Question

QUESTION 1

1. The primary objective of the statement of cash flows is to show cash flows and what type of cash flow it is.

   True

   False

QUESTION 2

1. Major financing and investing activities sometimes do not change cash.

   True

   False

QUESTION 3

1. The receipt of dividends from long-term investments in stock is classified as a cash flow from operating activities.

   True

   False

QUESTION 4

1. The reporting of noncash activities in a separate schedule is a requirement of the full disclosure principle.

   True

   False

QUESTION 5

1. If a company reports a net loss, it

   	A.	will not be able to pay cash dividends.
   	B.	will always have a negative cash flow.
   	C.	will not be able to get a loan.
   	D.	may still have a net increase in cash.

QUESTION 6

1. Which of the following transactions affects cash during the period?

   	A.	Paid employee payroll.
   	B.	Declared a dividend.
   	C.	Conversion of bonds payable into common stock.
   	D.	Write-off of uncollectible accounts.

QUESTION 7

1. Which of the following transactions does NOT affect cash during a period?

   	A.	Received a dividend.
   	B.	Write-off of uncollectible accounts.
   	C.	Purchased linventory by issuing a check.
   	D.	Paid the attorneys fees.

QUESTION 8

1. Flynn Company reported a net income of $21,000 for the year ended December 31, 20XX. During the year, accounts receivable decreased $5,000, merchandise inventory increased $11,000, accounts payable increased by $10,000, and depreciation expense of $8,000 was recorded. During 20XX, using the indirect method, cash flows from operating activities are

   	A.	used net cash of $3,000.
   	B.	provided net cash of $33,000.
   	C.	provided net cash of $32,000.
   	D.	provided net cash of $35,000.

QUESTION 9

1. Which of the following transactions would NOT be classified as a financing activity?

   	A.	A long-term loan obtained fron the bank.
   	B.	Sold treasury stock.
   	C.	Payment of dividends.
   	D.	Purchased a new truck for the business.
   	E.	Issued preferred stock.

QUESTION 10

1. In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment will appear as a(n)

   	A.	addition to cash flow from investing activities.
   	B.	addition to net income.
   	C.	subtraction from net income.
   	D.	subtraction from cash flow from investing activities.

QUESTION 11

1. If Prepaid Insurance decreased during the period,

   	A.	there is no impact on the statement of cash flows.
   	B.	Insurance expense on an accrual basis is less than Insurance expense on a cash basis.
   	C.	Insurance expense on an accrual basis is greater than insurance expense on a cash basis
   	D.	Insurance expense on an accrual basis is the same as insurance expense on a cash basis.

QUESTION 12

1. On the statement of cash flows using the indirect method, patent amortization expense will

   	A.	be added to net income in the operating section.
   	B.	be deducted from net income in the operating section.
   	C.	appear as an inflow of cash in the investing section.
   	D.	appear as an outflow of cash in the investing section.

QUESTION 13

1. The Titanic Company had the following cash transactions during 20XX:

   Received $300,000 from customers.

   Received $10,000 dividend revenue from stock investments.

   Purchased equipment for $70,000.

   Sold land for $40,000 which had a book value of $50,000.

   The 20XX cash flows from INVESTING Activities would be reported as:

   	A.	net decrease in cash of $30,000.
   	B.	net decrease in cash of $10,000.
   	C.	net increase in cash of $280,000.
   	D.	net increase in cash of $240,000.
   	E.	net decrease in cash of $20,000

QUESTION 14

1. The Titanic Company had the following cash transactions during 20XX:

   Paid cash dividends of $40,000

   Issued additional common stock for $300,000

   Issued bonds payable $100,000

   Paid interest on the bonds $10,000

   Purchased land for cash $90,000

   The 20XX cash flows from FINANCING Activities would be reported:

   	A.	net increase in cash of $350,000.
   	B.	net increase in cash of $440,000.
   	C.	net increase in cash of $270,000
   	D.	net increase in cash of $360,000.

QUESTION 15

1. The indirect and direct methods of preparing the statement of cash flows are identical except for the

   	A.	significant noncash activity section.
   	B.	operating activities section.
   	C.	investing activities section.
   	D.	financing activities section.

QUESTION 16

1. In converting net income to net cash provided by operating activities, under the indirect method:

   	A.	decreases in accounts receivable and increases in prepaid expenses are added.
   	B.	increases in inventory and increases in accrued liabilities are added.
   	C.	decreases in accounts payable and decreases in inventory are deducted.
   	D.	increases in accounts receivable and decreases in accrued liabilities are deducted.

QUESTION 17

1. The information in a statement of cash flows will not help investors to assess the entity's ability to

   	A.	generate future cash flows.
   	B.	pay dividends.
   	C.	obtain favorable borrowing terms from a bank.
   	D.	pay its obligations when they become due.

QUESTION 18

1. Generally, the most important category on the statement of cash flows is cash flows from

   	A.	operating activities.
   	B.	investing activities.
   	C.	financing activities.
   	D.	significant noncash activities.

QUESTION 19

1. A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is

   	A.	adjusted cash from operations
   	B.	free cash flow
   	C.	cash provided by operations
   	D.	net cash provided by operating activities

Answer 1

1.
Answer is True

2.
Answer is True, as there are non cash transactions

3.
Answer is True

4.
Answer is True

5.
Answer is D. may still have a net increase in cash.

6.
Answer is

A.	Paid employee payroll

7.
Answer is

B.	Write-off of uncollectible accounts.

8. Answer is

B.	provided net cash of $33,000

Cash flow from Operating Activities
Net Income		$           21,000
Adjustments
Depreciation	$             8,000
Change In current assets & Liabilities
Decrease in Accounts Receivable	$             5,000
Increase in Inventories	$          (11,000)
Increase in Accounts payable	$           10,000
Total Adjustments		$           12,000
Net Cash provided by operating activities			$         33,000

9.
Answer is

D.	Purchased a new truck for the business

10.
Answer is

C.	subtraction from net income

11.
Answer is

C.	Insurance expense on an accrual basis is greater than insurance expense on a cash basis

12.
Answer is

A.	be added to net income in the operating section

13.
Answer is

A.	net decrease in cash of $30,000

i.e. $40000 - 70000 = ($30000)

14.
Answer is

D.	net increase in cash of $360,000

i.e. $300000+100000-40000 = $360000

15.
Answer is

B.	operating activities section

16.
Answer is D. increases in accounts receivable and decreases in accrued liabilities are deducted.

17.
Answer is

C.	obtain favorable borrowing terms from a bank

18.
Answer is

A.	operating activities

19.
Answer is

B.	free cash flow