ACC 206 Week 9 Quiz – Strayer New
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Quiz 7 Chapter17
THESTATEMENTOFCASHFLOWS
CHAPTERSTUDYOBJECTIVES
1.Indicatetheusefulnessofthestatementofcashflows.
2.Distinguishamongoperating,investing,andfinancingactivities.
3.Prepareastatementofcashflowsusingtheindirectmethod.
4.Analyzethestatementofcashflows.
5.Explainhowtouseaworksheettopreparethestatementofcashflowsusingtheindirectmethod.
6.Prepareastatementofcashflowsusingthedirectmethod.
TRUE-FALSESTATEMENTS
1. Thestatementofcashflowsisarequiredstatementthatmustbepreparedalongwithan
income statement,balancesheet,andretainedearningsstatement.
2. Forexternalreporting,acompanymustprepareeitheranincomestatementora
statementof cashflows,but notboth.
3. Aprimaryobjectiveofthestatementofcashflowsistoshowtheincomeorlosson investingandfinancingtransactions.
4. A statementofcashflows
indicatesthe sourcesanduses of
cashduringaperiod.
5. Inpreparingastatementofcashflows,cashequivalentsaresubtractedfrom
cashinorder tocomputethenetchangeincashduring a period.
6. Cashequivalentsarehighly-liquidinvestmentsthathavematuritiesoflessthanthree months.
7. The useofcashtopurchasehighlyliquidshort-terminvestments(cashequivalents)would
be reportedonthestatement
of cashflowsasaninvestingactivity.
8. Inpreparingastatementofcashflows,theissuanceofdebtshouldbereported
separately from theretirementof debt.
9. Noncashinvestingandfinancingactivitiesmustbereportedinthebodyofastatementof cashflows.
10. Thestatementofcashflowsclassifiescashreceiptsandpaymentsasoperating, nonoperating, financial,andextraordinaryactivities.
11. Thesaleof landfor cashwouldbeclassifiedasacashinflowfroman investingactivity.
12. Cashflowfrominvestingactivitiesisconsideredthemostimportantcategoryonthe statementof cashflowsbecauseit
isconsideredthebestmeasureof
expectedincome.
13. Thereceiptofdividends
fromlong-term investments
instockisclassified asacashinflow
frominvestingactivities.
TheStatementof Cash Flows 17-5
14. Thepaymentofinterestonbondspayableisclassifiedasacashoutflowfromoperating activities.
15. Anyitemthatappearsontheincomestatementwouldbeconsideredaseitheracash inflowor cashoutflowfromoperatingactivities.
16. Theacquisitionofabuildingbyissuingbondswouldbeconsideredaninvestingand financing
activity
thatdidnot affectcash.
17. Allmajorfinancingandinvestingactivitiesaffectcash.
18. Cashprovidedbyoperationsisgenerallyequaltooperatingincome.
19. Usingtheindirectmethod,anincrease
inaccountsreceivable
duringaperiod isdeducted fromnetincomeincalculatingcashprovidedbyoperations.
20. Usingtheindirectmethod,anincreaseinaccountspayableduringaperiodisdeducted
from
netincomeincalculatingcashprovidedbyoperations.
21. Alossonsaleofequipmentisaddedtonetincomeindeterminingcashprovidedby operationsundertheindirectmethod.
22. Inpreparingastatementofcashflows,anincreaseintheCommonStockandTreasury Stockaccountsduringaperiodwouldbe an investingactivity.
23. Cashprovidedby
operatingactivitiesfailsto
take
intoaccountthatacompanymust
invest
in newfixedassetsjusttomaintainits
currentlevelofoperations.
24. Freecashflowequalscashprovidedbyoperationslesscapitalexpendituresandcash
dividends.
a25. Theuseof aworksheetto prepareastatementofcashflowsis optional.
a26. Duringtheyear,IncomeTaxExpenseamountedto$30,000andIncomeTaxesPayable
increasedby$3,000;therefore,thecashpaidforincometaxeswas$27,000.
a27. Inpreparingnetcashflowfromoperatingactivitiesusingthedirectmethod,eachitemin
theincomestatementisadjustedfromtheaccrualbasistothecashbasis.
a28. Usingthedirectmethod,majorclassesofinvestingandfinancingactivitiesarelistedin
theoperatingactivitiessection.
a29. Duringaperiod,costofgoodssold+anincreaseininventory+anincreaseinaccounts payable
=cashpaidtosuppliers.
a30. Operatingexpenses+anincreaseinprepaidexpenses–adecreaseinaccrued expensespayable=cashpaymentsfor
operatingexpenses.
