Chapter 16 Reporting the Statement of Cash Flows – Test Bank 24e

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Fundamental Accounting Principles, 24e (Wild)

Chapter 16 Reporting the Statement of Cash Flows

1) The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.

2) The statement of cash flows reports and proves the net change in cash for a reporting period.

3) To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a liquid asset.

4) The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

5) Cash flow statements help users decide whether a company has enough cash to pay its debts.

6) A cash equivalent must be readily convertible to a known amount of cash, and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.

7) Cash receipts and cash payments are classified as operating, investing, or financing activities on the statement of cash flows.

8) Financing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

9) Investing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) loaning money. 

10) Cash paid for merchandise is an operating activity.

11) The purchase of equity securities is classified as a financing activity.

12) The purchase of equity securities is classified as an investing activity.

13) Receipts of cash dividends and interest earned on loans are classified as investing activities.

14) The payment of cash dividends to shareholders is classified as a financing activity.

15) The purchase of a long-term asset using a long-term note payable is an example of a noncash investing and financing activity, which should be disclosed in a note or separate schedule.

16) Conversion of preferred stock to common stock is disclosed in the financing section of the statement of cash flows.

17) A purchase of land in exchange for a long-term note payable is reported in the investing section of the statement of cash flows.

18) A purchase of land in exchange for a long-term note payable must be disclosed as a noncash investing and financing activity.

19) A noncash investing activity should be disclosed in a note to the statement of cash flows or on a separate schedule.

20) A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable. The entire $150,000 is reported as a cash outflow in the financing section of the statement of cash flows.

21) A purchase of land in exchange for shares of stock is disclosed at the bottom of the statement of cash flows or in a note to the statement.

22) Information about cash flows influences decisions made by both internal and external users. 

23) The statement of cash flows explains how transactions and events impact the end-of-period cash balance to produce the end-of-period net income.

24) Managers review the statement of cash flows before making business decisions.

25) Managers primarily use the statement of cash flows to determine the amount of the company's assets relative to the amount of its debt.

26) A cash-based measure to help business decision makers estimate the amount and timing of cash flows from operating activities is the cash flow on total assets ratio.

27) The cash flow on total assets ratio is not affected by accounting recognition and measurement.

28) Cash flow amounts and their timing should be considered when planning and analyzing operating activities.

29) The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

30) The cash flow on total assets ratio is computed by dividing average total assets by operating income.

31) The cash flow on total assets ratio is affected by income recognition and measurement.

32) To effectively evaluate cash flows, we separately analyze investing, financing, and operating activities.

33) The cash flows from operating activities section of an indirect method of cash flows begins with net income or loss.

34) Both the direct and indirect methods yield the identical net cash flow amount provided or used by operating activities.

35) The reporting of financing activities in the statement of cash flows is identical under the direct method and indirect method.

36) The reporting of investing activities in the statement of cash flows is identical under the direct method and indirect method.

37) The direct method separately lists operating cash receipts, such as cash received from customers.

38) Because the direct method of preparing the statement of cash flows starts with net income, it is the method most frequently used.

39) Information to prepare the statement of cash flows usually comes from (a) comparative balance sheets, (b) current income statement, and (c) additional information.

40) The direct method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

41) The indirect method separately lists each major item of operating cash receipts and cash payments.

42) The indirect method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

43) The direct method separately lists each major item of operating cash receipts and cash payments.

44) Companies can use either the direct or indirect method to prepare the operating section of the statement of cash flows.

45) Cash flows are essentially the same as net income because they are both measured using accrual accounting principles.

46) When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income.

47) When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are added to net income.

48) When preparing the operating activities section of the statement of cash flows using the indirect method, expenses and losses with no cash outflows are added back to net income.

49) When preparing the operating activities section of the statement of cash flows using the direct method, revenues and gains with no cash inflows are added back to net income.

50) When preparing the operating activities section of the statement of cash flows using the direct method, expenses and losses with no cash outflows are added back to net income.

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

52) When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current assets are subtracted from net income.

53) When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current assets are added back to net income.

54) When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in income taxes payable is added back to net income.

55) When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are added back to net income.

56) When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current liabilities are subtracted from net income.

