Managerial Accounting 13th Edition Carl Warren James M Reeve Jonathan Duchac- Test Bank
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Sample Test
FinMan_Chapter_14(13)_Statement_of_Cash_Flows
1.
2. The
statement of cash flows is not one
of the basic financial statements.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
3. Cash,
as the term is used for the statement of cash flows, could indicate either cash
or cash equivalents.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
4. The
statement of cash flows is an optional financial statement.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
ACCT.AICPA.FN.04 – Reporting
BUSPROG: Analytic
5. The
statement of cash flows shows the effects on cash of a company’s operating,
investing, and financing activities.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
6. The
statement of cash flows reports a firm’s major sources of cash receipts and
major uses of cash for a period of time.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
7. Cash
flows from operating activities, as part of the statement of cash flows,
include cash transactions that enter into the determination of net income.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
8. To
arrive at cash flows from operations, it is necessary to convert the income
statement from an accrual basis to the cash basis of accounting.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
9. Cash
flows from investing activities, as part of the statement of cash flows, would
include any receipts from the sale of land.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
10.
Cash flows from financing activities, as part of the statement
of cash flows, would include any payments for dividends.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
11.
Cash flows from investing activities, as part of the statement
of cash flows, would include any payments for the purchase of treasury stock.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
12.
Cash flows from investing activities, as part of the statement
of cash flows, would include any receipts from the issuance of bonds payable.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
13.
There are two alternatives to reporting cash flows from
operating activities in the statement of cash flows: (1) the direct method and
(2) the indirect method.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
14.
The direct method of preparing the operating activities section
of the statement of cash flows reports major classes of cash receipts and cash
payments related to the day-to-day operations of the business.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
15.
Under the direct method of reporting cash flows from operations,
the primary source of cash is cash received from customers.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
16.
The main disadvantage of the direct method of reporting cash
flows from operating activities is that the necessary data are often costly to
accumulate.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
17.
A major disadvantage of
the indirect method of reporting cash flows from operating activities is that
the difference between the net amount of cash flows from operating activities
and net income is emphasized.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
18.
Cash outflows from financing activities include the payment of
cash dividends, the acquisition of treasury stock, and the repayment of amounts
borrowed.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
19.
Cash flows from investing activities, as part of the statement
of cash flows, include payments for the acquisition of fixed assets.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
20.
The acquisition of land in exchange for common stock is an
example of noncash investing and financing activity.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
–Measurement
BUSPROG: Analytic
21.
If a business issued bonds payable in exchange for land, the
transaction would be reported in a separate schedule on the statement of cash
flows.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
22.
In preparing the statement of cash flows, the correct order of
reporting cash activities is financing, operating, and investing.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
–Measurement
BUSPROG: Analytic
23.
A cash flow per share amount should be reported on the statement
of cash flows.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
24.
Which of the following is not one of
the four basic financial statements?
1. balance
sheet
2. statement
of cash flows
3. statement
of changes in financial position
4. income
statement
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
ACCT.AICPA.FN.04 – Reporting
BUSPROG: Analytic
25.
Which of the following can be found on the statement of cash
flows?
1. cash
flows from operating activities
2. total
assets
3. total
changes in stockholders’ equity
4. changes
in retained earnings
ANSWER:
a
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
26.
On the statement of cash flows, the cash flows from operating
activities section would include
1. receipts
from the issuance of capital stock
2. receipts
from the sale of investments
3. payments
for the acquisition of investments
4. cash receipts
from sales activities
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
27.
Preferred stock issued in exchange for land would be reported in
the statement of cash flows in
1. the
cash flows from financing activities section
2. the
cash flows from investing activities section
3. a
separate schedule
4. the
cash flows from operating activities section
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
28.
Cash paid to purchase long-term investments would be reported in
the statement of cash flows in
1. the
cash flows from operating activities section
2. the
cash flows from financing activities section
3. the
cash flows from investing activities section
4. a
separate schedule
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
29.
Which of the following would not be
found in a schedule of noncash investing and financing activities, reported at
the end of a statement of cash flows?
1. equipment
acquired in exchange for a note payable
2. bonds
payable exchanged for capital stock
3. purchase
of treasury stock
4. capital
stock issued to acquire fixed assets
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
30.
Which of the following does not represent
an outflow of cash and therefore would not be reported on the
statement of cash flows as a use of cash?
1. purchase
of noncurrent assets
2. purchase
of treasury stock
3. discarding
an asset that had been fully depreciated
4. payment
of cash dividends
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
31.