17-6
Additional
True-FalseQuestions
31. Thestatementofcashflowsclassifiescashreceiptsandcashpaymentsintotwo categories:operatingactivitiesand nonoperatingactivities.
32. Financingactivitiesincludetheobtainingofcashfromissuingdebtandrepayingthe
amounts borrowed.
33. TheadjustedtrialbalanceistheonlyitemneededtopreparetheStatementofCash Flows.
34. Undertheindirectmethod,retainedearningsisadjustedforitemsthataffectedreported
netincomebutdidnot affect cash.
a35. ThereconcilingentryfordepreciationexpenseinaworksheetisacredittoAccumulated DepreciationandadebittoOperating-DepreciationExpense.
a36. Underthedirectmethod,theformulaforcomputingcashcollectionsfromcustomersis
salesrevenuesplustheincreaseinaccountsreceivableorminusthedecreasein
accounts receivable.
MULTIPLECHOICEQUESTIONS
37. Thestatementofcashflowsshouldhelpinvestorsandcreditorsassesseachofthe
followingexceptthe
a.entity'sabilitytogeneratefutureincome. b.entity'sabilityto paydividends.
c.reasonsforthedifferencebetweennetincomeandnetcashprovidedbyoperating activities.
d.cashinvestingandfinancingtransactionsduringtheperiod.
38. Thestatementof cashflows
a.mustbepreparedona
dailybasis.
b.summarizesthe
operating,financing,andinvestingactivitiesofanentity.
c.is anothernamefortheincomestatement.
d.isaspecialsectionof the
incomestatement.
TheStatementof Cash Flows 17-7
39. Whichoneofthefollowingitemsisnotgenerallyusedinpreparingastatementofcash
flows?
a.Adjustedtrialbalance
b.Comparativebalancesheets c.Currentincomestatementd.Additionalinformation
40. Theprimarypurposeofthestatementof cashflows
is to
a.provideinformationabouttheinvestingandfinancingactivitiesduringaperiod.
b.prove thatrevenuesexceedexpensesifthereis anetincome.
c.provideinformationaboutthecashreceiptsandcashpaymentsduringa
period.
d.facilitatebanking
relationships.
41. Ifa
companyreportsanet loss,it
a.maystillhavea
netincreasein cash. b.willnotbe abletopaycashdividends.
c.will
not beabletogeta loan.
d.willnotbeable tomakecapitalexpenditures.
42. Inadditionto
the three basicfinancialstatements,which
ofthe
following isalso arequired
financialstatement?
a.the"CashBudget"
b.theStatementof
CashFlows
c.theStatementof CashInflowsandOutflows
d.the"CashReconciliation"
43. Thestatementof cashflowswillnotreportthe
a.amountof checksoutstanding
atthe endof
theperiod. b.sourcesofcashinthecurrentperiod.
c.uses of cashin
thecurrentperiod.
d.changeinthecash balanceforthecurrentperiod.
44. Cashequivalentsdonotinclude a.short-termcorporatenotes. b.treasurybills.
c.moneymarketfunds.
d.2-yearcertificatesofdeposit.
45. Whichofthefollowing
characteristicsdoesnotapplyto cashequivalents? a.Short-term
b.Highly-liquid
c.Readilyconvertibleintocash
d.Sensitiveto interestratechanges
46. Cashequivalentsaregenerally investmentswithmaturitiesof a.$1,000ormore.
b.threemonthsor less.
c.atleastsixmonths.
d.oneyearorthe
operatingcycle, whicheveris less.
17-8
47. The bestmeasureof
acompany'sabilitytogeneratesufficientcashtocontinueasagoing concern is netcashprovidedby
a.financingactivities.
b. investingactivities. c.operatingactivities. d.processingactivities.