57) When preparing the operating activities section of the statement of cash flows using the indirect method, depreciation is subtracted from net income.

58) When preparing the operating activities section of the statement of cash flows using the indirect method, depreciation is added back to net income.

59) The gain or loss from retirement of notes payable is reported under cash flows from operating activities on the statement of cash flows using the indirect method.

60) Financing activities include receiving cash dividends from investments in equity securities.

61) Investing activities include receiving cash dividends from stock investments.

62) Investing activities include: (a) the purchase and sale of long-term assets, (b) loaning money in return for notes receivable, and (c) the purchase and sale of short-term investments.

63) Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' stocks.

64) Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.

65) The payment of cash dividends never changes the balance of retained earnings.

66) Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000. This implies that $40,000 cash was received from the sale.

67) Equipment costing $200,000 with accumulated depreciation of $160,000 is sold at a loss of $10,000. This implies that $30,000 cash was received from the sale.

68) A spreadsheet can help organize the information needed to prepare a statement of cash flows.

69) On a spreadsheet used to prepare the operating activities section of the statement of cash flows, depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

70) When using a spreadsheet to prepare the statement of cash flows, a decrease in accounts payable is entered in the Analysis of Changes columns with a debit in the statement of cash flows section and a credit in the balance sheet section.

71) When using a spreadsheet to prepare the statement of cash flows, an increase in accounts payable is entered in the Analysis of Changes columns with a debit in the statement of cash flows section and a credit in the balance sheet section.

72) Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

73) Using the direct method, operating cash receipts includes cash received from customers.

74) Applying the direct method, the gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows.

75) The statement of cash flows reports:

A) Assets, liabilities, and equity.

B) Revenues, gains, expenses, and losses.

C) Cash inflows and cash outflows for an accounting period.

D) Equity, net income, and dividends.

E) Changes in equity.

76) The statement of cash flows reports all but which of the following:

A) Cash flows from operating activities.

B) Cash flows from financing activities.

C) Cash flows from investing activities.

D) Significant noncash financing and investing activities.

E) The financial position of the company at the end of the accounting period.

77) The statement of cash flows is:

A) Another name for the statement of financial position.

B) A financial statement that presents information about changes in equity during a period.

C) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.

D) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date.

E) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.

78) A cash equivalent is:

A) An investment readily convertible to a known amount of cash.

B) Close to its maturity date but its market value may still be affected by interest rate changes.

C) Generally within 3 years of its maturity date.

D) Is not considered highly liquid.

E) Another name for cash.

79) An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is unaffected by interest rate changes is a(n):

A) Equity method investment.

B) Operating activity.

C) Common stock.

D) Cash equivalent.

E) Financing activity.

80) Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

A) Financing activities.

B) Investing activities.

C) Operating activities.

D) Direct activities.

E) Indirect activities.

81) The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

A) Operating activities.

B) Financing activities.

C) Investing activities.

D) Schedule of noncash investing or financing activity.

E) This is not reported on the statement of cash flows.

82) Which of the following items is reported on the statement of cash flows under financing activities?

A) Purchase of equipment for cash.

B) Payment of a cash dividend.

C) Payment for merchandise.

D) Payment of a stock dividend.

E) Stock split.

83) Investing activities do not include the:

A) Purchase of plant assets.

B) Loaning of money in exchange for notes receivable.

C) Issuance of common stock.

D) Sale of plant assets.

E) Sale of short-term investments other than cash equivalents.

84) The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

A) Operating activities.

B) Financing activities.

C) Investing activities.

D) Schedule of noncash investing or financing activity.

E) This is not reported on the statement of cash flows.

85) The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

A) Operating activities.

B) Financing activities.

C) Investing activities.

D) Schedule of noncash investing or financing activity.

E) This is not reported on the statement of cash flows.

86) A company's transactions with its creditors to borrow money and/or to repay the principal amounts of both short- and long-term debt are reported as cash flows from:

A) Operating activities.

B) Investing activities.

C) Financing activities.

D) Direct activities.

E) Indirect activities.

87) The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:

A) Operating activities.

B) Financing activities.

C) Investing activities.

D) Schedule of noncash investing or financing activity.

E) This is not reported on the statement of cash flows.

88) Which one of the following is an example of cash flows from operating activities?

A) Proceeds from collecting the principal amounts of loans.

B) Repayment of principals on loans.

C) Proceeds from the issuance of bonds and notes payable.

D) Payments to acquire equity securities of other companies.

E) Receipts of cash from sales.

89) Cash flows from investing activities include each of the following except:

A) Payments to purchase plant assets.

B) Proceeds from collecting accounts receivable that arise from customer sales.

C) Payments to buy intangible assets.

D) Payments to acquire long-term investments.

E) Proceeds from the sale of equipment.

90) If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

A) Operating activity.

B) Investing activity.

C) Financing activity.

D) Noncash investing and financing activity.

E) This is not reported in the statement of cash flows.

91) Cash flows from collections on credit sales are usually reported in the statement of cash flows as part of:

A) Operating activities.

B) Financing activities.

C) Investing activities.

D) Noncash activities.

E) This is not reported in the statement of cash flows.

92) Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

A) Interest revenue.

B) Sale of equipment.

C) Interest expense.

D) Purchase of treasury stock.

E) Purchase of stock in another company.

93) Cash flows from interest received on loans are reported in the statement of cash flows as part of:

A) Operating activities.

B) Financing activities.

C) Investing activities.

D) Noncash activities.

E) This is not reported in the statement of cash flows.

94) All of the following are examples of noncash financing and investing except:

A) Retirement of debt by issuing equity stock.

B) Purchase of equipment by issuing a note payable.

C) Purchase of inventory using cash.

D) Purchase of a building by issuing equity stock.

E) Conversion of preferred stock to common stock.

95) The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

A) Operating activities.

B) Financing activities.

C) Investing activities.

D) Schedule of noncash investing or financing activity.

E) Reconciliation of cash balance.

96) The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

A) Operating activities.

B) Financing activities.

C) Investing activities.

D) Schedule of noncash financing and investing activities.

E) Reconciliation of cash balance.

97) An example of a transaction that must be disclosed as a noncash investing and financing activity includes all but which of the following?

A) The retirement of debt by issuing equity stock.

B) A transaction exchanging cash equivalents for cash.

C) The leasing of assets in a long-term lease transaction.

D) The purchase of noncash assets in exchange for equity or debt securities.

E) The purchase of long-term assets financed by issuing a note or bond.

98) Noncash investing and financing activities may be disclosed in:

A) A note in the financial statements or a schedule attached to the statement of cash flows.

B) The operating activities section of the statement of cash flows.

C) The investing activities section of the statement of cash flows.

D) The financing activities section of the statement of cash flows.

E) The reconciliation of cash balance section.

99) All of the following are true regarding the statement of cash flows except: 

A) Operating activities include transactions and events that affect net income.

B) Financing activities include transactions that affect long-term liabilities and equity.

C) Investing activities include transactions that affect issuance of common stock.

D) Investing activities include transactions and events that come from the purchase and sale of long-term assets.

E) Noncash activities are investing and financing activities that do not affect cash flows.

100) Common uses of the statement of cash flows include all but which of the following?

A) Management prediction of future cash flows for decision making.

B) Investor assessment of cash flows before buying and selling stock.

C) Creditor evaluation of a company's ability to generate cash to cover debt.

D) Government assessment of whether the company paid the correct amount of taxes.

E) Management determination of the specific sources and uses of cash.

101) The statement of cash flows helps analysts evaluate all but which of the following?

A) Ability of the company to generate profit.

B) Source of cash used for plant expansion.

C) Differences between net income and net operating cash flow.

D) Source of cash used to finance investing activities.

E) Source of cash used for debt repayments.

102) The statement of cash flows cannot help address questions such as:

A) How is the increase in investments financed?

B) What is the source of cash for new plant assets?

C) How much cash is generated from or used in operations?

D) How much of the company's revenues have been retained as profit?

E) Why is cash flow from operations different from income?

103) The cash flow on total assets ratio:

A) Is the same as return on assets.

B) Is the same as profit margin.

C) Can measure a company's ability to meet its obligations.

D) Is highly affected by accounting principles of income recognition and measurement.

