Question 1

In arriving at cash from operating activities,subtracting a decrease in Salaries and Wages Payable from net income includes the cash effects of transactions that:

Accepted Answer

A)  increased cash,but did not affect net income.
B)  increased cash and increased net income.
C)  decreased cash,but did not affect net income.
D)  decreased cash and decreased net income.E) All of the above
F) C) and D)

Question 2

The statement of cash flows may be viewed in terms of the balance sheet equation.Which of the following expressions below is correct?

Accepted Answer

A)  Change in Cash = Change in (Liabilities + Stockholders' Equity − Noncash Assets) 
B)  Change in Cash = Change in (Stockholders' Equity − Liabilities + Noncash Assets) 
C)  Change in Cash = Change in (Liabilities − Noncash Assets) 
D)  Change in Cash = Change in (Stockholders' Equity − Liabilities) E) B) and C)
F) A) and C) A

Question 3

Blair Madison Co.issues $2.8 million of new stock and pays $560,000 in cash dividends during the year.In addition,the company took advantage of falling interest rates to borrow $4.2 million in a new bond issue and paid off existing bonds with a face value of $5.6 million.The company bought 1,400 of another company's $1,000 bonds at a $280,000 premium.The net cash flow provided by financing activities is:

Accepted Answer

A)  An inflow of $1,400,000.
B)  An outflow of $560,000.
C)  An outflow of $280,000.
D)  An inflow of $840,000.E) None of the above
F) A) and D)

Question 4

Cash flows from financing activities:

Accepted Answer

A)  includes all cash inflows and outflows associated with a company's lending activities.
B)  includes all cash inflows and outflows between a company and its stockholders.
C)  are always negative because of the payments of cash dividends as well as interest and principal on debt.
D)  are always positive unless the company is experiencing serious financial trouble.E) B) and C)
F) C) and D) B

Question 5

If a company's Cost of Goods Sold is $158,000 for the period,beginning and ending Inventory balances are $18,000 and $13,000,respectively,and the beginning and ending Accounts Payable balances are $19,000 and $7,500,respectively,what is the amount of the cash paid to suppliers?

Accepted Answer

A)  $157,000
B)  $163,500
C)  $164,500
D)  $151,500E) C) and D)
F) B) and D)

Question 6

Which of the following items would not be classified as a cash flow from financing activities?

Accepted Answer

A)  Payments of amounts owed to owners.
B)  Borrowing from financial institutions.
C)  Issuing additional common stock.
D)  Making a payment on account.E) B) and C)
F) None of the above

Question 7

Match each term with the appropriate definition.Not all definitions will be used.
-Comparative Balance Sheet

Accepted Answer

A)  Results from activities such as purchases of goods and assets,payment of debt,payment of cash dividends,and payment of taxes.
B)  The starting point for calculating operating cash flows with the direct method.
C)  The percent of a company's net cash flow that comes from investing and financing activities.
D)  A balance sheet that shows the starting and ending balance of the different accounts;it is used to calculate the net cash flow provided by operating activities.
E)  Purchases and sales of this are classified as operating activities.F) Reported as supplement disclosures or in the notes section to the financial statements rather than within the body of the statement of cash flows.G) Cash flows from operations in excess of amount paid to replace property,plant and equipment and to pay cash dividends to stockholders.H) Cash flows in excess of net income.I) Purchases and sales of this are classified as investing activities.J) Results from activities such as sales of goods and assets,receipt of cash dividends,and receipts of interest.K) A financial statement that tracks the flow of cash into and out of a company according to the three types of activities that generate the flows.L) An adjustment made when using the indirect method of calculating cash flows from operating activities.M) Cash a company receives that is not subject to income tax.N) The starting point for calculating operating cash flows with the indirect method.O) A) and I)
P) G) and H)

