ACC 560 Week 10 Quiz – Strayer NEW
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Week 10 Quiz 9:
Chapter 13
TRUE-FALSE STATEMENTS
1. The statement of cash flows is a required statement that must be
prepared along with an income statement, balance sheet, and retained earnings
statement.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
2. For external reporting, a company must prepare either an income
statement or a statement of cash flows, but not both.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
3. A primary objective of the statement of cash flows is to show
the income or loss on investing and financing transactions.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
4. A statement of cash flows indicates the sources and uses of cash
during a period.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
5. A statement of cash flows should help investors and creditors
assess the entity’s ability to generate future income.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Measurement,
AICPA PC: Problem Solving, IMA: FSA
6. The information in a statement of cash flows helps investors and
creditors assess the company’s ability to pay dividends and meet obligations.
Ans: LO: 1, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
7. Financial statement readers can determine future investing and
financing transactions by examining a company’s statement of cash flows.
Ans: LO: 1, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
8. In preparing a statement of cash flows, the issuance of debt
should be reported separately from the retirement of debt.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Measurement,
AICPA PC: Problem Solving, IMA: FSA
9. Noncash investing and financing activities must be reported in
the body of a statement of cash flows.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
10. The statement of cash flows classifies cash receipts and
payments as operating, nonoperating, financial, and extraordinary activities.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
11. The sale of land for cash would be classified as a cash inflow
from an investing activity.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
12. Cash flow from investing activities is considered the most
important category on the statement of cash flows because it is considered the
best measure of expected income.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
13. The receipt of dividends from long-term investments in stock is
classified as a cash inflow from investing activities.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
14. The payment of interest on bonds payable is classified as a cash
outflow from operating activities.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
15. Any item that appears on the income statement would be
considered as either a cash inflow or cash outflow from operating activities.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
16. The acquisition of a building by issuing bonds would be
considered an investing and financing activity that did not affect cash.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
17. All major financing and investing activities affect cash.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA
18. Cash provided by operations is generally equal to operating
income.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
19. Using the indirect method, an increase in accounts receivable
during a period is deducted from net income in calculating cash provided by
operations.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
20. Using the indirect method, an increase in accounts payable
during a period is deducted from net income in calculating cash provided by
operations.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
21. A loss on sale of equipment is added to net income in
determining cash provided by operations under the indirect method.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
22. In preparing a statement of cash flows, an increase in the
Common Stock and Treasury Stock accounts during a period would be an investing
activity.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
23. Cash provided by operating activities fails to take into account
that a company must invest in new fixed assets just to maintain its current
level of operations.
Ans: LO: 4, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
24. Free cash flow equals cash provided by operations less capital
expenditures and cash dividends.
Ans: LO: 4, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA
FN: Reporting, AICPA PC: Communication, IMA: Reporting
a25. The use of a worksheet to prepare a
statement of cash flows is optional.
Ans: LO: 5, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a26. During the year, Income Tax Expense
amounted to $30,000 and Income Taxes Payable increased by $4,000; therefore,
the cash paid for income taxes was $26,000.
Ans: LO: 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a27. The loss on disposal of plant assets is a
debit to the operating section of the cash account.
Ans: LO: 6, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
a28. The change in cash is equal to the change
in liabilities less the change in equity plus the change in noncash assets.
Ans: LO: 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
a29. During a period, cost of goods sold + an
increase in inventory + an increase in accounts payable = cash paid to
suppliers.
Ans: LO: 6, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a30. Operating expenses + an
increase in prepaid expenses – a decrease in accrued expenses payable = cash
payments for operating expenses.
Ans: LO: 6, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
31. The
statement of cash flows classifies cash receipts and cash payments into two
categories: operating activities and
nonoperating activities.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
32. Financing
activities include the obtaining of cash from issuing debt and repaying the
amounts borrowed.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
33. The
adjusted trial balance is the only item needed to prepare the Statement of Cash
Flows.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
34. Under
the indirect method, retained earnings is adjusted for items that affected
reported net income but did not affect cash.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
a35. The reconciling entry for depreciation
expense in a worksheet is a credit to Accumulated Depreciation and a debit to
Operating-Depreciation Expense.
Ans: LO: 5, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a36. Under the direct method, the formula for
computing cash collections from customers is sales revenues plus the increase
in accounts receivable or minus the decrease in accounts receivable.