E) Is average net assets divided by cash flows from operations.

104) The cash flow on total assets ratio is calculated by:

A) Dividing cash flows from operations by average total assets.

B) Dividing total cash flows by average total assets.

C) Dividing average total assets by cash flows from financing activities.

D) Dividing average total assets by total cash flows.

E) Total cash flows divided by average total assets times 365.

105) A company had net cash flows from operations of $341,000, net income of $286,000 and average total assets of $1,850,000. The cash flow on total assets ratio equals:

A) 83.9%

B) 542.5%

C) 15.5%

D) 18.4%

E) 646.9%

106) A company had net cash flows from operations of $120,000, cash flows from financing of $330,000, total cash flows of $500,000, and average total assets of $2,500,000. The cash flow on total assets ratio equals:

A) 4.8%.

B) 5.0%.

C) 20.0%.

D) 20.8%.

E) 24.0%.

107) A company had average total assets of $1,660,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $750,000. The cash flow on total assets ratio equals:

A) 45.2%.

B) 22.0%.

C) 11.65%.

D) 12.3%.

E) 79.5%.

108) Preparation of the statement of cash flows does not involve:

A) Computing the net increase or decrease in cash.

B) Computing and reporting net cash provided or used by operations.

C) Computing the profit compared to the net increase or decrease in cash.

D) Computing and reporting net cash provided or used by financing activities.

E) Computing and reporting net cash provided or used by investing activities.

109) The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:

A) Direct method of reporting net cash provided or used by operating activities.

B) Cash basis of accounting.

C) Classified statement of cash flows.

D) Indirect method of reporting net cash provided or used by operating activities.

E) Net method of reporting cash flows from operating activities.

110) A statement of cash flows explains the differences between the beginning and ending balances of:

A) Net income.

B) Equity.

C) Cash and cash equivalents.

D) Working capital.

E) Cash and short-term investments.

111) The direct method for the preparation of the operating activities section of the statement of cash flows:

A) Separately lists each major item of operating cash receipts and cash payments.

B) Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement.

C) Reports a different amount of cash flows from operations than if the indirect method is used.

D) Is required if the company is a merchandiser.

E) Is required by the FASB.

112) The indirect method for the preparation of the operating activities section of the statement of cash flows:

A) Separately lists each major item of operating cash receipts.

B) Separately lists each major item of operating cash payments.

C) Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.

D) Is required if the company is a merchandiser.

E) Must not be used in all circumstances.

113) The direct method of reporting operating cash flows:

A) Separately lists cash receipts and payments.

B) Must be used by all companies.

C) Is used by most companies.

D) Is considered supplementary disclosure.

E) Is not recommended by the FASB, but is commonly used.

114) Of the following, which one affects cash during a period?

A) The declaration of a stock dividend.

B) Writing off an uncollectible account receivable.

C) The declaration of a cash dividend.

D) An adjusting entry recognizing the expiration of prepaid insurance.

E) The payment of interest expense accrued in a previous accounting period.

115) When using the indirect method to calculate and report the net cash provided or used by operating activities, net income is adjusted for all but which of the following?

A) Gains and losses from nonoperating items.

B) Revenues and expenses that did not provide or use cash.

C) Changes in noncurrent assets and noncurrent liabilities.

D) Changes in current liabilities related to operating activities.

E) Depreciation and amortization expense.

116) When using the indirect method to calculate and report net cash provided or used by operating activities, which of the following is subtracted from net income?

A) Decrease in income taxes payable.

B) Depreciation expense.

C) Amortization of intangible assets.

D) Bad debts expense.

E) Decrease in merchandise inventory.

117) The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

A) Cash.

B) Cash received from customers.

C) Increase (decrease) in accounts receivable.

D) Net income (loss).

E) Adjustments to net income.

118) When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

A) An increase in accounts receivable.

B) A decrease in accounts payable.

C) Proceeds from the disposal of a long-term asset with no gain or loss.

D) An increase in prepaid expenses.

E) A decrease in accrued expenses payable.

119) A company's Inventory balance at the end of the year was $188,000 and $200,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $84,000 and $80,000 at the beginning of the year, and its cost of goods sold for the year was $720,000. The company's total amount of cash payments for merchandise during the year equals:

A) $704,000.

