ACC 557 Week 10 Quiz – Strayer University NEW

ACC/557 Week 10 Quiz – Strayer NEW

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All possible Questions with answers.

TRUE-FALSE STATEMENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A loss on disposal 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

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

A company must deduct depreciation expense from net income to determining net cash provided by operating activities.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

A gain on disposal of plant assets is deducted from net income in determine net cash provided by operating activities.

Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

The measurement of free cash flow provides additional insight regarding a company’s cash-generating ability.

Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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

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

a28. 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

a29. 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

a30. 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

a31. 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

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

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

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

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

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

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

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

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

The statement of cash flows should help investors and creditors assess each of the following except the
entity’s ability to generate future income.
entity’s ability to pay dividends.
reasons for the difference between net income and net cash provided by operating activities.
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

The statement of cash flows
must be prepared on a daily basis.
summarizes the operating, financing, and investing activities of an entity.
is another name for the income statement.
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

Which one of the following items is not generally used in preparing a statement of cash flows?
Adjusted trial balance
Comparative balance sheets
Current income statement
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

The primary purpose of the statement of cash flows is to
provide information about the investing and financing activities during a period.
prove that revenues exceed expenses if there is a net income.
provide information about the cash receipts and cash payments during a period.
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

If a company reports a net loss, it
may still have a net increase in cash.
will not be able to pay cash dividends.
will not be able to get a loan.
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

In addition to the three basic financial statements, which of the following is also a required financial statement?
the “Cash Budget”
the Statement of Cash Flows
the Statement of Cash Inflows and Outflows
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

The statement of cash flows will not report the
amount of checks outstanding at the end of the period.
sources of cash in the current period.
uses of cash in the current period.
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

The statement of cash flows reports each of the following except
cash receipts from operating activities.
cash payments from investing activities.
the net change in cash.
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

Each of the following are particularly interested in the statement of cash flows except
creditors.
employees.
shareholders.
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

Lending money and collecting the loans are
operating activities.
investing activities.
financing activities.
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

The cash effects of transactions that create revenues and expenses are
financing activities.
investing activities.
operating activities.
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

The acquisition of land by issuing common stock is
a noncash transaction which is not reported in the body of a statement of cash flows.
a cash transaction and would be reported in the body of a statement of cash flows.
a noncash transaction and would be reported in the body of a statement of cash flows.
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

The order of presentation of activities on the statement of cash flows is
operating, investing, and financing.
operating, financing, and investing.
financing, operating, and investing.
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

Financing activities involve
lending money.
acquiring investments.
issuing debt.
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

Investing activities include
collecting cash on loans made.
obtaining cash from creditors.
obtaining capital from owners.
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

Generally, the most important category on the statement of cash flows is cash flows from
operating activities.
investing activities.
financing activities.
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

The category that is generally considered to be the best measure of a company’s ability to continue as a going concern is
cash flows from operating activities.
cash flows from investing activities.
cash flows from financing activities.
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

Cash receipts from interest and dividends are classified as
financing activities.
investing activities.
operating activities.
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

Each of the following is an example of a significant noncash activity except
conversion of bonds into common stock.
exchanges of plant assets.
issuance of debt to purchase assets.
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

If a company has both an inflow and outflow of cash related to property, plant, and equipment, the
two cash effects can be netted and presented as one item in the investing activities section.
cash inflow and cash outflow should be reported separately in the investing activities section.
two cash effects can be netted and presented as one item in the financing activities section.
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

Of the items below, the one that appears first on the statement of cash flows is
noncash investing and financing activities.
net increase (decrease) in cash.
cash at the end of the period.
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

Which of the following transactions does not affect cash during a period?
Write-off of an uncollectible account
Collection of an accounts receivable
Sale of treasury stock
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

Significant noncash transactions would not include
conversion of bonds into common stock.
asset acquisition through bond issuance.
treasury stock acquisition.
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

In preparing a statement of cash flows, a conversion of bonds into common stock will be reported in
the financing section.
the “extraordinary” section.
a separate schedule or note to the financial statements.
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