Ans: LO: 6, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
MULTIPLE
CHOICE QUESTIONS
37. The
statement of cash flows should help investors and creditors assess each of the
following except the
a. entity's ability to generate future income.
b. entity's ability to pay dividends.
c. reasons for the difference between net income
and net cash provided by operating activities.
d. cash investing and financing transactions
during the period.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
38. The statement of cash flows
a. must be prepared on a daily basis.
b. summarizes the operating, financing, and
investing activities of an entity.
c. is another name for the income statement.
d. is a special section of the income statement.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
39. Which one of the following items is not generally used in preparing a
statement of cash flows?
a. Adjusted trial balance
b. Comparative balance sheets
c. Current income statement
d. Additional information
Ans: LO: 1, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
40. The primary purpose of the statement of
cash flows is to
a. provide information about the investing and
financing activities during a period.
b. prove that revenues exceed expenses if there
is a net income.
c. provide information about the cash receipts
and cash payments during a period.
d. facilitate banking relationships.
Ans: LO: 1, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
41. If a company reports a net loss, it
a. may still have a net increase in cash.
b. will not be able to pay cash dividends.
c. will not be able to get a loan.
d. will not be able to make capital
expenditures.
Ans: LO: 1, Bloom: C, Difficulty:
Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting,
AICPA PC: None, IMA: Reporting
42. In addition to the three basic financial
statements, which of the following is also a required financial statement?
a. the "Cash Budget"
b. the Statement of Cash Flows
c. the Statement of Cash Inflows and Outflows
d. the "Cash Reconciliation"
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
43. The statement of cash flows will not report the
a. amount of checks outstanding at the end of
the period.
b. sources of cash in the current period.
c. uses of cash in the current period.
d. change in the cash balance for the current
period.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
44. The statement of cash flows reports each of
the following except
a. cash receipts from operating activities.
b. cash payments from investing activities.
c. the net change in cash.
d. cash sales.
Ans: LO: 1, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
45. Each of the following are particularly
interested in the statement of cash flows except
a. creditors.
b. employees.
c. shareholders.
d. government agencies.
Ans: LO: 1, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
46. Lending money and collecting the loans are
a. operating activities.
b. investing activities.
c. financing activities.
d. Non-cash investing and financing activities.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
47. The
cash effects of transactions that create revenues and expenses are
a. financing activities.
b. investing activities.
c. operating activities.
d. processing activities.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN:
Risk Analysis, AICPA PC: None, IMA: Business Economics
48. The acquisition of land by issuing common
stock is
a. a noncash transaction which is not reported
in the body of a statement of cash flows.
b. a cash transaction and would be reported in
the body of a statement of cash flows.
c. a noncash transaction and would be reported
in the body of a statement of cash flows.
d. only reported if the statement of cash flows
is prepared using the direct method.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
49. The order of presentation of activities on
the statement of cash flows is
a. operating, investing, and financing.
b. operating, financing, and investing.
c. financing, operating, and investing.
d. financing, investing, and operating.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
50. Financing activities involve
a. lending money.
b. acquiring investments.
c. issuing debt.
d. acquiring long-lived assets.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
51. Investing activities include
a. collecting cash on loans made.
b. obtaining cash from creditors.
c. obtaining capital from owners.
d. repaying money previously borrowed.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
52. 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.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
53. The category that is generally considered
to be the best measure of a company's ability to continue as a going concern is
a. cash flows from operating activities.
b. cash flows from investing activities.
c. cash flows from financing activities.
d. usually different from year to year.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
54. Cash receipts from interest and dividends
are classified as
a. financing activities.
b. investing activities.
c. operating activities.
d. either financing or investing activities.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
55. Each
of the following is an example of a significant noncash activity except
a. conversion of bonds into common stock.
b. exchanges of plant assets.
c. issuance of debt to purchase assets.
d. stock dividends.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
56. If a company has both an inflow and outflow of cash related to
property, plant, and equipment, the
a. two cash effects can be netted and presented
as one item in the investing activities section.
b. cash inflow and cash outflow should be
reported separately in the investing activities section.
c. two cash effects can be netted and presented
as one item in the financing activities section.
d. cash inflow and cash outflow should be reported
separately in the financing activities section.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
57. Of the items below, the one that appears
first on the statement of cash flows is
a. noncash investing and financing activities.
b. net increase (decrease) in cash.
c. cash at the end of the period.
d. cash at the beginning of the period.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
58. Which of the following transactions does not affect cash during a period?
a. Write-off of an uncollectible account
b. Collection of an accounts receivable
c. Sale of treasury stock
d. Exercise of the call option on bonds payable
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
59. Significant noncash transactions would not include
a. conversion of bonds into common stock.
b. asset acquisition through bond issuance.
c. treasury stock acquisition.
d. exchange of plant assets.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
60. In preparing a statement of cash flows, a
conversion of bonds into common stock will be reported in
a. the financing section.
b. the "extraordinary" section.
c. a separate schedule or note to the financial
statements.
d. the stockholders' equity section.