B) $712,000.

C) $720,000.

D) $728,000.

E) $736,000.

120) Use the following information to calculate cash paid for wages and salaries:

A) $157,400.

B) $163,800.

C) $168,000.

D) $172,200.

E) $174,400.

121) Use the following information to calculate cash paid for salaries:

A) $175,000.

B) $183,000.

C) $167,000.

D) $143,000.

E) $155,000.

122) Use the following information to calculate cash paid for income taxes:

A) $23,700.

B) $52,100.

C) $53,200.

D) $41,900.

E) $43,000.

123) Use the following information to calculate cash paid for income taxes:

A) $50,000.

B) $59,000.

C) $57,000.

D) $48,000.

E) $52,000.

124) Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

A) $218,000.

B) $223,200.

C) $220,000.

D) $228,800.

E) $234,000.

125) Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

A) $727,000.

B) $726,300.

C) $732,700.

D) $737,300.

E) $737,700.

126) Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

A) $585,000.

B) $520,000.

C) $480,000.

D) $508,000.

E) $512,000.

127) When preparing a statement of cash flows using the indirect method, which of the following is correct?

A) Proceeds from the sale of equipment should be added to net income in the operating activities section.

B) A loss on the sale of land should be added to net income in the operating activities section.

C) The declaration of a cash dividend should be a use of cash in the financing activities section.

D) The issuance of a stock dividend should be a use of cash in the financing activities section.

E) The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section.

128) A company's income statement showed the following: net income, $134,000; depreciation expense, $30,000; and gain on sale of plant assets, $4,000. An examination of the company's current assets and current liabilities showed the following changes: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

A) $156,600.

B) $141,000.

C) $96,600.

D) $148,600.

E) $88,600.

129) A company's income statement showed the following: net income, $124,000 and depreciation expense, $30,000. An examination of the company's current assets and current liabilities showed the following changes: accounts receivable decreased $9,400; merchandise inventory increased $18,000; and accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

A) $118,000.

B) $159,200.

C) $123,200.

D) $148,800.

E) $178,000.

130) Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

A) $69,900.

B) $108,900.

C) $93,900.

D) $85,700.

E) $81,600.

131) In preparing a company's statement of cash flows using the indirect method, the following information is available:

Net cash provided by operating activities was:

A) $120,000.

B) $71,000.

C) $70,000.

D) $24,000.

E) $110,000.

132) In preparing a company's statement of cash flows using the indirect method, the following information is available:

Net cash provided by operating activities was:

A) $120,000.

B) $71,000.

C) $70,000.

D) $24,000.

E) $110,000.

133) In preparing a company's statement of cash flows using the indirect method, the following information is available:

Net cash provided by operating activities was:

A) $120,000.

B) $60,000.

C) $70,000.

D) $80,000.

E) $130,000.

134) In preparing a company's statement of cash flows using the indirect method, the following information is available:

Net cash provided by operating activities was:

A) $34,000.

B) $60,000.

C) $70,000.

D) $80,000.

E) $52,000.

135) A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

A) $50,000.

B) $5,000.

C) $45,000.

D) Zero. This is an operating activity.

E) Zero. This is a financing activity.

136) A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported in the operating activities section reported under the direct method is:

A) $50,000.

B) $5,000.

C) $45,000.

D) $0.

E) $35,000.

137) A machine with a cost of $130,000, accumulated depreciation of $85,000, and current year depreciation expense of $17,000 is sold for $40,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

A) $45,000.

B) $5,000.

C) $17,000.

D) $28,000.

E) $40,000.

138) A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $40,000 cash. The total amount that should be reported in the operating section of the statement of cash flow as per indirect method is:

A) $17,000.

B) $4,000.

C) $57,000.

D) $21,000.

E) $5,000.

139) A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:

A) $(3,000).

B) $(60,000).

C) $(57,000).

D) $7,000.

E) $(7,000).

140) Atom Corporation paid cash dividends totaling $75,000 during its most recent fiscal year. How should this information be reported on Atom's statement of cash flows?

A) In operating activities as a source of funds.

B) In investing activities as a source of funds.