48. Theacquisitionof landbyissuingcommonstockis
a.a noncashtransactionwhich is
notreported inthebodyofastatementofcashflows.
b.acashtransactionandwouldbereportedinthebodyof
astatementofcashflows.
c.a noncashtransactionandwouldbereportedinthebodyofastatementof cashflows. d.onlyreportedif thestatement
of cashflowsisprepared usingthedirectmethod.
49. Theorderof presentationofactivitiesonthestatement of cashflowsis
a.operating,investing,andfinancing.
b.operating,financing,andinvesting. c.financing, operating,andinvesting.
d.financing,investing,andoperating.
50. Financingactivitiesinvolve
a.lendingmoney.
b.acquiringinvestments.
c.issuingdebt.
d.acquiringlong-lived assets.
51. Investingactivitiesinclude
a.collecting cash on
loansmade. b.obtainingcashfromcreditors.
c.obtainingcapitalfromowners.
d.repayingmoneypreviouslyborrowed.
52. Generally,themostimportantcategoryonthestatementofcashflowsiscashflowsfrom
a.operatingactivities.
b.investingactivities. c.financingactivities.
d.significantnoncash
activities.
53. Thecategorythat
isgenerally
consideredtobe thebestmeasure ofacompany'sability
to continue asagoingconcernis
a.cashflowsfromoperatingactivities.
b.cashflowsfrominvestingactivities.
c.cashflowsfromfinancingactivities.
d.usuallydifferentfromyear to
year.
54. Cashreceiptsfrom interestanddividendsareclassifiedas a.financingactivities.
b.investingactivities.
c.operatingactivities.
d.eitherfinancingorinvestingactivities.
TheStatementof Cash Flows 17-9
55. Eachof thefollowingisanexampleof
asignificantnoncashactivityexcept a.conversionofbonds intocommonstock.
b.exchangesof
plantassets.
c.issuanceof
debtto purchaseassets. d.stockdividends.
56. Ifacompanyhasbothaninflowandoutflowofcashrelatedtoproperty,plant,and equipment, the
a.twocasheffectscanbenettedandpresentedasoneitemintheinvestingactivities
section.
b.cashinflowandcashoutflowshouldbereportedseparatelyintheinvestingactivities section.
c.twocasheffectscanbenettedandpresentedasoneiteminthefinancingactivities section.
d.cashinflowandcashoutflowshouldbereportedseparatelyinthefinancingactivities section.
57. Of theitemsbelow,theonethatappearsfirst
onthestatementof cashflows is a.noncashinvesting andfinancingactivities.
b.netincrease(decrease)incash.
c.cash attheendof theperiod.
d.cash atthebeginningoftheperiod.
58. Whichof thefollowingtransactionsdoesnotaffectcashduring
aperiod? a.Write-offofanuncollectibleaccount
b.Collectionofanaccounts receivable
c.Saleof treasurystock
d.Exerciseofthecalloptiononbondspayable
59. Significantnoncashtransactionswouldnotinclude
a.conversionofbonds intocommonstock.b.assetacquisitionthroughbondissuance.
c.treasurystockacquisition.
d.exchangeof plantassets.
60. Inpreparingastatementofcashflows,aconversionofbondsintocommonstockwillbe
reported in
a.thefinancingsection.
b.the"extraordinary"section.
c.a separatescheduleornote tothefinancial statements. d.thestockholders'equitysection.
Usethefollowing
informationforquestions61–64.
Foreachofthefollowingtransactions,indicatewhere,ifatall,itwouldbeclassifiedonthe
statement of cashflows.Assumetheindirectmethodisused.
61. Paidincometaxes.
a.Operatingactivitiessection b.Investingactivitiessection
c.Financingactivities section
d.Doesnotrepresentacashflow
17-10
62. Issuedcommonstockfor cash.
a.Operatingactivitiessection b.Investingactivitiessectionc.Financingactivities
section
d.Doesnotrepresentacashflow
63. Purchasedlandforcash.
a.Operatingactivitiessection b.Investingactivitiessection
c.Financingactivities section
d.Doesnotrepresentacashflow
64. Purchasedlandandbuildingwithamortgage.
a.Operatingactivitiessection
b.Investingactivitiessection
c.Financingactivities section
d.Doesnotrepresentacashflow
Usethefollowing
informationforquestions65–66.
JoyElle’sVegetableMarkethadthefollowingtransactionsduring 2008:
1.Issued$25,000of par
valuecommonstockforcash.