Question 8

Indicate whether each of the following would be added to or subtracted from net income when using the indirect method to reconcile net income to cash flows from operating activities.
 $$\begin{array} { | l | c | } 
\hline  { \begin{array} { c } 
\text { Item Required to Convert Net Income to Cash Flows From } \
\text { Operating Activities }
\end{array} } & \begin{array} { c } 
\text { Added to or } \
\text { Subtracted From }
\end{array} \
\hline \text { Increase in Accounts Receivable } & \
\hline \text { Decrease in Accounts Payable } & \
\hline \text { Decrease in Inventory } & \
\hline \text { Increase in Accrued Expenses } & \
\hline \text { Depreciation Expense } & \
\hline \text { Increase in Prepaid Expenses } & \
\hline
\end{array}$$

Accepted Answer

$$\begin{array} { | l | c | } 
\hline  { \begin{array} { c } 
\text { Item Required to Convert Net Income to Cash Flows From } \
\text { Operating Activities }
\end{array} } & \begin{array} { c } 
\text { Added to or } \
\text { Subtracted From }
\end{array} \
\hline \text { Increase in Accounts Receivable } & \text { Subtract } \
\hline \text { Decrease in Accounts Payable } & \text { Subtract } \
\hline \text { Decrease in Inventory } & \text { Add } \
\hline \text { Increase in Accrued Expenses } & \text { Add } \
\hline \text { Depreciation Expense } & \text { Add } \
\hline \text { Increase in Prepaid Expenses } & \text { Subtract } \
\hline
\end{array}$$

Question 9

Which of the following is not needed to prepare a statement of cash flows?

Accepted Answer

A)  Statement of Retained Earnings
B)  Comparative balance sheets
C)  Additional data concerning selected accounts that increase and decrease as a result of investing and/or financing activities
D)  A complete income statementE) A) and B)
F) B) and C)

Question 10

If a company uses the indirect method to determine cash flows from operating activities,gains:

Accepted Answer

A)  must be added to net income and losses subtracted from net income.
B)  and losses must be added to net income.
C)  must be subtracted from net income and losses added to net income.
D)  and losses must be subtracted from net income.E) All of the above
F) B) and C)

Question 11

Which of the following statements about classification choices is correct?

Accepted Answer

A)  GAAP classifies cash dividends paid as a financing activity,but IFRS allows them to be classified as either an operating or financing activity.
B)  GAAP allows interest paid to be classified as either an operating or financing activity,but IFRS requires that it be classified as a financing activity.
C)  GAAP classifies cash dividends received as an investing activity,but IFRS allows them to be classified as either an operating or investing activity.
D)  GAAP classifies interest received as either an operating or investing activity,but IFRS requires it to be classified as an investing activity.E) A) and D)
F) All of the above

Question 12

In general,the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A)  The Accumulated Depreciation account includes cash flows that may be categorized as both operating and investing.
B)  Inventory includes cash flows that may be categorized as both operating and investing.
C)  Retained Earnings includes cash flows that may be categorized as both operating and investing.
D)  Bonds Payable includes cash flows that may be categorized as both operating and financing.E) B) and C)
F) A) and C)

Question 14

Sunnyside Co.'s comparative balance sheet indicated that the Equipment account increased by $112,000.Upon further investigation of the account changes,it is determined that Sunnyside purchased equipment totaling $196,000 for the year.It also sold equipment with an original cost of $84,000 for $22,400 cash.Assuming these are the only transactions affecting the investing activities,Sunnyside will report net cash flows provided by (used in) investing activities of:

Accepted Answer

A)  ($112,000) .
B)  ($196,000) .
C)  ($89,600) .
D)  ($173,600) .E) A) and B)
F) A) and C)