Which of the following represents an inflow of cash and
therefore would be reported on the statement of cash flows?
1. retirement
of bond payable
2. acquisition
of treasury stock
3. declaration
of stock dividends
4. issuance
of long-term debt
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
32.
A ten-year bond was issued at par for $250,000
cash. This transaction should be shown on a statement of cash flows
under
1. investing
activities
2. financing
activities
3. noncash
investing and financing activities
4. operating
activities
ANSWER:
b
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
33.
Cash paid for preferred stock dividends should be shown on the
statement of cash flows under
1. investing
activities
2. financing
activities
3. noncash
investing and financing activities
4. operating
activities
ANSWER:
b
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
34.
The last item on the statement of cash flows prior to the
schedule of noncash investing and financing activities reports
1. the
increase or decrease in cash
2. cash
at the end of the year
3. net
cash flow from investing activities
4. net
cash flow from financing activities
ANSWER:
b
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
35.
Which of the following is a noncash investing and financing
activity?
1. payment
of a cash dividend
2. payment
of a six-month note payable
3. purchase
of merchandise inventory on account
4. issuance
of common stock to acquire land
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
36.
Which of the following should be shown on a statement of cash
flows under the financing activities section?
1. the
purchase of a long-term investment in the common stock of another company
2. the
payment of cash to retire a long-term note
3. the
proceeds from the sale of a building
4. the
issuance of a long-term note to acquire land
ANSWER:
b
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
37.
A company purchases equipment for $32,000 cash. This
transaction should be shown on the statement of cash flows under
1. investing
activities
2. financing
activities
3. noncash
investing and financing activities
4. operating
activities
ANSWER:
a
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
38.
Cash flow per share is
1. required
to be reported on the balance sheet
2. required
to be reported on the income statement
3. required
to be reported on the statement of cash flows
4. not
required to be reported on any statement
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
ACCT.AICPA.FN.04 – Reporting
BUSPROG: Analytic
39.
On the statement of cash flows prepared by the indirect method,
the cash flows from operating activities section would include
1. receipts
from the sale of investments
2. amortization
of premium on bonds payable
3. payments
for cash dividends
4. receipts
from the issuance of capital stock
ANSWER:
b
DIFFICULTY:
Moderate
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
40.
The statement of cash flows is not useful
for
1. planning
future investing and financing activities
2. determining
a company’s ability to pay its debts
3. determining
a company’s ability to pay dividends
4. calculating
the net worth of a company
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
41.
Cash receipts received from the issuance of a mortgage notes
payable would be classified as a(n)
1. investing
activity
2. operating
activity
3. noncash
investing and financing activity
4. financing
activity
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
42.
Which of the following would not be on
the statement of cash flows?
1. cash
flows from investing activities
2. cash
flows from financing activities
3. cash
flows from operating activities
4. cash
flows from contingent activities
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
43.
The order of presentation of activities on the statement of cash
flows is
1. operating,
investing, and financing
2. operating,
financing, and investing
3. financing,
operating, and investing
4. financing,
investing, and operating
ANSWER:
a
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
44.
Financing activities include
1. lending
money
2. acquiring
investments
3. issuing
debt
4. acquiring
long-lived assets
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
45.
For each of the following, identify whether it would be
disclosed as an operating (O), financing (F), or investing (I) activity on the
statement of cash flows under the indirect method.
1. purchased
buildings
2. sold
patents
3. net
income
4. issued
common stock
5. paid
cash dividends
6. depreciation
expense
ANSWER:
a. I – investing
1. I –
investing
2. O – operating
3. F –
financing
4. F –
financing
5. O –
operating
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
46.
State the section(s) of the statement of cash flows prepared by
the indirect method (operating activities, investing activities, financing
activities, or not reported) and the amount that would be reported for each of
the following transactions:
(a) Received $120,000 from the sale of land costing $70,000
(b) Purchased investments for $75,000
(c) Declared $35,000 cash dividends on stock. $5,000 dividends
were payable at the beginning of the year, and
$6,000 were payable at the end of the year
(d) Acquired equipment for $64,000 cash
(e) Declared and issued 100 shares of $20 par common stock as a
stock dividend, when the market price of the
stock was $32 a share
(f) Recognized depreciation for the year, $37,000
(g) Issued 85,000 shares of $10 par common stock for $25 a
share, receiving cash
(h) Issued $500,000 of 20-year, 10% bonds payable at 99
(i) Borrowed $43,000 from Regional Bank, issuing a 5-year,
8% note for that amount
ANSWER:
(a) Investing activities, $120,000 (the $50,000 gain on the sale would be
deducted
from net income in determining the cash flows from operating
activities)
(b) Investing activities, ($75,000)
(c) Financing activities, ($34,000)
Cash payment of dividends = Dividends payable at the beginning
of the year
+ Dividends declared during the year – Dividends payable at the
end of the
year = $5,000 + $35,000 – $6,000 = $34,000
(d) Investing activities, ($64,000)
(e) Not reported
(f) Operating activities, $37,000 (addition to net income
in determining cash
flows from operating activities)
(g) Financing activities, $2,125,000
Cash from financing activity = Number of shares issued × Issue
price per
share = 85,000 × $25 = $2,125,000
(h) Financing activities, $495,000
Cash from financing activities = $500,000 × (99 / 100) =
$495,000
(i) Financing activities, $43,000
DIFFICULTY:
Moderate
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
47.
Identify which section the statement of cash flows (using the
indirect method) would present information regarding the following activities.
(Use O for operating, I for investing, or F for financing).
1. Issued
common stock
2. Redeemed
bonds
3. Issued
preferred stock
4. Purchased
patents
5. Net
income
6. Paid
cash dividends
7. Purchased
treasury stock
8. Sold
long-term investment
9. Sold
equipment
10.
Purchased buildings
11.
Issued bonds
ANSWER:
a. F
1. F
2. F
3. I
4. O
5.
F
6. F
7. I
8.
I
9.
I
10.
F
DIFFICULTY:
Moderate
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
48.
For each of the following, identify whether it would be
disclosed as an operating (O), financing (F), or investing (I) activity on the
statement of cash flows under the indirect method.
1. Purchased
treasury stock
2. Sold
equipment at book value
3. Net
income
4. Sold
long-term investments
5. Issued
common stock
6. Depreciation
expense
ANSWER:
a. F – financing
1. I –
investing
2. O –
operating
3. I –
investing
4. F –
financing
5. O –
operating
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
49.
The net income reported on the income statement for the current
year was $210,000. Depreciation recorded on equipment and a building
amount to $62,500 for the year. Balances of the current asset and
current liabilities accounts at the beginning and end of the year are as
follows:
End of Year Beginning of
Year
Cash
$
56,000
$ 59,500
Accounts receivable
(net)
71,000
73,400
Inventories
140,000
126,500
Prepaid
expenses
7,800
8,400
Accounts payable (merchandise creditors)
62,600
66,400
Salaries
payable
9,000
8,250
(a) Prepare the cash flows from operating activities section of
the statement of cash flows, using the indirect
method.
(b) If the direct method had been used, would the net cash flow
from operating activities have been the
same? Explain.
ANSWER:
(a) Cash flows from operating activities:
Net
income
$210,000
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation
62,500
Changes in current operating assets and liabilities:
Decrease in accounts
receivable
2,400
Increase in
inventories
(13,500)
Decrease in prepaid
expenses
600
Decrease in accounts
payable
(3,800)
Increase in salaries
payable
750
Net cash flow from operating
activities $258,950
(b) Yes. The amount of cash flows from operating
activities reported on the
statement of cash flows is not affected by the method of
reporting such
flows.
DIFFICULTY:
Moderate
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
FNMN.WARD.16.16-02
– LO: 16-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
50.
The income statement disclosed the following items for the
current year:
Depreciation
expense
$ 36,000
Gain on disposal of
equipment
21,000
Net
income
317,500
Balances of the current assets and current liabilities accounts
changed between December 31, last year, and December 31, this year, as follows:
Increase in accounts
receivable
$5,600
Decrease in
inventory
3,200
Decrease in prepaid
insurance
1,200
Decrease in account
payable
3,800
Increase in income taxes
payable
1,200
Increase in dividends
payable
850
Prepare the cash flows from operating activities section of the
statement of cash flows using the indirect method.
ANSWER:
Cash flows from operating activities:
Net
income
$317,500
Adjustments to reconcile net income to net cash
flow from operating activities:
Depreciation
36,000
Gain on disposal of
equipment
(21,000)
Changes in current operating assets and liabilities:
Increase in accounts
receivable
(5,600)
Decrease in
inventory
3,200
Decrease in prepaid
insurance
1,200
Decrease in accounts
payable
(3,800)
Increase in income taxes payable
1,200
Net cash flow from operating
activities $328,700
Note: The change in dividends payable would be used to adjust
the dividends
declared
in obtaining the cash paid for dividends in the financing activities
section of the statement of cash flows.