Ans: LO: 2, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
61. Indicate
where the event paid income taxes would appear, if at all, on the statement of
cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
62. Indicate
where the event common stock issued for cash would appear, if at all, on the
indirect statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
63. Indicate
where the event purchased land for cash would appear, if at all, on the
indirect statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
64. Indicate
where the event purchased land and a building with a mortgage would appear, if
at all, on the indirect statement of cash flows.
a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Does not represent a cash flow
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
65. Joan’s
Vegetable Market had the following transactions during 2013:
1. Issued
$60,000 of par value common stock for cash.
2. Repaid a 6
year note payable in the amount of $21,000.
3. Acquired
land by issuing common stock of par value $50,000.
4. Declared
and paid a cash dividend of $5,000.
5. Sold a
long-term investment (cost $63,000) for cash of $6,000.
6. Acquired
an investment in IBM stock for cash of $10,000.
What
is the net cash provided by financing activities?
a. $34,000
b. $80,000
c. $39,000
d. $0
Ans: LO: 2, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
66. Joan’s
Vegetable Market had the following transactions during 2013:
1. Issued
$50,000 of par value common stock for cash.
2. Repaid a 6
year note payable in the amount of $22,000.
3. Acquired
land by issuing common stock of par value $100,000.
4. Declared
and paid a cash dividend of $2,000.
5. Sold a
long-term investment (cost $63,000) for cash of $6,000.
6. Acquired
an investment in IBM stock for cash of $12,000.
What
is the net cash provided by investing activities?
a. $12,000
b. $32,000
c. ($6,000)
d. $6,000
Ans: LO: 2, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
67. Miracle
Company purchased treasury stock with a cost of $15,000 during 2013. During the
year, the company paid dividends of $20,000 and issued bonds payable for
proceeds of $866,000. Cash flows from
financing activities for 2013 total
a. $846,000 net cash inflow.
b. $861,000 net cash inflow.
c. $866,000 net cash outflow.
d. $831,000 net cash inflow.
Ans: LO: 2, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
68. Carrot
Company issued common stock for proceeds of $381,000 during 2013. The company
paid dividends of $90,000 and issued a long-term note payable for $95,000 in
exchange for equipment during the year. The company also purchased treasury
stock that had a cost of $18,000. The financing section of the statement of
cash flows will report net cash inflows of
a. $273,000.
b. $489,000.
c. $183,000.
d. $363,000.
Ans: LO: 2, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
69. In
Garland Company, land decreased $140,000 because of a cash sale for $140,000,
the equipment account increased $40,000 as a result of a cash purchase, and
Bonds Payable increased $130,000 from issuance for cash at face value. The net
cash provided by investing activities is
a. $140,000.
b. $230,000.
c. $100,000.
d. $110,000.
Ans: LO: 2, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
70. Accounts
receivable arising from sales to customers amounted to $85,000 and $75,000 at
the beginning and end of the year, respectively. Income reported on the income
statement for the year was $285,000. Exclusive of the effect of other
adjustments, the cash flows from operating activities to be reported on the
statement of cash flows is
a. $285,000.
b. $295,000.
c. $445,000.
d. $275,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
71. Accounts
receivable arising from sales to customers amounted to $45,000 and $50,000 at
the beginning and end of the year, respectively. Income reported on the income
statement for the year was $160,000. Exclusive of the effect of other
adjustments, the cash flows from operating activities to be reported on the
statement of cash flows is
a. $160,000.
b. $165,000.
c. $205,000.
d. $155,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
72. Winston
Company reported net income of $50,000 for the year. During the year, accounts
receivable decreased by $7,000, accounts payable increased by $3,000 and
depreciation expense of $5,000 was recorded. Net cash provided by operating
activities for the year is
a. $40,000.
b. $65,000.
c. $49,000.
d. $45,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
73. Blocker
Company reported a net loss of $5,000 for the year ended December 31, 2013.
During the year, accounts receivable increased $14,000, merchandise inventory
decreased $10,000, accounts payable decreased by $20,000, and depreciation
expense of $10,000 was recorded. During 2013, operating activities
a. used net cash of $19,000.
b. used net cash of $27,000.
c. provided net cash of $27,000.
d. provided net cash of $17,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
74. The
net income reported on the income statement for the current year was
$225,000. Depreciation recorded on plant
assets was $38,000. Accounts receivable and inventories increased by $2,000 and
$8,000, respectively. Prepaid expenses and accounts payable decreased by $1,000
and $11,000 respectively. How much cash was provided by operating activities?
a. $205,000
b. $243,000
c. $225,000
d. $259,000
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
75. The
net income reported on the income statement for the current year was
$240,000. Depreciation was $50,000.