Question 15

The following additional information is available from the financial statements of Garfield Industries:   Amortization Expense $3,000 Purchase of building for cash 270,000 Depreciation Expense 108,000 Increase in Accounts Receivable 30,000 Increase in Bonds Payable 500,000 Increase in Common Stock 120,000 Increase in Inventory 86,000 Decrease in Accounts Payable 136,000 Increase in Salaries and Wages Payable 50,000 Cash dividends paid 200,000 Net income 584,000\begin{array}{lr}	ext { Amortization Expense } & \$ 3,000 \	ext { Purchase of building for cash } & 270,000 \	ext { Depreciation Expense } & 108,000 \	ext { Increase in Accounts Receivable } & 30,000 \	ext { Increase in Bonds Payable } & 500,000 \	ext { Increase in Common Stock } & 120,000 \	ext { Increase in Inventory } & 86,000 \	ext { Decrease in Accounts Payable } & 136,000 \	ext { Increase in Salaries and Wages Payable } & 50,000 \	ext { Cash dividends paid } & 200,000 \	ext { Net income } & 584,000\end{array} Amortization Expense  Purchase of building for cash  Depreciation Expense  Increase in Accounts Receivable  Increase in Bonds Payable  Increase in Common Stock  Increase in Inventory  Decrease in Accounts Payable  Increase in Salaries and Wages Payable  Cash dividends paid  Net income ​$3,000270,000108,00030,000500,000120,00086,000136,00050,000200,000584,000​  What is Garfield's net cash provided by operating activities?

Accepted Answer

A)  $526,000
B)  $570,000
C)  $792,000
D)  $736,000 E) All of the above
F) B) and D)

Question 16

Match each term with the appropriate definition.Not all definitions will be used.
-Cash Equivalents

Accepted Answer

A)  A measure of the amount by which current assets exceed current liabilities.
B)  Cash inflows and outflows related to the sale or purchase of investments and long-lived assets.
C)  Include assets that are very liquid and are purchased by the entity within three months of maturity.
D)  These activities include only purchases made with borrowed funds.
E)  Must include cash paid for interest and income tax in a separate schedule.F) Measures the ability of a company to finance its interest payments with its operating cash flow before taxes and interest.G) Cash inflows and outflows related to financing sources external to the company (owners and lenders) .H) These activities include money lent by a company as well as money borrowed by a company.I) Reports the components of cash flows from operating activities as gross receipts and gross payments.J) This ratio uses net income instead of operating cash flow to analyze a company's ability to finance the cost of its debt.K) Cash inflows and outflows related to components of net income.L) Presents the operating activities section of the cash flow statement by adjusting net income to compute cash flows from operating activities.M) G) and K)
N) C) and H)

Question 17

When a company uses the direct method to determine the cash flows from operating activities,cash flows from operating activities will:

Accepted Answer

A)  be identical to the amount reported using the indirect method.
B)  be larger if there is a net cash inflow and smaller if there is a net cash outflow compared to the amount reported using the indirect method.
C)  always be larger than the amount reported using the indirect method.
D)  be larger if there is a net cash outflow and smaller if there is a net cash inflow compared to the amount reported using the indirect method.E) B) and C)
F) None of the above

Question 18

A company has positive cash flow from investing and financing activities,but negative cash flow from operating activities.The likely result is:

Accepted Answer

A)  investors may not buy the company's stock because the receipt of dividends is unlikely.
B)  investors will continue to buy stock since the company's growth prospects are good.
C)  Creditors will continue to lend money to the company.
D)  Creditors will demand immediate repayment of all outstanding debt.E) A) and D)
F) All of the above

Question 19

Blanton Ridge,Inc.'s Salaries and Wages Expense is $900,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $36,000 and $33,000,respectively,the cash paid to employees is:

Accepted Answer

A)  $900,000.
B)  $867,000.
C)  $897,000.
D)  $903,000.E) A) and B)
F) A) and C)

Question 20

Oakdale Co.borrowed $1,960,000 cash from Eugene National Bank last year.In addition,the company repaid a $1,260,000 note payable to Michigan State Bank.How should these transactions be listed in the Statement of Cash Flows?

