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When using the spreadsheet approach for preparing a Statement of Cash Flows using the indirect method,one half of the spreadsheet reflects changes in balance sheet accounts and the other half is used to demonstrate their effect on cash flows.The spreadsheet is organized with the balance sheet on the top and the adjustments that would appear on a statement of cash flows on the bottom.

A) True
B) False

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Cash flows from operating activities include all of the following except:


A) a purchase of land.
B) collections from customers on account.
C) payments to employees for hours worked.
D) receipt of dividends.

E) A) and D)
F) A) and C)

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Which of the following statements is true?


A) Accrual-based net income can be manipulated because it is based on estimates.
B) Cash flows are easily manipulated because they are based on estimates.
C) Accrual-based net income is not easily manipulated because valuation for such items as bad debts and inventory are precise and based on objectively verifiable information.
D) Cash flows are not easily manipulated because they are generated by internal transactions and do not involve external parties.

E) None of the above
F) All of the above

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Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.Use the information above to answer the following question.If the cash balance at the beginning of the current year was $0,what is the amount of cash at the end of the year? Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.Use the information above to answer the following question.If the cash balance at the beginning of the current year was $0,what is the amount of cash at the end of the year? A) $112,500 B) $425,000 C) $737,500 D) $311,500


A) $112,500
B) $425,000
C) $737,500
D) $311,500

E) A) and B)
F) A) and C)

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The income statement for the year contains the following: Use the information above to answer the following question.What is the amount of inventory purchases? The income statement for the year contains the following: Use the information above to answer the following question.What is the amount of inventory purchases? A) $78,000 B) $80,000 C) $82,000 D) $79,000 The income statement for the year contains the following: Use the information above to answer the following question.What is the amount of inventory purchases? A) $78,000 B) $80,000 C) $82,000 D) $79,000


A) $78,000
B) $80,000
C) $82,000
D) $79,000

E) B) and C)
F) A) and C)

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Negative operating cash flow may indicate all of the following except:


A) the company may not be able to replace property,plant and equipment.
B) stockholders may not receive a dividend.
C) the company may be in the introductory phase of its life cycle.
D) The company did not earn a profit from its core business activity.

E) B) and C)
F) C) and D)

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Which of the following statements is true regarding cash flows from financing activities?


A) When companies borrow,cash outflows for financing activities have occurred.
B) When companies receive dividends,cash inflows from financing activities have occurred.
C) When companies repurchase their own stock,cash outflows for financing activities have occurred.
D) When companies pay dividends,cash inflows from financing activities have occurreD.Financing activities include issuing long-term debt (cash inflow) ,issuing stock (cash inflow) ,repurchasing their own stock (cash outflow) ,and paying dividends (cash outflow) .A dividend received from investments is an operating activity,not a financing activity.

E) B) and C)
F) None of the above

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In 2014,a company paid $4,500 which it owed from its 2013 income tax liability and $30,000 for its 2014 tax liability.The company still owes $6,000 at year-end.How much should the company report as cash paid for income taxes on its 2014 statement of cash flows,using the direct method?


A) $34,500
B) $40,500
C) $30,000
D) $3,500

E) A) and B)
F) All of the above

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The net cash flow from operating activities is an inflow of $37,042,the net cash flow from investing activities is an outflow of $16,831,and the net cash flow from financing activities is an outflow of $26,397.If the beginning cash account balance is $11,283,what is the ending cash account balance?


A) $5,097
B) ($6,186)
C) $38,759
D) $27,476

E) A) and B)
F) None of the above

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Your company owned equipment with a book value of $120,000 that was sold during this accounting period for $30,500 in cash,and purchased new equipment for cash of $148,000.Your company would record:


A) a debit of $148,000 and a credit of $30,500 to the cash account for a net cash inflow of $117,500.
B) a debit of $148,000 and a credit of $89,500 to the cash account for a net cash inflow of $58,500.
C) a debit of $30,500 and a credit of $148,000 to the cash account for a net cash outflow of $117,500.
D) a debit of $89,500 and a credit of $148,000 to the cash account for a net cash outflow of $58,500.

E) A) and B)
F) A) and C)

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Depreciation expense is $20,000 and the beginning and ending accumulated depreciation balances are $150,000 and $155,000,respectively.What is the cash paid for depreciation?


A) $20,000
B) $5,000
C) $0
D) $25,000

E) A) and B)
F) All of the above

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Which of the following statements regarding calculation of cash flows from operating activities under the indirect method is true?


A) When the indirect method is used,changes in current liabilities are subtracted while changes in current assets are added to convert net income to net cash flow from operating activities.
B) When the indirect method is used,depreciation expense is added to net income as a step in the process of calculating net cash flow from operating activities.
C) When the indirect method is used,gains on the sale of property,plant and equipment are added to convert net income to net cash flow from operating activities.
D) When the indirect method is used,changes in long-term liabilities are subtracted to convert net income to net cash flow from operating activities.

E) A) and B)
F) None of the above

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If cost of goods sold is $145,000 and the beginning and ending inventory balances are $18,000 and $13,000,respectively,the net purchases of inventory are:


A) $145,000.
B) $140,000.
C) $150,000.
D) $132,000.

E) None of the above
F) A) and D)

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The direct exchange of debt for equipment would be shown:


A) on the statement of cash flows as an operating activity.
B) on the statement of cash flows as an investing activity.
C) on the statement of cash flows as a financing activity.
D) as a supplementary disclosure to the statement of cash flows.

E) B) and D)
F) None of the above

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All of the following might be used to evaluate cash flow performance,except:


A) the absolute amount of cash flow.
B) whether cash flow is positive or negative.
C) the relationship between net income and cash flow.
D) the trend in sales and operating expenses.

E) All of the above
F) B) and D)

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The statement of cash flows cannot be used to determine


A) changes in working capital.
B) expenditures on long-term assets.
C) profitability as measured by specific revenues and expenses.
D) reliance on external financing.

E) All of the above
F) A) and C)

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Divergence between net income and cash flow may be due to any of the following except


A) use of the direct method of presenting cash flows from operations.
B) the company being brand new.
C) fraudulent financial reporting.
D) seasonal variations in a company's operations.

E) None of the above
F) All of the above

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The repayment of the principal of a loan which had been used to finance the purchase of equipment should be reported on the statement of cash flows as a


A) cash outflow from investing activities.
B) cash outflow from operating activities.
C) cash outflow from financing activities.
D) noncash transaction in a supplemental disclosure.

E) A) and D)
F) A) and C)

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Brighton,Inc. ,uses the indirect method to determine its net cash flows from operating activities.During the course of the year,the company's accounts receivable increased by $10,000 and its accounts payable decreased by $5,000.As a result of these two items,the calculation to determine cash flows from operating activities will be:


A) increased by $5,000.
B) decreased by $5,000.
C) increased by $15,000.
D) decreased by $15,000.

E) A) and B)
F) None of the above

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Depreciation expense is not reported on the statement of cash flows when prepared using the direct method.The direct method converts revenues to cash inflows and expenses to cash outflows.Since depreciation is a noncash expense,it does not appear in the operating activities section of the statement of cash flows.

A) True
B) False

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