2.Repaida 6yearnotepayableintheamountof$11,000.
3.Acquiredlandbyissuingcommonstockof parvalue$50,000. 4.Declaredandpaidacashdividendof$1,000.
5.Solda long-terminvestment(cost$3,000)forcashof$3,000. 6.Acquiredan investmentinIBMstockforcashof $6,000.
65. Whatisthenetcash providedbyfinancingactivities?
a.$13,000
b.$25,000 c.$14,000 d.$9,000
66. Whatisthenetcash providedbyinvestingactivities? a.$6,000
b.$16,000 c.($3,000) d.$3,000
67. MillerCompanypurchasedtreasurystockwithacostof$15,000during2008.Duringthe year,thecompanypaiddividendsof$20,000andissuedbondspayableforproceedsof
$816,000.Cashflowsfromfinancingactivitiesfor2008total
a.$796,000net cashinflow. b.$811,000net cashinflow.
c.$5,000netcashoutflow. d.$781,000net cashinflow.
TheStatementof Cash Flows 17-11
68. ClineCompanyissuedcommonstockforproceedsof$186,000during2008.The companypaiddividendsof$33,000andissuedalong-termnotepayablefor$45,000in
exchangeforequipment
duringtheyear.Thecompanyalsopurchased treasurystockthat hadacostof$7,000.Thefinancingsectionofthestatementofcashflowswillreportnet cash inflowsof
a.$146,000.
b.$202,000. c.$153,000. d.$179,000.
69. InGentryCompany,landdecreased$120,000becauseofacashsalefor$120,000,the equipmentaccountincreased$40,000asaresultofacashpurchase,andBonds Payable increased$130,000fromissuanceforcashatfacevalue.Thenetcashprovidedby
investingactivities
is
a.$120,000. b.$210,000. c.$80,000.
d.$90,000.
70. Accounts receivablearisingfromsalestocustomersamountedto$80,000and$70,000at
thebeginningandendoftheyear,respectively.Incomereported ontheincomestatement fortheyearwas$240,000.Exclusiveoftheeffectofotheradjustments,thecashflows fromoperatingactivitiestobereportedonthestatement
of cashflowsis
a.$240,000.
b.$250,000. c.$310,000. d.$230,000.
71. Accounts receivablearisingfromsalestocustomersamountedto$35,000and$40,000at
thebeginningandendoftheyear,respectively.Incomereported ontheincomestatement fortheyearwas$120,000.Exclusiveoftheeffectofotheradjustments,thecashflows fromoperatingactivitiestobereportedonthestatement
of cashflowsis
a.$120,000. b.$125,000. c.$155,000. d.$115,000.
72. WiltonCompanyreportednetincomeof$40,000fortheyear.Duringtheyear,accounts receivabledecreasedby$7,000,accountspayableincreasedby$3,000anddepreciation expense of $5,000wasrecorded.Netcashprovidedbyoperatingactivitiesfortheyearisa.$30,000.
b.$55,000.
c.$39,000. d.$35,000.
73. BusterCompanyreportedanetlossof$3,000fortheyearendedDecember31,2008. Duringtheyear,accountsreceivableincreased$7,000,
merchandiseinventorydecreased
$5,000,accountspayabledecreasedby$10,000,anddepreciationexpenseof$5,000
was recorded.During2007,operatingactivities
a.usednetcashof $10,000.
b.usednetcashof $14,000.
c.providednetcash of$14,000. d.providednetcash of$9,000.
17-12
74. Thenetincomereportedontheincomestatementforthecurrentyearwas$205,000. Depreciationrecordedonplantassetswas$38,000.Accountsreceivableandinventories
increasedby$2,000and$8,000,respectively.Prepaidexpensesandaccountspayable
decreasedby$1,000and$11,000respectively.Howmuchcashwasprovidedby operatingactivities?
a.$185,000 b.$223,000
c.$205,000 d.$239,000
75. Thenetincomereportedontheincomestatementforthecurrentyearwas$220,000. Depreciationwas
$50,000.Accountreceivableand inventoriesdecreasedby
$10,000 and $30,000,respectively.Prepaidexpensesandaccountspayableincreased,respectively, by$1,000and$8,000.Howmuchcash wasprovidedbyoperating activities?
a.$281,000
b.$317,000 c.$301,000 d.$309,000
76. Ifagainof$10,000isincurredinselling(forcash)officeequipmenthavingabookvalue of$100,000,thetotalamount reportedinthecashflows frominvestingactivitiessectionof thestatementof cashflows
is
a.$90,000. b.$110,000. c.$100,000. d.$10,000.
77. Ifa
lossof $12,500 is incurred
inselling(forcash)office equipmenthavinga
bookvalueof $50,000,thetotalamountreportedinthecashflowsfrominvestingactivities sectionof the statement
of cashflowsis
a.$37,500.
b.$50,000. c.$62,500. d.$12,500.
78. HarborCompanyreportednetincomeof$60,000
fortheyearended December31,2008. Duringtheyear,inventoriesdecreasedby$12,000,accountspayabledecreasedby
$18,000,depreciationexpensewas$20,000andagainondisposalofequipmentof $9,000wasrecorded.Netcashprovidedbyoperating activitiesin2008usingtheindirect
methodwas
a.$119,000.
b.$65,000. c.$77,000. d.$55,000.
79. Thethird(final)stepinpreparingthestatementofcashflowsisto
a.analyzechanges innoncurrentassetandliabilityaccounts.
b.comparethenetchangeincashwiththechangeinthecashaccountreportedonthe
balance sheet.
c.determinenet
cashprovidedbyoperatingactivities.
d.listthenoncashactivities.
TheStatementof Cash Flows 17-13
80. Whichoneof
thefollowingitemsisnot necessaryinpreparinga statementofcashflows?
a.Determinethechangeincash
b.Determinethecashprovidedbyoperations
c.Determinecashfromfinancingandinvestingactivities d.Determinethe cashin all bankaccounts
81. Ifaccountsreceivablehave increasedduringtheperiod,
a.revenuesonanaccrualbasisarelessthanrevenuesonacashbasis.
b.revenuesonanaccrualbasisaregreaterthanrevenuesonacashbasis. c.revenues
onanaccrual basisarethesameasrevenues onacashbasis. d.expensesonanaccrualbasisaregreater
thanexpensesonacashbasis.
82. Ifaccountspayablehaveincreasedduringaperiod,
a.revenuesonanaccrualbasisarelessthanrevenuesonacashbasis. b.expensesonanaccrualbasisarelessthanexpensesonacashbasis.
c.expensesonanaccrualbasisaregreater
thanexpensesonacashbasis.
d.expensesonanaccrualbasisarethesameasexpensesonacashbasis.
83. Whichoneof
thefollowing affectscashduringaperiod? a.Recordingdepreciationexpense
b.Declarationof acashdividend
c.Write-offof anuncollectibleaccountreceivable
d.Paymentof anaccountspayable
84. Incalculatingcashflowsfromoperatingactivitiesusingtheindirectmethod,againonthe sale
ofequipmentis
a.addedtonet income.
b.deductedfrom netincome.
c.ignoredbecauseit
doesnotaffectcash.d.notreportedonastatementof
cashflows.
85. MeyerCompanyreportednetincomeof$50,000fortheyear.Duringtheyear,accounts receivableincreasedby$7,000,accountspayabledecreasedby$3,000anddepreciation expense of $5,000wasrecorded.Netcashprovidedbyoperatingactivitiesfortheyearisa.$45,000.
b.$65,000.
c.$49,000. d.$50,000.
86. FlynnCompanyreportedanetlossof$20,000fortheyearendedDecember31,2008. Duringtheyear,accountsreceivabledecreased$10,000,merchandiseinventory
increased$16,000,accountspayableincreasedby$20,000,anddepreciationexpense
of $10,000wasrecorded.During2008,operatingactivities
a.usednetcashof $4,000. b.usednetcashof $16,000.
c.providednetcash
of$4,000.d.providednetcash of$16,000.
17-14
87. Startingwithnetincomeandadjustingitforitemsthataffectedreportednetincomebut which didnot affect cashis
calledthe
a.directmethod.b.indirectmethod.
c.workingcapitalmethod.
d.cost-benefitmethod.
88. Incalculatingnetcashprovidedbyoperatingactivitiesusingtheindirectmethod,an
increase inprepaidexpensesduringaperiodis
a.deducted
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