Accepted Answer

A)  Oakdale can combine the transactions and show an increase to cash of $700,000 in the investing activities section of the statement.
B)  Oakdale can combine the transactions and show an increase to cash of $700,000 in the financing activities section of the statement.
C)  A decrease to cash for $1,260,000 is listed in the investing activities section and an increase of $1,960,000 is in the financing activities section.
D)  Transactions must be shown separately as a decrease to cash for $1,260,000 and an increase of $1,960,000 in the financing activities section.E) B) and C)
F) A) and C)

Exam 12: Statement of Cash Flows

In arriving at cash from operating activities,subtracting a decrease in Salaries and Wages Payable from net income includes the cash effects of transactions that:

Correct Answer
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The statement of cash flows may be viewed in terms of the balance sheet equation.Which of the following expressions below is correct?

Correct Answer
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A

Correct Answer
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Cash flows from financing activities:

Correct Answer
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B

If a company's Cost of Goods Sold is $158,000 for the period,beginning and ending Inventory balances are $18,000 and $13,000,respectively,and the beginning and ending Accounts Payable balances are $19,000 and $7,500,respectively,what is the amount of the cash paid to suppliers?

Correct Answer
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Which of the following items would not be classified as a cash flow from financing activities?

Correct Answer
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Match each term with the appropriate definition.Not all definitions will be used. -Comparative Balance Sheet

Correct Answer
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Which of the following is not needed to prepare a statement of cash flows?

Correct Answer
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If a company uses the indirect method to determine cash flows from operating activities,gains:

Correct Answer
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Which of the following statements about classification choices is correct?

Correct Answer
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In general,the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows.

Correct Answer
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Which of the following statements is correct?

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Match each term with the appropriate definition.Not all definitions will be used. -Cash Equivalents

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When a company uses the direct method to determine the cash flows from operating activities,cash flows from operating activities will:

Correct Answer
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A company has positive cash flow from investing and financing activities,but negative cash flow from operating activities.The likely result is:

Correct Answer
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Blanton Ridge,Inc.'s Salaries and Wages Expense is $900,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $36,000 and $33,000,respectively,the cash paid to employees is:

Correct Answer
verified

Oakdale Co.borrowed $1,960,000 cash from Eugene National Bank last year.In addition,the company repaid a $1,260,000 note payable to Michigan State Bank.How should these transactions be listed in the Statement of Cash Flows?

Correct Answer
verified

Exam 12: Statement of Cash Flows

In arriving at cash from operating activities,subtracting a decrease in Salaries and Wages Payable from net income includes the cash effects of transactions that:

Correct AnswerverifiedShow Answer

The statement of cash flows may be viewed in terms of the balance sheet equation.Which of the following expressions below is correct?

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

Cash flows from financing activities:

Correct AnswerverifiedB

If a company's Cost of Goods Sold is $158,000 for the period,beginning and ending Inventory balances are $18,000 and $13,000,respectively,and the beginning and ending Accounts Payable balances are $19,000 and $7,500,respectively,what is the amount of the cash paid to suppliers?

Correct AnswerverifiedShow Answer

Which of the following items would not be classified as a cash flow from financing activities?

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Comparative Balance Sheet

Correct AnswerverifiedShow Answer

Which of the following is not needed to prepare a statement of cash flows?

Correct AnswerverifiedShow Answer

If a company uses the indirect method to determine cash flows from operating activities,gains:

Correct AnswerverifiedShow Answer

Which of the following statements about classification choices is correct?

Correct AnswerverifiedShow Answer

In general,the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Cash Equivalents

Correct AnswerverifiedShow Answer

When a company uses the direct method to determine the cash flows from operating activities,cash flows from operating activities will:

Correct AnswerverifiedShow Answer

A company has positive cash flow from investing and financing activities,but negative cash flow from operating activities.The likely result is:

Correct AnswerverifiedShow Answer

Blanton Ridge,Inc.'s Salaries and Wages Expense is $900,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $36,000 and $33,000,respectively,the cash paid to employees is:

Correct AnswerverifiedShow Answer

Oakdale Co.borrowed $1,960,000 cash from Eugene National Bank last year.In addition,the company repaid a $1,260,000 note payable to Michigan State Bank.How should these transactions be listed in the Statement of Cash Flows?

Correct AnswerverifiedShow Answer

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A

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B

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