64. Indicate where the event paid income taxes would appear, if at all, on the statement of cash flows.
Operating activities section
Investing activities section
Financing activities section
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

Indicate where the event common stock issued for cash would appear, if at all, on the indirect statement of cash flows.
Operating activities section
Investing activities section
Financing activities section
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

Indicate where the event purchased land for cash would appear, if at all, on the indirect statement of cash flows.
Operating activities section
Investing activities section
Financing activities section
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

Indicate where the event purchased land and a building with a mortgage would appear, if at all, on the indirect statement of cash flows.
Operating activities section
Investing activities section
Financing activities section
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

Joan’s Vegetable Market had the following transactions during 2013:
Issued $60,000 of par value common stock for cash.
Repaid a 6 year note payable in the amount of $21,000.
Acquired land by issuing common stock of par value $50,000.
Declared and paid a cash dividend of $5,000.
Sold a long-term investment (cost $63,000) for cash of $6,000.
Acquired an investment in IBM stock for cash of $10,000.
What is the net cash provided by financing activities?

$34,000
$80,000
$39,000
$0

Ans: LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

Joan’s Vegetable Market had the following transactions during 2013:
Issued $50,000 of par value common stock for cash.
Repaid a 6 year note payable in the amount of $22,000.
Acquired land by issuing common stock of par value $100,000.
Declared and paid a cash dividend of $2,000.
Sold a long-term investment (cost $63,000) for cash of $6,000.
Acquired an investment in IBM stock for cash of $12,000.
What is the net cash provided by investing activities?

$12,000
$32,000
($6,000)
$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

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
$846,000 net cash inflow.
$861,000 net cash inflow.
$866,000 net cash outflow.
$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

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
$273,000.
$489,000.
$183,000.
$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

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
$140,000.
$230,000.
$100,000.
$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

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
$285,000.
$295,000.
$445,000.
$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

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
$160,000.
$165,000.
$205,000.
$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

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
$40,000.
$65,000.
$49,000.
$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

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
used net cash of $19,000.
used net cash of $27,000.
provided net cash of $27,000.
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

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?
$205,000
$243,000
$225,000
$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

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?
$301,000
$337,000
$321,000
$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

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
$95,000.
$115,000.
$100,000.
$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

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
$60,000.
$80,000.
$100,000.
$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

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
$154,000.
$105,000.
$112,000.
$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

The third (final) step in preparing the statement of cash flows is to
analyze changes in noncurrent asset and liability accounts.
compare the net change in cash with the change in the cash account reported on the balance sheet.
determine net cash provided by operating activities.
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

Which one of the following items is not necessary in preparing a statement of cash flows?
Determine the change in cash
Determine the cash provided by operations
Determine cash from financing and investing activities
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

If accounts receivable have increased during the period,
revenues on an accrual basis are less than revenues on a cash basis.
revenues on an accrual basis are greater than revenues on a cash basis.
revenues on an accrual basis are the same as revenues on a cash basis.
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

If accounts payable have increased during a period,
revenues on an accrual basis are less than revenues on a cash basis.
expenses on an accrual basis are less than expenses on a cash basis.
expenses on an accrual basis are greater than expenses on a cash basis.
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

Which one of the following affects cash during a period?
Recording depreciation expense
Declaration of a cash dividend
Write-off of an uncollectible account receivable
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

In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is
added to net income.
deducted from net income.
ignored because it does not affect cash.
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

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
$67,000.
$87,000.
$71,000.
$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

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
used net cash of $5,000.
used net cash of $23,000.
provided net cash of $5,000.
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

Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the
direct method.
indirect method.
working capital method.
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

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is
deducted from net income.
added to net income.
ignored because it does not affect income.
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

Using the indirect method, patent amortization expense for the period
is deducted from net income.
causes cash to increase.
causes cash to decrease.
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

In developing the cash flows from operating activities, most companies in the U. S.
use the direct method.
use the indirect method.
present both the indirect and direct methods in their financial reports.
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

Each of the following is added to net income in computing net cash provided by operating activities except
amortization expense.
an increase in accrued expenses payable.
a gain on sale of equipment.
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

