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| 1 | |
A major purpose of the statement of cash flows is to accomplish which of the following? |
| | A) | Evaluate only the company's ability to have sufficient cash for short-run needs |
| | B) | Assess only the company's ability to meet its obligations and pay dividends |
| | C) | Assess only the cash aspects of the company's investment and financing transactions for the period |
| | D) | All of the above |
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| 2 | |
The statement of cash flows is useful to which of the following? |
| | A) | Current competitors |
| | B) | Investors |
| | C) | Creditors |
| | D) | All of the above |
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| 3 | |
The statement of cash flows is used to report the net cash flows from how many distinct activities? |
| | A) | Two |
| | B) | Three |
| | C) | Four |
| | D) | Five |
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| 4 | |
Which of the following is a financing activity? |
| | A) | Purchasing production equipment |
| | B) | Paying a cash dividend |
| | C) | Receiving interest income |
| | D) | Selling an investment in marketable securities |
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| 5 | |
Which of the following is an investing activity? |
| | A) | Selling bonds at a price in excess of par value |
| | B) | Issuing common stock at a price in excess of stated value |
| | C) | Paying $80,000 down on a $250,000 building |
| | D) | Issuing a mortgage note for $400,000 to acquire land with a purchase price of $400,000 |
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| 6 | |
Which of the following is not a financing activity? |
| | A) | Payments on a mortgage note |
| | B) | Repaying a bond issue at maturity |
| | C) | Paying an account payable |
| | D) | Issuing common stock for cash |
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| 7 | |
Which of the following is an operating activity? |
| | A) | Selling a bond at a price in excess of face value |
| | B) | Selling a marketable security |
| | C) | Repaying a short-term note payable |
| | D) | Collecting an account receivable |
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| 8 | |
A company issued $1,000,000 of bonds at face value. On the maturity date, the company repaid the $1,000,000 plus interest of $150,000 that was accrued from the last interest date. What portion of the payment of the bonds is an operating activity? |
| | A) | $150,000 |
| | B) | $1,000,000 |
| | C) | $1,150,000 |
| | D) | None of the amount |
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| 9 | |
Which of the following is not an operating activity? |
| | A) | Receiving dividends |
| | B) | Paying interest |
| | C) | Collecting accounts receivable |
| | D) | Paying a dividend |
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| 10 | |
Which of the following activities is not a financing activity? |
| | A) | Purchasing land for cash |
| | B) | Issuing convertible bonds |
| | C) | Paying cash dividends |
| | D) | Borrowing money by issuing a long-term note payable |
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| 11 | |
Classifying interest expense, interest revenue, and dividend receipts as operating activities is based on which point of view? |
| | A) | Activities entering into the determination of net income should be classified as operating activities |
| | B) | It is appropriate to classify some financing activities as operating activities |
| | C) | It is appropriate to classify some investing activities as operating activities |
| | D) | Both (B) and (C) apply |
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| 12 | |
Which of the following statements is false? |
| | A) | Transactions involving marketable securities are classified as investing activities. |
| | B) | Transfers of money between a company's bank accounts are not viewed as cash receipts and cash payments. |
| | C) | Marketable securities do not qualify as cash equivalents. |
| | D) | Interest received from owning cash equivalents is not viewed as a cash receipt from operating activities. |
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| 13 | |
Which of the following is the most efficient way to begin the preparation of a statement of cash flows? |
| | A) | Review the cash receipts journal and the cash payments journals |
| | B) | Review the recorded transactions in all journals |
| | C) | Review the changes in the noncash accounts in the balance sheet |
| | D) | Review the changes in income statement accounts |
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| 14 | |
Consider the following:
| Beginning accounts receivable | $50,000 | | Ending accounts receivable | $30,000 | | Net sales | $600,000 | | Cost of goods sold | $375,000 | | Operating expenses | $80,000 |
Assume all sales were credit sales. Calculate the amount of cash received from customers. |
| | A) | $620,000 |
| | B) | $580,000 |
| | C) | $630,000 |
| | D) | $395,000 |
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| 15 | |
Consider the following:
| Interest revenue as reported in the income statement | $150,000 | | Beginning balance of interest receivable | $30,000 | | Ending balance of interest receivable | $40,000 | | Ending balance of interest payable | $75,000 |
Calculate the amount of cash received from interest. |
| | A) | $160,000 |
| | B) | $140,000 |
| | C) | $130,000 |
| | D) | $110,000 |
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| 16 | |
Consider the following:
| Beginning accounts payable | $34,000 | | Ending accounts payable | $32,000 | | Beginning inventory | $80,000 | | Ending inventory | $94,000 | | Cost of goods sold | $560,000 | | Net sales | $990,000 |
All inventories were purchased on account. Calculate the cash payments for purchases. |
| | A) | $588,000 |
| | B) | $548,000 |
| | C) | $572,000 |
| | D) | $576,000 |
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| 17 | |
Consider the following:
| Beginning accounts payable | $34,000 | | Ending accounts payable | $38,000 | | Beginning inventory | $80,000 | | Ending inventory | $92,000 | | Cost of goods sold | $490,000 | | Net sales | $870,000 |
All inventories were purchased on account. Calculate the cash outflow for purchases. |
| | A) | $498,000 |
| | B) | $497,000 |
| | C) | $485,000 |
| | D) | $491,000 |
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| 18 | |
Consider the following:
| Total operating expenses | $95,000 | | Depreciation expense | $5,000 | | Amortization expenses | $3,000 | | Beginning balance, prepaid expenses | $15,000 | | Ending balance, prepaid expense | $11,000 | | Beginning balance, accrued liabilities related to expenses | $6,000 | | Ending balance, accrued liabilities related to expenses | $1,000 |
Calculate total of cash payments for expenses. |
| | A) | $ 96,000 |
| | B) | $ 86,000 |
| | C) | $ 94,000 |
| | D) | $ 88,000 |
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| 19 | |
Consider the following:
| Interest revenue reported in income statement | $95,000 | | Beginning balance of Interest Receivable | $5,000 | | Ending balance of Interest Receivable | $18,000 | | Beginning balance of Interest Payable | $00 | | Ending balance of Interest Payable | $45,000 |
Calculate the cash total of interest received. |
| | A) | $82,000 |
| | B) | $50,000 |
| | C) | $68,000 |
| | D) | $95,000 |
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| 20 | |
Consider the following:
| Income tax expense reported in income statement | $95,000 | | Beginning balance of Income Taxes Payable | $5,000 | | Ending balance of Income Taxes Payable | $18,000 | | Interest expense reported in income statement | $80,000 | | Beginning balance of Interest Payable | $10,000 | | Ending balance of Interest Payable | $8,000 |
Calculate the total amount of cash used to pay income taxes and interest. |
| | A) | $162,000 |
| | B) | $164,000 |
| | C) | $175,000 |
| | D) | $196,000 |
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| 21 | |
Net cash provided by operating activities was $45,000. Net cash provided by investing activities was $50,000. The beginning and ending cash and cash equivalent balance was $12,000 and $14,000, respectively. What was the cash flow provided (used) by financing activities? |
| | A) | ($95,000) |
| | B) | ($93,000) |
| | C) | ($97,000) |
| | D) | Cannot be determined from information provided. |
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| 22 | |
The net cash provided by investing activities was $450,000. The net cash used by financing activities was $500,000. The beginning and ending balance of cash and cash equivalents was $65,000 and $45,000, respectively. What was the amount of cash provided (used) by operating activities? |
| | A) | $30,000 |
| | B) | ($30,000) |
| | C) | $20,000 |
| | D) | $25,000 |
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| 23 | |
Which of the following activities would not be reported in the Supplementary Schedule of Noncash Investing and Financing Activities? |
| | A) | Common stock was issued in exchange for title to land. |
| | B) | Purchased a building by issuing a mortgage note. |
| | C) | Holders of convertible bonds exchanged their bonds for common stock. |
| | D) | Bonds were retired three years prior to maturity date. |
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| 24 | |
Which of the following would not be reported in a statement of cash flows? |
| | A) | Common stock was sold at price in excess of its par value. |
| | B) | Bonds were issued at price less than their par or face value. |
| | C) | Cash dividends were declared. |
| | D) | Land was purchased by paying $10,000 down and issuing a mortgage note. |
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| 25 | |
Which of the following is not an investing activity? |
| | A) | Borrowing money |
| | B) | Purchasing assets |
| | C) | Purchasing an investment |
| | D) | Collecting the principal of a note receivable |
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| 26 | |
Which of the following is an operating activity? |
| | A) | Issuing common stock in exchange for a building |
| | B) | Retiring bonds payable |
| | C) | Collecting interest on an investment |
| | D) | Purchasing the common stock of another corporation |
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| 27 | |
Cash dividends of $48,500 were declared. The beginning and ending balance of the Cash Dividends Payable account was $8,000 and $10,500, respectively. In the statement of cash flows, how are the cash dividend transactions reported? |
| | A) | As an investing activity of $51,000 |
| | B) | As a financing activity of $46,000 |
| | C) | As a financing activity of $48,500 |
| | D) | As an investing activity of $46,000 |
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| 28 | |