DIFFICULTY:
Moderate
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
FNMN.WARD.16.14-02
– LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
51.
Indicate whether each of the following would be added to or
deducted from net income in determining net cash flow from operating activities
by the indirect method:
(a) Increase in prepaid expenses
(b) Amortization of patents
(c) Increase in salaries payable
(d) Gain on sale of fixed assets
(e) Decrease in accounts receivable
(f) Increase in notes receivable due in
60 days
(g) Amortization of discount on bonds payable
(h) Decrease in merchandise inventory
(i) Depreciation of fixed assets
(j) Loss on retirement of long-term debt
(k) Decrease in accounts payable
(l) Increase in notes payable due in 30
days
(m) Increase in income taxes payable
ANSWER:
(a) deducted
(b) added
(c) added
(d) deducted
(e) added
(f) deducted
(g) added
(h) added
(i) added
(j) added
(k) deducted
(l) added
(m) added
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
FNMN.WARD.16.14-02
– LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
52.
For each of the following, identify whether it would be disclosed
as an operating (O), financing (F), or investing (I) activity on the statement
of cash flows under the indirect method.
1. Received
dividends
2. Paid
of dividends
3. Purchased
of equipment
4. Net
income
5. Issued
company’s common stock
6. Amortization
expense
ANSWER:
a. O – operating
1. F –
financing
2. I –
investing
3. O –
operating
4. F –
financing
5. O –
operating
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
FNMN.WARD.16.14-03
– LO: 14-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
53.
Each of the events below may have an effect on the statement of
cash flows. Designate how the event should be reported within the statement of
cash flows using the codes provided below. Codes may be used more than once, or
not at all.
Codes:
I + investing activity; cash inflow
I – investing activity; cash outflow
F + financing activity; cash inflow
F – financing activity; cash outflow
O + operating activity; cash inflow
O – operating activity; cash outflow
NC noncash investing and financing activity
Events:
1. Paid
the weekly payroll
2. Paid
an account payable
3. Issued
bonds payable for cash
4. Declared
and paid a cash dividend
5. Paid
cash for a new piece of equipment
6. Purchased
treasury stock for cash
7. Paid
cash for stock in another company
8. Received
interest on a long-term bond investment
9. Received
cash for sales
10.
Sold a long-term stock investment for cash at book value
ANSWER:
1. O –
2. O –
3. F
+
4. F –
5. I –
6. F –
7. I –
8. O
+
9. O
+
10.
I +
DIFFICULTY:
Moderate
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
FNMN.WARD.16.14-03
– LO: 14-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
54.
Indicate the section (operating activities, investing
activities, financing activities, or none) in which each of the following would
be reported on the statement of cash flows prepared by the indirect method:
(a) Gain on sale of fixed assets
(b) Net income
(c) Retirement of long-term debt
(d) Sale of capital stock
(e) Distribution of stock dividends
(f) Payment of cash dividends
(g) Purchase of fixed assets
(h) Sale of fixed assets
(i) Receipt of interest revenue
(j) Payment of interest expense
ANSWER:
(a) operating activities
(b) operating activities
(c) financing activities
(d) financing activities
(e) none
(f) financing activities
(g) investing activities
(h) investing activities
(i) operating activities
(j) operating activities
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-01 – LO: 14-01
FNMN.WARD.16.14-04
– LO: 14-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
55.
Rarely will the cash flows from operating activities, as
reported on the statement of cash flows, be the same as the net income reported
on the income statement.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
56.
Using the indirect method, if land costing $85,000 was sold for
$145,000, the amount reported in the financing activities section of the
statement of cash flows would be $85,000.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
57.
If land costing $145,000 was sold for $205,000, the $60,000 gain
on the sale would be added to net income in the operating activities section of
the statement of cash flows (prepared by the indirect method).
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
58.
In preparing the cash flows from operating activities section of
the statement of cash flows by the indirect method, the net decrease in
inventories from the beginning to the end of the period is added to net income
for the period.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
59.
In determining the cash flows from operating activities for the
statement of cash flows by the indirect method, the depreciation expense for
the period is added to the net income for the period.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
60.
In preparing the cash flows from operating activities section of
the statement of cash flows by the indirect method, the amortization of bond
discount for the period is deducted from the net income for the period.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
61.
