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Exam 12: Reporting and Interpreting the Statement of Cash Flows

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Question 101

Multiple Choice

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Cash flows from financing activities can include:

A) selling goods on credit.
B) acquiring long-lived assets.
C) issuing long-term debt.
D) purchasing inventory on credit.

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

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Question 102

Multiple Choice

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When a company uses the direct method to determine the cash flows from operating activities,cash flows from operating activities will:

A) be identical to the amount reported using the indirect method.
B) be larger if there is a net cash inflow and smaller if there is a net cash outflow compared to the amount reported using the indirect method.
C) always be larger than the amount reported using the indirect method.
D) be larger if there is a net cash outflow and smaller if there is a net cash inflow compared to the amount reported using the indirect method.

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

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Question 103

Multiple Choice

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If Salaries and Wages Expense is $450,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $18,000 and $16,500,respectively,the cash paid to employees is:

The receipts of dividends and interest are both reported as cash inflows from investing activities on the statement of cash flows.

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $35,000 cash. Required: Part a.Prepare the journal entry to record this transaction. Part b.Explain how this transaction would be reported on the statement of cash flows prepared using the indirect method.

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 debit of:

When preparing the operating activities section of the statement of cash flows using the direct method,net income must be adjusted for gains or losses realized when property,plant,and equipment is sold.

Assume that the indirect method is used to determine net cash provided by (used in) operating activities and that Accounts Receivable balance decreased by $10 million during the year.That $10 million should be:

Match each item with the correct letter below to indicate how each revenue or expense account on the income statement is adjusted when using the direct method to determine net cash flow provided by operating activities. Account Balance Change 1._____ Increase in Accrued Expenses 2._____ Decrease in Accounts Receivable 3._____ Decrease in Unearned Income 4._____ Increase in Prepaid Expenses 5._____ Decrease in Accounts Payable 6._____ Increase in Long-Term Notes Payable 7._____ Decrease in Prepaid Insurance 8._____ Increase in Inventory 9._____ Increase in Interest Payable 10._____ Increase in Accumulated Depreciation Type of Adjustment A - Add item to related revenue or expense account balance S - Subtract item from related revenue or expense account balance N - No adjustment necessary

Repayments of loans will be reported as a:

A toy store with a calendar year-end is likely to have:

Which of the following statements about the statement of cash flows is not correct?

Which of the following is not needed to prepare a statement of cash flows?

A company purchases a $300,000 building,paying $200,000 in cash and signing a $100,000 promissory note.What will be reported on the statement of cash flows as a result of this transaction?

In general,the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows.

In the decline phase,the company continues to enjoy positive operating cash flows but stops spending cash on investing activities and instead uses its cash for financing activities such as repaying lenders and returning excess cash to shareholders.

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

In arriving at cash from operating activities,adding a decrease in Supplies to net income eliminates the effect of recording adjusts net income for transactions that:

Cash flows from operating activities include:

A general rule for the relationship between operating,investing,and financing cash flows and the financial statements is: