 8

Short-term investments in marketable equity securities are considered the equivalent of cash (i.e.,they are combined with cash)in preparing the statement of cash flows.

Accepted Answer

The answer of Short-term investments in marketable equity securities are...

Question 9

The net cash inflow or outflow for the year is the same amount as the increase or decrease in cash and cash equivalents for the year.

Accepted Answer

This is because the net cash inflow or outflow represents the net change in cash and cash equivalents for the year, which is reflected in the increase or decrease of these accounts on the balance sheet.

Question 10

Randy,Inc.,issued $50,000 of bonds,paid cash dividends of $8,000,sold long-term investments for $12,000,received $5,000 of dividend revenue,purchased treasury shares for $15,000,and purchased new equipment for $19,000.What is the net cash flow from financing activities?
A)($20,000).
B)$27,000.
C)$70,000.
D)$80,000.

Accepted Answer

The answer of Randy,Inc.,issued $50,000 of bonds,paid cash dividends of...

Question 11

If a loss of $20,000 is incurred in selling (for cash)office equipment that cost $90,000 and had accumulated depreciation of $22,500,the total amount reported in the investing activities section of the statement of cash flows is
A)$70,000.
B)$67,500.
C)$47,500.
D)$87,500.

Accepted Answer

The total amount reported in the investing activities section of the statement of cash flows is equal to the cash proceeds received from the sale of the office equipment.

To calculate the cash proceeds, we need to deduct the loss on the sale from the selling price:

Selling price = $90,000 - $22,500 = $67,500 
Cash proceeds = selling price - loss on sale = $67,500 - $20,000 = $47,500

Therefore, the answer is C) $47,500.

Question 12

The statement of cash flows and the statement of cash flows both report on the causes of the changes in the cash of the business.

Accepted Answer

The statement of cash flows is the only financial statement that specifically reports on the causes of changes in the cash of the business.

Question 13

Cash equivalents are highly liquid investments with original maturities of less than six months.

Accepted Answer

Cash equivalents are highly liquid investments with original maturities of three months or less, not six months.

Question 14

Typical financing activities do NOT include the following:
A)Proceeds from issuance of short- and long-term borrowings.
B)Principal payments on short- and long-term borrowings.
C)Purchase of short- or long-term investments for cash.
D)Purchase of shares for retirement.

Accepted Answer

Financing activities typically involve obtaining or repaying funds through borrowing, issuance of stock, or other external sources of capital. Purchasing short- or long-term investments for cash is not considered a typical financing activity.

Question 15

The income statement,statement of financial position and statement of cash flows all are prepared on the accrual basis.

Accepted Answer

The answer of The income statement,statement of financial position and...

Question 16

Lori Company sold an operational asset,a machine,for cash.It originally cost $20,000.The accumulated depreciation at the date of disposal was $15,000.A gain on the disposal of $2,000 was reported.What was the cash inflow from this transaction?
A)$3,000.
B)$4,000.
C)$5,000.
D)$7,000.

Accepted Answer

The answer of Lori Company sold an operational asset,a machine,for...

Question 17

Cash equivalents are defined as short-term,highly liquid investments that are readily convertible into known amounts of cash and are so near their maturity that there is insignificant risk of changes in their value due to interest rate changes.

Accepted Answer

This is the generally accepted definition of cash equivalents.

Question 18

In 2012,C Co.disclosed cash paid for property,plant and equipment of $1.069 million and cash flow from operations of $3.883 million.Their average property,plant and equipment from the comparative statement of financial position was $3.968 million.Compute C Co.'s capital acquisitions ratio for 2012.
A).28
B).77
C).98
D)3.63

Accepted Answer

The capital acquisitions ratio is calculated by dividing cash flow from operations by cash paid for property, plant, and equipment. Thus, $3.883 million / $1.069 million = 3.63.

Question 19

In 2012,C Co.reported a quality of earnings ratio of 1.60.In 2011 and 2010 the ratio was .97 and .98 respectively.Which of the following was the most likely cause of the large increase in the ratio?
A)An increase in current assets such as receivables and inventory.
B)An increase in trade payables and accrued liabilities.
C)An increase in sales revenue while profit remained the same.
D)None of these is a likely cause.

Accepted Answer

The answer of In 2012,C Co.reported a quality of earnings...

Question 20

The net cash inflow (or outflow)from operating activities is computed by adjusting the reported accrual profit for noncash revenue and noncash expense items.

Accepted Answer

The net cash inflow (or outflow) from operating activities is determined by adjusting the reported accrual profit for noncash revenue and noncash expense items. This is done to convert the accrual basis of accounting to a cash basis for the purpose of determining cash flows from operating activities. Therefore, the statement is true.

Quiz 5: Communicating and Interpreting Accounting Information

Nelson Company collected the following data in its accounting records in 20B: No new equipment was purchased during the year.What was the cash inflow from the sale of equipment in 20B?

When the statement of cash flows is prepared in conformity with IFRS there is only one acceptable way to measure and report cash flows from operating activities.

A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common shares (par $10 per share; no market price was quoted) .How should this be reported on the statement of cash flows?

In the years 2005-2008,B Co.'s capital acquisitions ratio was 2.74 and from 2009-2012,it was 1.24.From 2009-2012,R Co.'s ratio was .30.Which of the following statements about B Co.'s capital acquisitions ratio is correct?

The statement of cash flows is dated exactly like the income statement but unlike the statement of financial position.

When a cash dividend is paid,the cash outflow is classified as an operating activity.

If there is a change in cash,there will be a change in one or more noncash accounts.

Short-term investments in marketable equity securities are considered the equivalent of cash (i.e.,they are combined with cash)in preparing the statement of cash flows.

The net cash inflow or outflow for the year is the same amount as the increase or decrease in cash and cash equivalents for the year.

Randy,Inc.,issued $50,000 of bonds,paid cash dividends of $8,000,sold long-term investments for $12,000,received $5,000 of dividend revenue,purchased treasury shares for $15,000,and purchased new equipment for $19,000.What is the net cash flow from financing activities?

If a loss of $20,000 is incurred in selling (for cash) office equipment that cost $90,000 and had accumulated depreciation of $22,500,the total amount reported in the investing activities section of the statement of cash flows is

The statement of cash flows and the statement of cash flows both report on the causes of the changes in the cash of the business.

Cash equivalents are highly liquid investments with original maturities of less than six months.

Typical financing activities do NOT include the following:

The income statement,statement of financial position and statement of cash flows all are prepared on the accrual basis.

Lori Company sold an operational asset,a machine,for cash.It originally cost $20,000.The accumulated depreciation at the date of disposal was $15,000.A gain on the disposal of $2,000 was reported.What was the cash inflow from this transaction?

Cash equivalents are defined as short-term,highly liquid investments that are readily convertible into known amounts of cash and are so near their maturity that there is insignificant risk of changes in their value due to interest rate changes.

In 2012,C Co.disclosed cash paid for property,plant and equipment of $1.069 million and cash flow from operations of $3.883 million.Their average property,plant and equipment from the comparative statement of financial position was $3.968 million.Compute C Co.'s capital acquisitions ratio for 2012.

In 2012,C Co.reported a quality of earnings ratio of 1.60.In 2011 and 2010 the ratio was .97 and .98 respectively.Which of the following was the most likely cause of the large increase in the ratio?

The net cash inflow (or outflow)from operating activities is computed by adjusting the reported accrual profit for noncash revenue and noncash expense items.