Account receivable and inventories decreased by $10,000 and $30,000,
respectively. Prepaid expenses and accounts payable increased, respectively, by
$1,000 and $8,000. How much cash was provided by operating activities?
a. $301,000
b. $337,000
c. $321,000
d. $329,000
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
76. If
a gain of $15,000 is incurred in selling (for cash) office equipment having a
book value of $100,000, the total amount reported in the cash flows from
investing activities section of the statement of cash flows is
a. $95,000.
b. $115,000.
c. $100,000.
d. $15,000.
Ans: LO: 3, Bloom: K,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
77. If a
loss of $20,000 is incurred in selling (for cash) office equipment having a
book value of $80,000, the total amount reported in the cash flows from
investing activities section of the statement of cash flows is
a. $60,000.
b. $80,000.
c. $100,000.
d. $20,000.
Ans: LO: 3, Bloom: K,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
78. Madison
Company reported net income of $100,000 for the year ended December 31,
2013. During the year, inventories
decreased by $12,000, accounts payable decreased by $18,000, depreciation
expense was $20,000 and a gain on disposal of equipment of $9,000 was
recorded. Net cash provided by operating
activities in 2013 using the indirect method was
a. $154,000.
b. $105,000.
c. $112,000.
d. $90,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
79. The third (final) step in preparing
the statement of cash flows is to
a. analyze changes in noncurrent asset and
liability accounts.
b. compare the net change in cash with the
change in the cash account reported on the balance sheet.
c. determine net cash provided by operating
activities.
d. list the noncash activities.
Ans: LO: 3, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
80. Which one of the following items is not necessary in preparing a statement
of cash flows?
a. Determine the change in cash
b. Determine the cash provided by operations
c. Determine cash from financing and investing
activities
d. Determine the cash in all bank accounts
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
81. If accounts receivable have increased
during the period,
a. revenues on an accrual basis are less than
revenues on a cash basis.
b. revenues on an accrual basis are greater than
revenues on a cash basis.
c. revenues on an accrual basis are the same as
revenues on a cash basis.
d. expenses on an accrual basis are greater than
expenses on a cash basis.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
82. If accounts payable have increased during a
period,
a. revenues on an accrual basis are less than
revenues on a cash basis.
b. expenses on an accrual basis are less than
expenses on a cash basis.
c. expenses on an accrual basis are greater than
expenses on a cash basis.
d. expenses on an accrual basis are the same as
expenses on a cash basis.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
83. Which one of the following affects cash during a period?
a. Recording depreciation expense
b. Declaration of a cash dividend
c. Write-off of an uncollectible account
receivable
d. Payment of an accounts payable
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
84. In calculating cash flows from operating
activities using the indirect method, a gain on the sale of equipment is
a. added to net income.
b. deducted from net income.
c. ignored because it does not affect cash.
d. not reported on a statement of cash flows.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
85. Dino Company reported net income of $72,000
for the year. During the year, accounts receivable increased by $7,000, accounts
payable decreased by $3,000 and depreciation expense of $5,000 was recorded.
Net cash provided by operating activities for the year is
a. $67,000.
b. $87,000.
c. $71,000.
d. $72,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
86. Fare Company reported a net loss of $31,000
for the year ended December 31, 2013. During the year, accounts receivable
decreased $15,000, merchandise inventory increased $24,000, accounts payable
increased by $30,000, and depreciation expense of $15,000 was recorded. During
2013, operating activities
a. used net cash of $5,000.
b. used net cash of $23,000.
c. provided net cash of $5,000.
d. provided net cash of $23,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
87. Starting with net income and adjusting it for items that
affected reported net income but which did not affect cash is called the
a. direct method.
b. indirect method.
c. working capital method.
d. cost-benefit method.
Ans: LO: 3, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
88. In calculating net cash provided by
operating activities using the indirect method, an increase in prepaid expenses
during a period is
a. deducted from net income.
b. added to net income.
c. ignored because it does not affect income.
d. ignored because it does not affect expenses.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
89. Using the indirect method, patent amortization expense for the
period
a. is deducted from net income.
b. causes cash to increase.
c. causes cash to decrease.
d. is added to net income.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
90. In developing the cash flows from operating
activities, most companies in the U. S.
a. use the direct method.
b. use the indirect method.
c. present both the indirect and direct methods
in their financial reports.
d. prepare the operating activities section on
the accrual basis.
Ans: LO: 3, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
91. Each of the following is added to
net income in computing net cash provided by operating activities except
a. amortization expense.
b. an increase in accrued expenses payable.
c. a gain on sale of equipment.
d. a decrease in inventory.