Which of the following would be subtracted from net income using the indirect method?
Depreciation expense
An increase in accounts receivable
An increase in accounts payable
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

Which of the following would be added to net income using the indirect method?
An increase in accounts receivable
An increase in prepaid expenses
Depreciation expense
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

Which of the following would not be an adjustment to net income using the indirect method?
Depreciation Expense
An increase in Prepaid Insurance
Amortization Expense
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

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)
subtraction from net income.
addition to net income.
addition to cash flow from investing activities.
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

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

Accounts Receivable increase decrease
Prepaid Expenses increase decrease
Inventory decrease increase
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

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

Accounts Receivable decrease increase
Prepaid Expenses increase decrease
Inventory decrease increase
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

Which of the following adjustments to convert net income to net cash provided by operating activities is not added to net income?
Gain on Sale of Equipment
Depreciation Expense
Patent Amortization Expense
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

Using the indirect method, if equipment is sold at a gain, the
sale proceeds received are deducted in the operating activities section.
sale proceeds received are added in the operating activities section.
amount of the gain is added in the operating activities section.
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

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?
$176,000
$182,000
$256,000
$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

On the statement of cash flows using the indirect method, patent amortization expense will
be added to net income in the operating section.
be deducted from net income in the operating section.
appear as an inflow of cash in the investing section.
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

The indirect and direct methods of preparing the statement of cash flows are identical except for the
significant noncash activity section.
operating activities section.
investing activities section.
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

Land acquired from the issuance of common stock is reported
as a financing activity.
as an investing activity.
as an operating activity.
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

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:
$25,000.
$45,000.
$120,000.
$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

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:
$85,000.
$185,000.
$375,000.
$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

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:
as a net purchase of land, $48,000.
only as a purchase of land $158,000.
as a purchase of land $158,000 and a sale of land $110,000.
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

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

Net cash provided by operating activities is:

$240,000.
$330,000.
$360,000.
$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

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:

$315,000.
$260,000.
$335,000.
$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

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:

$280,000.
$490,000.
$460,000.
$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

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)
net increase in cash of $150,000.
net decrease in cash of $150,000.
increase in cash of $250,000 and a decrease in cash of $100,000.
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

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?
Declaration and payment of a cash dividend during the period.
Net income for the period.
1
2
Neither 1 nor 2.
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

The statement of cash flows
is prepared instead of an income statement under generally accepted accounting principles.
is used to assess an entity’s ability to pay dividends and meet obligations.
is prepared from comparative income statements.
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

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of
the adjusted trial balance.
the current period’s balance sheet.
a comparative balance sheet.
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

To determine the net cash provided (used) by operating activities, it is necessary to analyze
the current year’s income statement.
a comparative balance sheet.
additional information.
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

Which of the following would not be needed to determine net cash provided by operating activities?
Depreciation expense
Change in accounts receivable
Payment of cash dividends
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

When equipment is sold for cash, the amount received is reflected as a cash
inflow in the operating section.
inflow in the financing section.
inflow in the investing section.
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

The statement of cash flows will not provide insight into
why dividends were not increased.
whether cash flow is greater than net income.
the exact proceeds of a future bond issue.
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

Which of the following transactions would not be classified as a financing activity?
Purchase of treasury stock
Payment of dividends
Issuance of bonds at a discount
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

A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is
adjusted cash from operations.
cash provided by operations.
free cash flow.
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

Free cash flow equals cash provided by
operations less capital expenditures and cash dividends.
operations less cash dividends.
investing activities less capital expenditures and cash dividends.
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

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?