If cash dividends of $135,000 were paid during the year and the
company sold 1,000 shares of common stock at $30 per share, the statement of
cash flows would report net cash flow from financing activities as $165,000.
1. True
2. False
ANSWER:
False
RATIONALE:
Net cash flow from financing activities = Cash received from sale of common
stock
– Cash paid for dividends = (1,000 × $30) – $135,000 = ($105,000)
DIFFICULTY:
Easy
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
62.
The declaration and issuance of a stock dividend would be
reported on the statement of cash flows.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
63.
If 800 shares of $40 par common stock are sold for $43,000, the
$43,000 would be reported in the cash flows from financing activities section
of the statement of cash flows.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
64.
If $475,000 of bonds payable are sold at 101, $475,000 would be
reported in the cash flows from financing activities section of the statement
of cash flows.
1. True
2. False
ANSWER:
False
RATIONALE:
Net cash flows from financing activities = Par value of bonds × (101 / 100) =
$475,000
× (101 / 100) = $479,750
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
65.
Net income was $51,000 for the year. The accumulated
depreciation balance increased by $14,000 over the year. There were
no sales of fixed assets or changes in noncash current assets or
liabilities. Under the indirect method, the cash flow from
operations is $37,000.
1. True
2. False
ANSWER:
False
RATIONALE:
Cash flow from operations = Net income + Depreciation expense = $51,000 +
$14,000
= $65,000
DIFFICULTY:
Easy
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
66.
Net income for the year was $29,500. Accounts
receivable increased $2,500 and accounts payable increased $5,400. There were
no other changes in noncash current assets and liabilities. Under the indirect
method, the cash flow from operations is $32,400.
1. True
2. False
ANSWER:
True
RATIONALE:
Cash flow from operations = Net income – Increase in accounts receivable +
Increase
in accounts payable = $29,500 – $2,500 + $5,400 = $32,400
DIFFICULTY:
Easy
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
67.
A building with a cost of $153,000 and accumulated depreciation
of $42,000 was sold for an $11,000 gain. When using the indirect
method, the cash generated from this investing activity was $121,000.
1. True
2. False
ANSWER:
False
RATIONALE:
Cash generated from investing activity = Book value of building + Gain on sale
of
building = ($153,000 – $42,000) + $11,000 = $122,000
DIFFICULTY:
Easy
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
68.
Under the indirect method, expenses that do not affect cash are
added to net income in the operating activities section of the statement of
cash flows.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
69.
Cash paid to acquire treasury stock should be shown on the
statement of cash flows under investing activities.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
70.
Repayments of bonds would be shown as a cash outflow in the
investing section of the statement of cash flows.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
71.
Purchasing equipment by issuing a six-month note should be shown
on the statement of cash flows under the investing activities section.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
72.
Cash inflows and outflows are not netted
in the investing or financing sections of the statement of cash flows but are
separately disclosed to give the reader full information.
1. True
2. False
ANSWER:
False
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
73.
There is no difference in the investing and financing sections
of the statement of cash flows using the indirect and direct method.
1. True
2. False
ANSWER:
True
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
FNMN.WARD.16.14-04
– LO: 14-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
74.
Depreciation on factory equipment would be reported in the
statement of cash flows prepared by the indirect method in
1. the
cash flows from financing activities section
2. the
cash flows from investing activities section
3. a
separate schedule
4. the
cash flows from operating activities section
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
75.
Which of the following should be added to net income in
calculating net cash flow from operating activities using the indirect method?
1. an
increase in inventory
2. a
decrease in accounts payable
3. preferred
dividends declared and paid
4. a
decrease in accounts receivable
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
76.
Which of the following should be deducted from net income in
calculating net cash flow from operating activities using the indirect method?
1. depreciation
expense
2. gain
on sale of land
3. a
loss on the sale of equipment
4. dividends
declared and paid
ANSWER:
b
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
77.
Which of the following increases cash?
1. depreciation
expense
2. acquisition
of treasury stock
3. borrowing
money by issuing a six-month note
4. the declaration
of a cash dividend
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
78.
Which of the following would not be
classified as an operating activity?
1. interest
expense
2. income
taxes
3. payment
of dividends
4. selling
expenses
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
79.
Which of the following should be added to net income in
calculating net cash flow from operating activities using the indirect method?
1. a
gain on the sale of land
2. a
decrease in accounts payable
3. an
increase in accrued liabilities
4. dividends
paid on common stock
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
80.