An analysis of noncash accounts disclosed the following:
| a | Machinery was purchased for $4,500 cash. | | b | $10,000 was borrowed on a long-term note. | | c | 1,000 shares of common stock were issued at $5 each. | | d | Cash dividends of $2,000 were declared and paid. | | e | An investment was sold for $23,000. | | f | $50,000 of bonds was retired at maturity. |
What was the amount of the net cash provided (used) by financing activities? |
| | A) | $14,000 |
| | B) | $37,000 |
| | C) | $23,000 |
| | D) | ($33,000) |
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| 29 | |
The net cash flow provided by operations was $23,000. The net cash flow from financing activities was $15,000. The net increase in cash and cash equivalents was $22,000. What was the net cash flow from investing activities? |
| | A) | Net cash outflow of $16,000 |
| | B) | Net cash inflow of $16,000 |
| | C) | Net cash outflow of $14,000 |
| | D) | Net cash inflow of $1,000 |
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| 30 | |
How is the balance sheet tied to the statement of cash flows? |
| | A) | Reconciliation of the ending cash and cash equivalents reported in the statement of cash flows |
| | B) | The total of plant assets being equal to the net cash flow used by investing activities |
| | C) | The increase in stockholders' equity being equal to the net cash flow from financing activities |
| | D) | The cash flow from operating activities being equal to the total increases in the cash and cash equivalent accounts |
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| 31 | |
Which of the following is true? |
| | A) | The Financial Accounting Standards Board (FASB) recommends the direct method of reporting cash flows from operating activities. |
| | B) | The majority of companies use the indirect method of reporting cash flows from operating activities. |
| | C) | When the direct method is used to report the cash flows from operating activities, it must be shown that the amount is consistent with the amount reported under the indirect method. |
| | D) | All of the above are true. |
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| 32 | |
Which feature distinguishes the direct method from the indirect method of reporting cash flows from operating activities? |
| | A) | The indirect method adjusts accrual-basis net income to net cash flows from operating activities, but the direct method does not. |
| | B) | The indirect method reports gain and losses on assets as cash flows from operating activities, but the direct method does not. |
| | C) | The indirect method reports financing activities differently than the direct method. |
| | D) | The indirect method ignores depreciation expense, but the direct method does not. |
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| 33 | |
In the indirect method of reporting cash flows from operating activities, how are the gains on the sales of assets reported in the statement of cash flows? |
| | A) | Deducted from the reported net income. |
| | B) | Added to reported net income. |
| | C) | Ignored. |
| | D) | Shown as investing activities. |
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| 34 | |
Why is an increase in the balance of accounts receivable deducted from reported net income when using the indirect method of reporting cash flows from operations? |
| | A) | Because the increase is a nonoperating gain |
| | B) | Because the increase is a permanent difference between elements of net income and net cash flows. |
| | C) | Because the increase represents a timing difference between elements of net income and net cash flows |
| | D) | Because the increase is a noncash expense |
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| 35 | |
Under the indirect method of preparing a statement of cash flows, how will an increase in the Inventory account be reported? |
| | A) | As an addition to the reported net income |
| | B) | As a deduction from the reported net income |
| | C) | As an investing activity |
| | D) | As cash paid to suppliers |
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| 36 | |
Under the indirect method of preparing a statement of cash flows, how will a decrease in prepaid expenses be reported? |
| | A) | As an addition to the reported net income |
| | B) | As a deduction from the reported net income |
| | C) | As an investing activity |
| | D) | As cash paid to suppliers |
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| 37 | |
Consider the following:
| Account | Net Change | Indirect Method | | A | Accounts Receivable | Increase | Deducted from net income | | B | Accounts Payable | Increase | Deducted from net income | | C | Prepaid Expenses | Decrease | Added to net income | | D | Deferred Income Taxes Payable | Decrease | Deducted from net income |
Which line of the schedule is incorrect with regard to how the change in the account is reported in the cash flows from operating activities section under the indirect method of preparing a statement of cash flows? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 38 | |
Consider the following:
| Account | Net Change | Indirect Method | | A | Accounts Receivable | Increase | Deducted from net income | | B | Accounts Payable | Increase | Added to net income | | C | Prepaid Expenses | Increase | Deducted from net income | | D | Inventories | Decrease | Deducted from net income |
Which line of the schedule is incorrect with regard to how the change in the account is reported in the cash flows from operating activities section under the indirect method of preparing a statement of cash flows? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 39 | |
Consider the following:
| Account | Net Change | Indirect Method | | A | Accounts Receivable | Increase | Deducted from net income | | B | Accounts Payable | Increase | Added to net income | | C | Prepaid Expenses | Decrease | Deducted from net income | | D | Inventories | Decrease | Added to net income |
Which line of the schedule is incorrect with regard to how the change in the account is reported in the cash flows from operating activities section under the indirect method of preparing a statement of cash flows? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 40 | |
Consider the following:
| Account | Net Change | Indirect Method | | A | Accounts Receivable | Increase | Deducted from net income | | B | Accounts Payable | Increase | Added to net income | | C | Prepaid Expenses | Decrease | Added to net income | | D | Gain on Sale of Assets | Increase | Added to net income |
Which line of the schedule is incorrect with regard to how the change in the account is treated in the cash flows from operating activities section under the indirect method of preparing a statement of cash flows? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 41 | |
Which of the following would not appear directly in the statement of cash flows but should be shown in a supplementary schedule to the statement of cash flows? |
| | A) | Cash dividends paid |
| | B) | Purchasing land by issuing a mortgage note |
| | C) | Purchase of a building for cash |
| | D) | Issuing common stock for cash |
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| 42 | |
Consider the following:
| Net cash flow from operating activities | $196,000 | | Net cash flow used for investment in plant assets | $100,000 | | Dividends paid | $60,000 |
Calculate the free cash flow. |
| | A) | $06,000 |
| | B) | $236,000 |
| | C) | $36,000 |
| | D) | $40,000 |
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| 43 | |
Which is the primary cash management tool for anticipating future cash flows? |
| | A) | Statement of cash flows |
| | B) | Income statement of prior periods |
| | C) | Cash budget |
| | D) | Current ratio |
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| 44 | |
The purposes of a cash budget include which of the following? |
| | A) | Providing targets useful in evaluating departmental performance |
| | B) | Providing advance warnings of potential cash shortages |
| | C) | Encouraging managers to plan and coordinate the activities of their departments in advance |
| | D) | All of the above |
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| 45 | |
Strategies to permanently improve cash flows include which of the following? |
| | A) | Deferring income taxes |
| | B) | Changing credit policies from n60 to n30 |
| | C) | Peak pricing |
| | D) | Both (A) and (C) |
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| 46 | |
Which of the following illustrates product mix and complementary products? |
| | A) | Selling paint and pre-mixed concrete in same department. |
| | B) | Selling printers and office supplies in the same department. |
| | C) | Selling farm tractors and lumber products at the same location. |
| | D) | Selling manufactured houses and automobiles at the same location. |
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| 47 | |
In a worksheet for a statement of cash flows, the Debit Changes column contains the net change between the beginning and ending balances of balance sheet accounts. The cash effects of these net changes are shown in which of the following? |
| | A) | Uses column of the worksheet |
| | B) | Sources column of the worksheet |
| | C) | Credit Changes column of the worksheet |
| | D) | None of the above |
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| 48 | |
A net increase in a long-term liability account will be shown in the worksheet for a statement of cash flows as which of the following? |
| | A) | A Credit Change and a Use |
| | B) | A Debit Change and a Use |
| | C) | A Credit Change and a Source |
| | D) | A Debit Change and a Source |
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| 49 | |
A net increase in the Cash and Cash Equivalents account, as shown in the Debit Changes column of a worksheet for a statement of cash flows, will also appear in which of the following: |
| | A) | Sources column and shown as a cash effect from operating activities |
| | B) | Uses column and shown as a cash effect from financing activities |
| | C) | Sources column and shown as net decrease in cash |
| | D) | Uses column and shown as a net increase in cash |
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| 50 | |
Consider the following partial worksheet for a statement of cash flows:
| Cash effects: Operating activities | Sources | Uses | | Net income | (1) 450,000 | | | Depreciation expense | (2) 60,000 | | | Decrease in accounts receivable | (3) 40,000 | | | Increase in inventory | | (4) 100,000 | | Decrease in accounts payable | | (5) 80,000 | | Gain on sale of plant assets | | (6) 20,000 |
Calculate the net cash flow from operating activities. |
| | A) | $350,000 |
| | B) | $550,000 |
| | C) | $230,000 |
| | D) | $410,000 |
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