Ans: LO: 3, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
92. Which of the following would be subtracted
from net income using the indirect method?
a. Depreciation expense
b. An increase in accounts receivable
c. An increase in accounts payable
d. A decrease in prepaid expenses
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
93. Which of the following would be added to
net income using the indirect method?
a. An increase in accounts receivable
b. An increase in prepaid expenses
c. Depreciation expense
d. A decrease in accounts payable
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
94. Which of the following would not be an adjustment to net income using
the indirect method?
a. Depreciation Expense
b. An increase in Prepaid Insurance
c. Amortization Expense
d. An increase in Land
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
95. In calculating cash flows from operating
activities using the indirect method, a loss on the sale of equipment will
appear as a(n)
a. subtraction from net income.
b. addition to net income.
c. addition to cash flow from investing
activities.
d. subtraction from cash flow from investing
activities.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
96. Which of the following adjustments to convert net income to net
cash provided by operating activities is correct?
Add to Net Income Deduct from Net Income
a. Accounts Receivable increase decrease
b. Prepaid Expenses increase decrease
c. Inventory decrease increase
d. Taxes Payable decrease increase
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
97. Which of the following adjustments to convert net income to net
cash provided by operating activities is incorrect?
Add to Net Income Deduct from Net Income
a. Accounts Receivable decrease increase
b. Prepaid Expenses increase decrease
c. Inventory decrease increase
d. Accounts Payable increase decrease
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
98. Which of the following adjustments to convert net income to net
cash provided by operating activities is not
added to net income?
a. Gain on Sale of Equipment
b. Depreciation Expense
c. Amortization Expense
d. Depletion Expense
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
99. Using the indirect method, if equipment is
sold at a gain, the
a. sale proceeds received are deducted in the
operating activities section.
b. sale proceeds received are added in the
operating activities section.
c. amount of the gain is added in the operating
activities section.
d. amount of the gain is deducted in the
operating activities section.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
100. A company had net income of $210,000.
Depreciation expense is $26,000. During the year, Accounts Receivable and
Inventory increased $15,000 and $40,000, respectively. Prepaid Expenses and
Accounts Payable decreased $2,000 and $4,000, respectively. There was also a
loss on the sale of equipment of $3,000. How much cash was provided by
operating activities?
a. $176,000
b. $182,000
c. $256,000
d. $268,000
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
101. 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.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
102. 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.
Ans: LO: 3, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
103. Land acquired from the issuance of
common stock is reported
a. as a financing activity.
b. as an investing activity.
c. as an operating activity.
d. in a separate schedule at the bottom of the
statement.
Ans: LO: 3, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
104. In Numar Company, Treasury Stock increased $25,000 from a cash
purchase, and Retained Earnings increased $75,000 as a result of net income of
$120,000 and cash dividends paid of $45,000. Net cash used by financing
activities is:
a. $25,000.
b. $45,000.
c. $120,000.
d. $70,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
105. In Flagg Company, net income is $280,000. If accounts receivable
increased $145,000 and accounts payable decreased $50,000, net cash provided by
operating activities using the indirect method is:
a. $85,000.
b. $185,000.
c. $375,000.
d. $475,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
106. In Stretch Company, there was an increase in the land account
during the year of $48,000. Analysis reveals that the change resulted form a
cash sale of land at cost $110,000, and a cash purchase of land for $158,000.
In the statement of cash flows, the change in the land account should be
reported in the investment section:
a. as a net purchase of land, $48,000.
b. only as a purchase of land $158,000.
c. as a purchase of land $158,000 and a sale of
land $110,000.
d. only as a sale of land $110,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Hard, Min: 4, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
107. The following data are available for Simpson Corporation.
Net income $300,000
Depreciation expense 60,000
Dividends paid 90,000
Gain on sale of land 15,000
Decrease in accounts receivable 30,000
Decrease in accounts payable 45,000
MC.
107 (cont.)
Net
cash provided by operating activities is:
a. $240,000.
b. $330,000.
c. $360,000.
d. $420,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Hard, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
108. The following data are available for Nemo Corporation.
Sale of land $250,000
Sale of equipment $125,000
Issuance of common stock 140,000
Purchase of equipment 60,000
Payment of cash dividends 120,000
Net
cash provided by investing activities is:
a. $315,000.
b. $260,000.
c. $335,000.
d. $455,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Hard, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
109. The following data are available for Quarter Company.
Increase in accounts payable $120,000
Increase in bonds payable 400,000
Sale of investments 150,000
Issuance of common stock 180,000
Payment of cash dividends 90,000
Net
cash provided by financing activities is:
a. $280,000.
b. $490,000.
c. $460,000.
d. $520,000.
Ans: LO: 3, Bloom: AP,
Difficulty: Hard, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
110. If $250,000 of bonds are issued during the
year but $100,000 of old bonds are retired during the year, the statement of
cash flows will show a(n)
a. net increase in cash of $150,000.
b. net decrease in cash of $150,000.
c. increase in cash of $250,000 and a decrease
in cash of $100,000.
d. net gain on retirement of bonds of $150,000.
