Question 1

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

Accepted Answer

A)   deducted from net income.
B)   added to net income.
C)   ignored because it does not affect income.
D)   ignored because it does not affect expenses.E) A) and B)
F) A) and C)

Question 2

All major financing and investing activities affect cash.

Accepted Answer

A) True 
 B)False

Question 3

The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.

Accepted Answer

A) True 
 B)False

Question 4

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)

Accepted Answer

A)   subtraction from net income.
B)   addition to net income.
C)   addition to cash flow from investing activities.
D)   subtraction from cash flow from investing activities.E) B) and C)
F) A) and B)

Question 5

Analysis of the changes in all of the noncash balance sheet accounts will explain the change in the cash account.

Accepted Answer

A) True 
 B)False

Question 6

In preparing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis.

Accepted Answer

A) True 
 B)False

Question 7

All of the following statements about free cash flow are false except:

Accepted Answer

A)   Significant free cash flow indicates less potential to finance new investments.
B)   Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends.
C)   Free cash flow is not reported on the statement of cash flows.
D)   Significant free cash flow indicates less potential to pay additional dividends.E) B) and C)
F) A) and D)

Question 8

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

Accepted Answer

A) True 
 B)False  True

Question 9

Which of the following transactions would not be classified as a financing activity?

Accepted Answer

A)   Purchase of treasury stock
B)   Payment of dividends
C)   Issuance of bonds at a discount
D)   Purchase of a long-term investment in bondsE) C) and D)
F) A) and D)

Question 10

Indicate where the issuance of common stock issued for cash would appear, if at all, on the indirect statement of cash flows.

Accepted Answer

A)   Operating activities section
B)   Investing activities section
C)   Financing activities section
D)   Does not represent a cash flowE) A) and B)
F) All of the above C

Question 11

The third (final)  step in preparing the statement of cash flows is to

Accepted Answer

A)   analyze changes in noncurrent asset and liability accounts.
B)   compare the net change in cash with the change in the cash account reported on the balance sheet.
C)   determine net cash provided by operating activities.
D)   list the noncash activities.E) All of the above
F) B) and C)

Question 12

In addition to the three basic financial statements, which of the following is also a required financial statement?

Accepted Answer

A)   the "Cash Budget"
B)   the Statement of Cash Flows
C)   the Statement of Cash Inflows and Outflows
D)   the "Cash Reconciliation"E) C) and D)
F) A) and B)

Question 13

In Lynne Company, there was an increase in the land account during the year of $43,000. Analysis reveals that the change resulted from a cash sale of land at cost $115,000, 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:

Accepted Answer

A)   as a net purchase of land, $43,000.
B)   only as a purchase of land $158,000.
C)   as a purchase of land $158,000 and a sale of land $115,000.
D)   only as a sale of land $115,000.E) None of the above
F) A) and D)

Question 14

Land acquired from the issuance of common stock is reported

Accepted Answer

A)   as a financing activity.
B)   as an investing activity.
C)   as an operating activity.
D)   in a separate schedule at the bottom of the statement of cash flows.E) C) and D)
F) B) and D)

Question 15

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.

Accepted Answer

A) True 
 B)False

Question 16

In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.

Accepted Answer

A) True 
 B)False  True

Question 17

The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would not be needed to determine net cash provided by operating activities?

Accepted Answer

A)   Depreciation expense
B)   Change in accounts receivable
C)   Payment of cash dividends
D)   Change in prepaid expensesE) None of the above
F) A) and D)

Question 19

In converting net income to net cash provided by operating activities, under the indirect method:

Accepted Answer

A)   decreases in accounts receivable and increases in prepaid expenses are added.
B)   decreases in inventory and increases in accrued liabilities are added.
C)   decreases in accounts payable and decreases in inventory are deducted.
D)   increases in accounts receivable and increases in accrued liabilities are deducted.E) B) and C)
F) A) and B)

Question 20

Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

Accepted Answer

A) True 
 B)False

Exam 13: Statement of Cash Flows

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

Correct Answer
verified

All major financing and investing activities affect cash.

Correct Answer
verified

The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.

Correct Answer
verified

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)

Correct Answer
verified

Analysis of the changes in all of the noncash balance sheet accounts will explain the change in the cash account.

Correct Answer
verified

In preparing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis.

Correct Answer
verified

All of the following statements about free cash flow are false except:

Correct Answer
verified

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

Correct Answer
verified
True

Which of the following transactions would not be classified as a financing activity?

Correct Answer
verified

Indicate where the issuance of common stock issued for cash would appear, if at all, on the indirect statement of cash flows.

Correct Answer
verified
C

The third (final) step in preparing the statement of cash flows is to

Correct Answer
verified

In addition to the three basic financial statements, which of the following is also a required financial statement?

Correct Answer
verified

Correct Answer
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Land acquired from the issuance of common stock is reported

Correct Answer
verified

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.

Correct Answer
verified

In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.

Correct Answer
verified
True

The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities.

Correct Answer
verified

Which of the following would not be needed to determine net cash provided by operating activities?

Correct Answer
verified

In converting net income to net cash provided by operating activities, under the indirect method:

Correct Answer
verified

Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

Correct Answer
verified

Exam 13: Statement of Cash Flows

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

Correct AnswerverifiedShow Answer

All major financing and investing activities affect cash.

Correct AnswerverifiedShow Answer

The information in a statement of cash flows helps investors and creditors assess the company's ability to pay dividends and meet obligations.

Correct AnswerverifiedShow Answer

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as a(n)

Correct AnswerverifiedShow Answer

Analysis of the changes in all of the noncash balance sheet accounts will explain the change in the cash account.

Correct AnswerverifiedShow Answer

In preparing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis.

Correct AnswerverifiedShow Answer

All of the following statements about free cash flow are false except:

Correct AnswerverifiedShow Answer

The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.

Correct AnswerverifiedTrue

Which of the following transactions would not be classified as a financing activity?

Correct AnswerverifiedShow Answer

Indicate where the issuance of common stock issued for cash would appear, if at all, on the indirect statement of cash flows.

Correct AnswerverifiedC

The third (final) step in preparing the statement of cash flows is to

Correct AnswerverifiedShow Answer

In addition to the three basic financial statements, which of the following is also a required financial statement?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Land acquired from the issuance of common stock is reported

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.

Correct AnswerverifiedTrue

The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities.

Correct AnswerverifiedShow Answer

Which of the following would not be needed to determine net cash provided by operating activities?

Correct AnswerverifiedShow Answer

In converting net income to net cash provided by operating activities, under the indirect method:

Correct AnswerverifiedShow Answer

Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.

Correct AnswerverifiedShow Answer

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True

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C

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True

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