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Cash flows from financing activities:


A) includes all cash inflows and outflows associated with a company's lending activities.
B) includes all cash inflows and outflows between a company and its stockholders.
C) are always negative because of the payments of cash dividends as well as interest and principal on debt.
D) are always positive unless the company is experiencing serious financial trouble.

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

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Maya Company's purchase of 100 shares of Labrador Inc.common stock would be reported as a financing activity on its statement of cash flows.

A) True
B) False

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Mill Garden Company's income statement for the year shows a net loss of $135,000.Additional information for the year follows: Mill Garden Company's income statement for the year shows a net loss of $135,000.Additional information for the year follows: What is the net cash provided by (used in) operating activities? A) ($148,500) B) $40,500 C) $19,500 D) ($67,500) What is the net cash provided by (used in) operating activities?


A) ($148,500)
B) $40,500
C) $19,500
D) ($67,500)

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

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When preparing the operating activities section of the statement of cash flows using the indirect method,a decrease in accounts receivable is subtracted from net income.

A) True
B) False

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Almost all U.S.companies have used the indirect method of preparing the statement of cash flows:


A) because most users of the financial statements do not understand the direct method.
B) in spite of the FASB's stated preference for the direct method.
C) because it usually requires less space in the annual report.
D) so that stockholders cannot determine how much cash was spent on executives' salaries.

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

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A company purchased money market funds with cash during the current year.Which of the following statements is correct?


A) This transaction will result in a decrease in cash from operating activities.
B) This transaction will result in a decrease in cash from investing activities.
C) This transaction will result in a decrease in cash from financing activities.
D) This transaction will not cause a change in cash from operating,investing,or financing activities.

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

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The payment of interest on bonds is classified as a cash outflow from operating activities on the statement of cash flows.

A) True
B) False

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Using the indirect method,which of the following would not be added to net income?


A) An increase in Equipment.
B) A decrease in Prepaid Insurance.
C) An increase in Salaries and Wages Payable.
D) A decrease in Supplies.

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

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Which method of preparing the operating activities section of the statement of cash flows consists of a summary of each component of operating transactions that result in either a debit or a credit to cash?


A) Direct method.
B) Indirect method.
C) Accrual method.
D) Cash method.

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

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Which of the following equations is correct?


A) Change in cash = Change in noncash assets
B) Change in cash = Change in liabilities + Change in stockholders' equity
C) Change in cash = Change in liabilities + Change in stockholders' equity − Change in noncash assets
D) Change in cash = Change in liabilities + Change in stockholders' equity + Change in noncash assets

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

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Which of the following journal entries has an effect on cash provided by (used in) operating activities?


A) Bad debts expense.
B) Depreciation expense.
C) Sale of an investment.
D) Payment of interest on long-term notes payable.

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

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If Cost of Goods Sold is $72,500 and the beginning and ending Inventory balances are $9,000 and $6,500,respectively,inventory purchases for cash equal:


A) $72,500.
B) $70,000.
C) $75,000.
D) $66,000.

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

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A company has a net cash inflow from operating activities of $789,000,a net cash outflow of $50,000 from investing activities and a net cash inflow of $100,000 from financing activities.The company paid $124,000 in interest,$186,500 in income taxes,and $200,000 in cash dividends.Which of the following statements about the statement of cash flows is not correct?


A) The cash dividends of $200,000 paid will be reported as a cash outflow in the cash flow from investing activities section.
B) Supplemental disclosures required for a company using the indirect method include the amount of interest and the amount of income taxes paid.
C) The statement of cash flows will show a net increase in cash and cash equivalents of $839,000.
D) If the direct method is used,the $124,000 of interest paid and the $186,500 of income taxes paid will be reported in the cash flows from operating activities.

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

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When the net cash flows from operating,investing,and financing activities are combined to arrive at the overall net change in cash,a net decrease in cash is subtracted from the beginning cash balance to calculate the ending cash balance.

A) True
B) False

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Selected balance sheet information and the income statement for Pioneer Industries for the current year are presented below. Selected balance sheet information and the income statement for Pioneer Industries for the current year are presented below. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. Selected balance sheet information and the income statement for Pioneer Industries for the current year are presented below. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

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Cash Flows from Operating Activities
Net...

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Marathon,Inc.showed Salaries and Wages Expense of $244,000 on its income statement.If the Salaries and Wages Payable account was $27,000 at the beginning of the year and $18,500 at the end of the year,how much cash was paid to employees?


A) $217,000
B) $225,500
C) $252,500
D) $235,500

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

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Assume a company uses the indirect method to prepare its statement of cash flows.If the Supplies account decreases and Salaries and Wages Payable increases during an accounting period,what does the company do with the changes in these accounts to calculate cash flows from operating activities?


A) Both are subtracted from net income.
B) The change in Salaries and Wages Payable is added to net income;the change in Supplies is subtracted from net income
C) Both are added to net income.
D) The change in Supplies is added to net income;the change in Salaries and Wages Payable is subtracted from net income.

E) A) and D)
F) B) and D)

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When preparing the statement of cash flow using the indirect method,Depreciation Expense is:


A) added back to net income under the operating activities section.
B) subtracted from net income under the operating activities section.
C) subtracted net income under the financing activities section.
D) added back to net income under the financing activities section.

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

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What is the purpose of the statement of cash flows?


A) It is intended to provide a cash-based view of a company.
B) It illustrates the profitability of a company.
C) It reports the financial position of a company at a specific point in time.
D) It outlines the changes in stockholders' equity accounts from the beginning of the period to the end of the period.

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

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The Extra Surplus Company's Balance Sheet for December 31,2017 and the Income Statement for 2018 are shown below. The Extra Surplus Company's Balance Sheet for December 31,2017 and the Income Statement for 2018 are shown below. Additional data: • Sales were $13,000;$8,000 in cash was received from customers. • Bought new land for cash,$10,000. • Sold other land for its book value of $5,000. • Paid $1,000 principal on the long-term note payable and $1,000 in interest. • Issued new shares of stock for $10,000 cash. • Cash dividends of $1,000 were declared and paid to stockholders. • Paid $5,500 on accounts payable. • No inventory purchases were made;other expenses were incurred on account. • All wages were paid in cash. • Other expenses were on account. Required: Part a.Prepare a balance sheet at December 31,2018. Part b.Prepare the statement of cash flows using the direct method. The Extra Surplus Company's Balance Sheet for December 31,2017 and the Income Statement for 2018 are shown below. Additional data: • Sales were $13,000;$8,000 in cash was received from customers. • Bought new land for cash,$10,000. • Sold other land for its book value of $5,000. • Paid $1,000 principal on the long-term note payable and $1,000 in interest. • Issued new shares of stock for $10,000 cash. • Cash dividends of $1,000 were declared and paid to stockholders. • Paid $5,500 on accounts payable. • No inventory purchases were made;other expenses were incurred on account. • All wages were paid in cash. • Other expenses were on account. Required: Part a.Prepare a balance sheet at December 31,2018. Part b.Prepare the statement of cash flows using the direct method. Additional data: • Sales were $13,000;$8,000 in cash was received from customers. • Bought new land for cash,$10,000. • Sold other land for its book value of $5,000. • Paid $1,000 principal on the long-term note payable and $1,000 in interest. • Issued new shares of stock for $10,000 cash. • Cash dividends of $1,000 were declared and paid to stockholders. • Paid $5,500 on accounts payable. • No inventory purchases were made;other expenses were incurred on account. • All wages were paid in cash. • Other expenses were on account. Required: Part a.Prepare a balance sheet at December 31,2018. Part b.Prepare the statement of cash flows using the direct method.

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