Ans: LO: 3, 6, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
111. Which of
the following changes in retained earnings during a period will be reported in
the financing activities section of the statement of cash flows?
1. Declaration and payment of a cash dividend
during the period.
2. Net income for the period.
a. 1
b. 2
c. Neither 1 nor 2.
d. Both 1 and 2.
Ans: LO: 3, 6, Bloom: C,
Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
112. The statement of cash flows
a. is prepared instead of an income statement
under generally accepted accounting principles.
b. is used to assess an entity's ability to pay
dividends and meet obligations.
c. is prepared from comparative income
statements.
d. reflects earnings per share figures on a cash
basis and on an accrual basis in the body of the statement.
Ans: LO: 3, 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
113. In preparing the statement of cash flows, determining the net
increase or decrease in cash requires the use of
a. the adjusted trial balance.
b. the current period's balance sheet.
c. a comparative balance sheet.
d. a comparative income statement.
Ans: LO: 3, 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
114. To determine the net cash provided (used)
by operating activities, it is necessary to analyze
a. the current year's income statement.
b. a comparative balance sheet.
c. additional information.
d. all of these.
Ans: LO: 3, 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
115. Which of the following would not be needed to determine net cash
provided by operating activities?
a. Depreciation expense
b. Change in accounts receivable
c. Payment of cash dividends
d. Change in prepaid expenses
Ans: LO: 3, 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
116. When equipment is sold for cash, the amount
received is reflected as a cash
a. inflow in the operating section.
b. inflow in the financing section.
c. inflow in the investing section.
d. outflow in the operating section.
Ans: LO: 3, 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
117. The
statement of cash flows will not
provide insight into
a. why dividends were not increased.
b. whether cash flow is greater than net income.
c. the exact proceeds of a future bond issue.
d. how the retirement of debt was accomplished.
Ans: LO: 3, 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Risk Analysis, AICPA PC: Problem Solving, IMA: Business Economics
118. Which of the following transactions would not be classified as a financing
activity?
a. Purchase of treasury stock
b. Payment of dividends
c. Issuance of bonds at a discount
d. Purchase of a long-term investment in bonds
Ans: LO: 3, 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
119. A
measure that describes the cash remaining from operations after adjustment for
capital expenditures and dividends is
a. adjusted cash from operations.
b. cash provided by operations.
c. free cash flow.
d. net cash provided by operating activities.
Ans: LO: 4, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
120. Free cash flow equals cash provided
by
a. operations less capital expenditures and cash
dividends.
b. operations less cash dividends.
c. investing activities less capital
expenditures and cash dividends.
d. operations less capital expenditures.
Ans: LO: 4, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
121. Collins
Pest Control Products has the following information available:
Net Income $25,000
Cash Provided by
Operations 31,000
Cash Sales 65,000
Capital
Expenditures 11,000
Dividends Paid 3,000
What
is Collins’ free cash flow?
a. $28,000
b. $20,000
c. $17,000
d. $11,000
Ans: LO: 4, Bloom: AP,
Difficulty: Hard, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
122. During 2013, Korman Industries reported
cash provided by operations of $690,000, cash used in investing of $1,029,000,
and cash used in financing of $135,000. In addition, cash spent for fixed
assets during the period was $414,000. No dividends were paid. Based on this
information, what was Korman's free cash flow?
a. ($339,000)
b. $1,440,000
c. $276,000
d. ($888,000)
Ans: LO: 4, Bloom: AN,
Difficulty: Hard, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
123. All
of the following statements about free cash flow are false except:
a. Significant free cash flow indicates less
potential to finance new investments.
b. Free cash flow is most commonly calculated by
subtracting capital expenditures from cash provided by operations and then
adding cash dividends.
c. Free cash flow is not reported on the
statement of cash flows.
d. Significant free cash flow indicates less
potential to pay additional dividends.
Ans: LO: 4, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
a124. In the Gannett Company, the beginning and
ending balances in Land were $198,000 and $240,000 respectively. During the
year, land costing $50,000 was sold for $50,000 cash, and land costing $92,000
was purchased for cash. The entries in the reconciling columns of the worksheet
will include a:
a. credit to Land $50,000 and a debit to Sale of
Land $50,000 under investing activities.
b. debit to Land $92,000 and a credit to
Purchase of Land $92,000 under financing activities.
c. net debit to Land $42,000 and a credit to
Purchase of Land $42,000 under investing activities.
d. credit to Land $50,000 and a debit to Sale of
Land $50,000 under financing activities.