On the statement of cash flows prepared by the indirect method,
a $50,000 gain on the sale of investments would be
1. deducted
from net income in converting the net income reported on the income statement
to cash flows from operating activities
2. added
to net income in converting the net income reported on the income statement to
cash flows from operating activities
3. added
to dividends declared in converting the dividends declared to the cash flows
from financing activities related to dividends
4. deducted
from dividends declared in converting the dividends declared to the cash flows
from financing activities related to dividends
ANSWER:
a
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
81.
Accounts receivable from sales transactions were $51,000 at the
beginning of the year and $64,000 at the end of the year. Net income
reported on the income statement for the year was
$105,000. Exclusive of the effect of other adjustments, the cash
flows from operating activities to be reported on the statement of cash flows
prepared by the indirect method is
1. $105,000
2. $118,000
3. $92,000
4. $169,000
ANSWER:
c
RATIONALE:
Cash flows from operating activities = Net income – Increase in accounts
receivable
= $105,000 – ($64,000 – $51,000) = $92,000
DIFFICULTY:
Easy
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
82.
The net income reported on the income statement for the current
year was $275,000. Depreciation recorded on fixed assets and
amortization of patents for the year were $40,000 and $9,000,
respectively. Balances of current asset and current liability
accounts at the end and at the beginning of the year are as follows:
End Beginning
Cash
$50,000 $60,000
Accounts
receivable
112,000 108,000
Inventories
105,000
93,000
Prepaid
expenses
4,500
6,500
Accounts payable (merchandise creditors)
75,000 89,000
What is the amount of cash flows from operating activities
reported on the statement of cash flows prepared by the indirect method?
1. $198,000
2. $324,000
3. $352,000
4. $296,000
ANSWER:
d
RATIONALE:
Cash flows from operating activities:
Net
income
$275,000
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation
40,000
Amortization of
patents
9,000
Changes in current operating assets and liabilities:
Increase in accounts
receivable
(4,000)
Increase in
inventories
(12,000)
Decrease in prepaid
expenses
2,000
Decrease in accounts
payable
(14,000)
Net cash flow from operating
activities
$296,000
DIFFICULTY:
Moderate
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
83.
The following information is available from the current period
financial statements:
Net
income
$175,000
Depreciation
expense
28,000
Increase in accounts
receivable
16,000
Decrease in accounts
payable
21,000
The net cash flow from operating activities using the indirect
method is
1. $166,000
2. $184,000
3. $110,000
4. $240,000
ANSWER:
a
RATIONALE:
Cash flows from operating activities:
Net
income
$175,000
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation
expense
28,000
Changes in current operating assets and liabilities:
Increase in accounts
receivable
(16,000)
Decrease in accounts
payable
(21,000)
Net cash flow from operating
activities $166,000
DIFFICULTY:
Moderate
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
84.
On the statement of cash flows, the cash flows from investing
activities section would include
1. receipts
from the issuance of capital stock
2. payments
for dividends
3. payments
for retirement of bonds payable
4. receipts
from the sale of investments
ANSWER:
d
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
85.
A building with a book value of $54,000 is sold for $63,000
cash. Using the indirect method, this transaction should be shown on the
statement of cash flows as follows:
1. an
increase of $54,000 from investing activities
2. an
increase of $63,000 from investing activities and a deduction from net income
of $9,000
3. an
increase of $9,000 from investing activities
4. an
increase of $54,000 from investing activities and an addition to net income of
$9,000
ANSWER:
b
RATIONALE:
Gain on sale of building = $63,000 – $54,000 = $9000
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
86.
Cash paid for equipment would be reported on the statement of
cash flows in
1. the
cash flows from operating activities section
2. the
cash flows from financing activities section
3. the
cash flows from investing activities section
4. a
separate schedule
ANSWER:
c
DIFFICULTY:
Easy
Bloom’s:
Remembering
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
87.
If a gain of $11,000 is realized in selling (for cash) office
equipment having a book value of $55,000, the total amount reported in the cash
flows from investing activities section of the statement of cash flows is
1. $44,000
2. $11,000
3. $55,000
4. $66,000
ANSWER:
d
RATIONALE:
Cash flow from sale of office equipment to be reported as an investing activity
=
Book
value of office equipment + Gain on sale of office equipment = $55,000 +
$11,000 = $66,000
DIFFICULTY:
Easy
Bloom’s:
Applying
LEARNING OBJECTIVES:
FNMN.WARD.16.14-02 – LO: 14-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24
– Statement of Cash Flows
ACCT.AICPA.FN.03
– Measurement
BUSPROG: Analytic
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