$28,000
$20,000
$17,000
$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

During 2013, Forman 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 Forman’s free cash flow?
($339,000)
$1,440,000
$276,000
($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

All of the following statements about free cash flow are false except:
Significant free cash flow indicates less potential to finance new investments.
Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends.
Free cash flow is not reported on the statement of cash flows.
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

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:
credit to Land $50,000 and a debit to Sale of Land $50,000 under investing activities.
debit to Land $92,000 and a credit to Purchase of Land $92,000 under financing activities.
net debit to Land $42,000 and a credit to Purchase of Land $42,000 under investing activities.
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

When listing accounts in the statement of cash flows worksheet, the accumulated depreciation account is shown
with accounts that have credit balances.
with accounts that have debit balances.
as a credit under the reconciling items.
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

In the bottom portion of the statement of cash flows worksheet,
inflows of cash are debits in the reconciling columns.
outflows of cash are debits in the reconciling columns.
information pertaining to investing and financing activities only is entered.
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

On the statement of cash flows worksheet,
significant noncash investing and financing activities are not entered in the reconciling columns.
a decrease in cash will be offset by a debit in the reconciling items columns at the bottom of the worksheet.
an increase in cash will be offset by a debit in the reconciling items column at the bottom of the worksheet.
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

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:
$36,000.
$29,700.
$33,900.
$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 132. Each of the following would be reported under operating activities except cash receipts

from sales of goods.
from sales of investments.
of interest on loans.
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

Which of the following statements concerning the statement of cash flows is true?
The statement of cash flows is usually more accurate when using the indirect method.
If the direct method is used, a supplementary schedule reconciling the net income to net cash from operating activities must still be provided.
The statement of cash flows reflects both earnings per share and cash per share.
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

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

$215,000.
$205,000.
$175,000.
$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

During the year, Salaries and Wages Payable decreased by $6,000. If Salaries Expense amounted to $170,000 for the year, the cash paid to employees (including deductions from gross pay) is
$176,000.
$170,000.
$164,000.
$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

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
$160,000.
$170,000.
$140,000.
$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

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?
$650,000
$550,000
$450,000
$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

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?
$1,475,000
$1,075,000
$1,500,000
$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

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?
$230,000
$220,000
$260,000
$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

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?
$141,000
$51,000
$129,000
$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

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?

$243,000
$257,000
$213,000
$287,000

Ans: LO: 6, Bloom: AP, Difficulty: Hard, Min: 3, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

a142. 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?

$77,000
$73,000
$65,000
$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

a143. 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?

$80,000
$77,000
$75,000
$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

Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method?
Cash receipts from customers
Cash paid for income taxes
Gain on sale of equipment
Cash paid to employees

Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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
$188,000.
$182,000.
$176,000.
$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

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
$180,000.
$190,000.
$215,000.
$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

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?
$1,168,000
$1,392,000
$1,360,000
$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

The operating section of the Cash account includes debits for each fo the following except:
depreciation expense.
net income.
a loss on disposal of equipment.
an increase in prepaid expenses.

Which of the following steps is not required in preparing the statement of cash flows?
Determine the net change in cash.
Determine the net cash provided by operating activities.
Determine cash from investing and financing activities.
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

Financing activities involve
lending money to other entities and collecting on those loans.
cash receipts from sales of goods and services.
acquiring and disposing of productive long-lived assets.
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

The information to prepare the statement of cash flows usually comes from each of the following except
the comparative balance sheet.
the retained earnings statement.
additional information.
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

The statement of cash flows is prepared from all of the following except
the adjusted trial balance.
comparative balance sheets.
selected transaction data.
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

The information in a statement of cash flows will not help investors to assess the entity’s ability to
generate future cash flows.
obtain favorable borrowing terms at a bank.
pay dividends.
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

In converting net income to net cash provided by operating activities, under the indirect method:
decreases in accounts receivable and increases in prepaid expenses are added.
decreases in inventory and increases in accrued liabilities are added.
decreases in accounts payable and decreases in inventory are deducted.
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

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
$75,000.
$125,000.
$55,000.
$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

a156. When a worksheet is used, all but one of the following statements is correct. The incorrect statement is

Reconciling items on the worksheet are not journalized or posted.
The bottom portion of the worksheet shows the statement of cash flows effects.
The balance sheet accounts portion of the worksheet is divided into two parts: assets, and liabilities and stockholders’ equity.
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

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
$240,000.
$340,000.
$300,000.
$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

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
$50,000.
$80,000.
$90,000.
$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