Ans: LO: 5, Bloom: C,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
a125. When
listing accounts in the statement of cash flows worksheet, the accumulated
depreciation account is shown
a. with accounts that have credit balances.
b. with accounts that have debit balances.
c. as a credit under the reconciling items.
d. as a debit under the reconciling items.
Ans: LO: 5, Bloom: C, Difficulty:
Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting,
AICPA PC: None, IMA: Reporting
a126. In
the bottom portion of the statement of cash flows worksheet,
a. inflows of cash are debits in the reconciling
columns.
b. outflows of cash are debits in the
reconciling columns.
c. information pertaining to investing and
financing activities only is entered.
d. only significant noncash transactions are
entered.
Ans: LO: 5, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
a127. On the statement of cash
flows worksheet,
a. significant noncash investing and financing
activities are not entered in the reconciling columns.
b. a decrease in cash will be offset by a debit
in the reconciling items columns at the bottom of the worksheet.
c. an increase in cash will be offset by a debit
in the reconciling items column at the bottom of the worksheet.
d. income statement accounts are listed after
balance sheet accounts in the top half of the worksheet under the indirect
method.
Ans: LO: 5, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
128. In the Paper Corporation,
cash receipts from customers were $138,000, cash payments for operating
expenses were $102,000, and one-third of the company's $6,300 income taxes were
paid during the year. Net cash provided by operating activities is:
a. $36,000.
b. $29,700.
c. $33,900.
d. $31,800.
Ans: LO: 6, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
a 129. Each of the following would be reported
under operating activities except
cash receipts
a. from sales of goods.
b. from sales of investments.
c. of interest on loans.
d. of dividends from investments.
Ans: LO: 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
a 130. Which of the following statements concerning
the statement of cash flows is true?
a. The statement of cash flows is usually more
accurate when using the indirect method.
b. If the direct method is used, a supplementary
schedule reconciling the net income to net cash from operating activities must
still be provided.
c. The statement of cash flows reflects both
earnings per share and cash per share.
d. The statement of cash flows is an optional
financial statement for external reporting purposes.
Ans: LO: 6, Bloom: K,
Difficulty: Easy, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
a131. Crush
Company reports the following:
End
of Year Beginning of
Year
Inventory $27,000 $42,000
Accounts Payable 32,000 12,000
If cost of goods sold for the year is $210,000, the
amount of cash paid to suppliers is
a. $215,000.
b. $205,000.
c. $175,000.
d. $245,000.
Ans: LO: 6, Bloom: AP,
Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a132. During the year, Salaries
and Wages Payable decreased by $6,000. If Salaries and Wages Expense amounted
to $170,000 for the year, the cash paid to employees (including deductions from
gross pay) is
a. $176,000.
b. $170,000.
c. $164,000.
d. $182,000.
Ans: LO: 6, Bloom: AP,
Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a133. Gore
Company reports a $16,000 increase in inventory and a $6,000 increase in
accounts payable during the year. Cost of Goods Sold for the year was $160,000.
The cash payments made to suppliers were
a. $160,000.
b. $170,000.
c. $140,000.
d. $155,000.
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a134. Ranger
Company had credit sales of $550,000. The beginning accounts receivable balance
was $40,000 and the ending accounts receivable balance was $140,000. What were
the cash collections from customers during the period?
a. $650,000
b. $550,000
c. $450,000
d. $590,000
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a135. Hark Inc.
had cash sales of $400,000 and credit sales of $1,100,000. The accounts
receivable balance increased $25,000 during the year. How much cash did Hark
receive from its customers during the year?
a. $1,475,000
b. $1,075,000
c. $1,500,000
d. $725,000
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a136. Barry
Company had a cost of purchases of $250,000. The comparative balance sheet
analysis revealed a $10,000 decrease in inventory and a $20,000 increase in
accounts payable. What were Barry's cash payments to suppliers?
a. $230,000
b. $220,000
c. $260,000
d. $280,000
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a137. Thomas
Company had an increase in inventory of $45,000. The cost of goods sold was
$90,000. There was a $6,000 decrease in accounts payable from the prior period.
What were Thomas’ cash payments to suppliers?
a. $141,000
b. $51,000
c. $129,000
d. $96,000
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a138. Which of
the following items does not appear
in the statement of cash flows under the direct method?
a. Cash payments to suppliers
b. Cash collections from customers
c. Depreciation Expense
d. Cash from the sale of equipment
Ans: LO: 6, Bloom: C, Difficulty:
Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting,
AICPA PC: None, IMA: Reporting
a139. Lager
Company has other operating expenses of $75,000. There has been a decrease in
prepaid expenses of $4,000 during the year, and accrued liabilities are $6,000
larger than in the prior period. What were Lager's cash payments for operating
expenses?
a. $77,000
b. $73,000
c. $65,000
d. $75,000
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a140. Damien
Corporation shows income tax expense of $80,000. There has been a $5,000
decrease in federal income taxes payable and a $8,000 increase in state income
taxes payable during the year. What was Damien's cash payment for income taxes?
a. $80,000
b. $77,000
c. $75,000
d. $93,000
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a141. Monitor Company
has other operating expenses of $250,000. There has been an increase in prepaid
expenses of $15,000 during the year, and accrued liabilities are $22,000 lower
than in the prior period. Using the direct method of reporting cash flows from
operating activities, what were Monitor's cash payments for operating expenses?
a. $243,000
b. $257,000
c. $213,000
d. $287,000
Ans: LO: 6, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
a142. The cost of goods sold during the year was
$185,000. Merchandise inventory decreased by $6,000 during the year and
accounts payable decreased by $3,000 during the year. Using the direct method of reporting cash
flows from operating activities, cash payments for merchandise total
a. $188,000.
b. $182,000.
c. $176,000.
d. $194,000.
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a143. Bongo Company reports a $25,000 increase in
inventory and a $10,000 decrease in accounts payable during the year. Cost of
Goods Sold for the year was $180,000. Using the direct method of reporting cash
flows from operating activities, cash payments made to suppliers were
a. $180,000.
b. $190,000.
c. $215,000.
d. $135,000.
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a144. During 2013, Uma Company had $160,000 in
cash sales and $1,200,000 in credit sales.
The accounts receivable balances were $180,000 and $212,000 at December
31, 2012 and 2013, respectively. Using
the direct method of reporting cash flows from operating activities, what was
the total cash collected from all customers during 2013?
a. $1,168,000
b. $1,392,000
c. $1,360,000
d. $1,328,000
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
a145. The operating section of the cash account
includes debits for each of the following except
a. depreciation expense.
b. net income.
c. a loss on disposal of equipment.
d. an increase in prepaid expense.
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
146. Which of the following steps is not required in preparing the statement of
cash flows?
a. Determine the net change in cash.
b. Determine the net cash provided by operating
activities.
c. Determine cash from investing and financing
activities.
d. Determine the change in current assets.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
147. Financing
activities involve
a. lending money to other entities and
collecting on those loans.
b. cash receipts from sales of goods and
services.
c. acquiring and disposing of productive
long-lived assets.
d. long-term liability and owners' equity items.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
148. The information to prepare the
statement of cash flows usually comes from each of the following except
a. the comparative balance sheet.
b. the retained earnings statement.
c. additional information.
d. the current income statement.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement,
AICPA PC: None, IMA: FSA
149. The statement of cash flows is
prepared from all of the following except
a. the adjusted trial balance.
b. comparative balance sheets.
c. selected transaction data.
d. the current income statement.
Ans: LO: 2, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
150. 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. obtain favorable borrowing terms at a bank.
c. pay dividends.
d. pay its obligations when they become due.
Ans: LO: 1, Bloom: C,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
151. 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. decreases 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
increases in accrued liabilities are deducted.
Ans: LO: 3, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: None, IMA: Reporting
152. In the Rogers Company, land
decreased $75,000 because of a cash sale for $75,000, the equipment account
increased $20,000 as a result of a cash purchase, and Bonds Payable increased $70,000
from an issuance for cash at face value. The net cash provided by investing
activities is
a. $75,000.
b. $125,000.
c. $55,000.
d. $50,000.
Ans: LO: 3, 6, Bloom: AP,
Difficulty: Hard, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
a153. Corgan Company
uses the direct method in determining net cash provided by operating
activities, During the year, operating expenses were $290,000, prepaid expenses
increased $20,000, and accrued expenses payable increased $30,000. Cash
payments for operating expenses were
a. $240,000.
b. $340,000.
c. $300,000.
d. $280,000.
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
a 154. Bath Company uses the direct method in
determining net cash provided by operating activities. The income statement
shows income tax expense $80,000. Income taxes payable were $35,000 at the
beginning of the year and $25,000 at the end of the year. Cash payments for
income taxes are
a. $50,000.
b. $80,000.
c. $90,000.
d. $140,000.
Ans: LO: 6, Bloom: AP,
Difficulty: Hard, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Reporting, AICPA PC: Problem Solving, IMA: Reporting
a155. When a worksheet
is used, all but one of the following statements is correct. The incorrectstatement is
a. Reconciling items on the worksheet are not
journalized or posted.
b. The bottom portion of the worksheet shows the
statement of cash flows effects.
c. The balance sheet accounts portion of the
worksheet is divided into two parts:
assets, and liabilities and stockholders' equity.
d. Each line pertaining to a balance sheet
account should foot across.
Ans: LO: 5, Bloom: K,
Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN:
Measurement, AICPA PC: None, IMA: FSA
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