C) In investing activities as a use of funds.

D) In financing activities as a source of funds.

E) In financing activities as a use of funds.

141) Use the following information to calculate cash received from dividends:

A) $26,400.

B) $29,000.

C) $29,800.

D) $30,600.

E) $32,400.

142) Use the following information to calculate cash received from dividends:

A) $63,500.

B) $63,000.

C) $64,000.

D) $67,100.

E) $60,400.

143) Analysis reveals that a company had a net increase in cash of $20,000 for the current year. Net cash provided by operating activities was $18,000; net cash used in investing activities was $10,000 and net cash provided by financing activities was $12,000. If the year-end cash balance is $24,000, the beginning cash balance was:

A) $4,000.

B) $16,000.

C) $44,000.

D) $40,000.

E) $39,000.

144) Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $28,000; net cash used in investing activities was $10,000 and net cash used in financing activities was $12,000. If the beginning cash balance is $5,000, what is the ending cash balance?

A) $55,000.

B) $45,000.

C) $31,000.

D) $6,000.

E) $11,000.

145) Bagrov Corporation had a net decrease in cash of $10,000 for the current year. Net cash used in investing activities was $52,000 and net cash used in financing activities was $38,000. What amount of cash was provided (used) in operating activities?

A) $100,000 provided.

B) $(100,000) used.

C) $80,000 provided.

D) $(80,000) used.

E) $(10,000) used.

146) The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

What is the ending balance for retained earnings?

A) $218,000.

B) $170,000.

C) $352,000.

D) $172,000.

E) $179,000.

147) The accountant for Walter Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

The amount of cash dividends paid during the year would be:

A) $48,000.

B) $46,000.

C) $8,000.

D) $64,000.

E) $44,000.

148) The accountant for TI Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

What is the ending balance for retained earnings?

A) $264,000.

B) $13,000.

C) $243,000.

D) $197,000.

E) $105,000.

149) The accountant for Sysco Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows?

A) $42,000.

B) $43,000.

C) $63,000.

D) $1,000.

E) $41,000.

150) In preparing a company's statement of cash flows for the most recent year, the following information is available:

Net cash flows from investing activities for the year were:

A) $234,000 of net cash used.

B) $120,000 of net cash provided.

C) $340,000 of net cash used.

D) $259,000 of net cash used.

E) $280,000 of net cash provided.

151) In preparing a company's statement of cash flows for the year just ended, the following information is available:

Net cash flows from financing activities for the year were:

A) $147,000 of net cash used.

B) $26,000 of net cash used.

C) $347,000 of net cash used.

D) $51,000 of net cash used.

E) $340,000 of net cash used.

152) In preparing Tywin Company's statement of cash flows for the most recent year, the following information is available:

Net cash flows from investing activities for the year were:

A) $438,000 of net cash used.

B) $438,000 of net cash provided.

C) $264,000 of net cash used.

D) $351,000 of net cash used.

E) $264,000 of net cash provided.

153) In preparing a company's statement of cash flows for the most recent year, Jeffers Corp. reported the following information:

Net cash flows from financing activities for the year were:

A) $230,000 of net cash used.

B) $230,000 of net cash provided.

C) $108,000 of net cash used.

D) $138,000 of net cash used.

E) $138,000 of net cash provided.

154) When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from operating activities generally are affected by:

A) Net income, current assets, and current liabilities.

B) Noncurrent assets.

C) Noncurrent liability and equity accounts.

D) Both noncurrent assets and noncurrent liabilities.

E) Equity accounts only.

155) When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from investing activities generally are affected by:

A) Net income, current assets, and current liabilities.

B) Noncurrent assets.

C) Noncurrent liability and equity accounts.

D) Both noncurrent assets and noncurrent liabilities.

E) Equity accounts only.

156) When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from financing activities generally are affected by:

A) Net income, current assets, and current liabilities.

B) Noncurrent assets.

C) Noncurrent liability and equity accounts.

D) Both noncurrent assets and noncurrent liabilities.

E) Equity accounts only.

157) Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

A) Credit sales.

B) Cash collections from customers.

C) Depreciation expense.

D) Cash received from the sale of a building.

E) Cash received from the sale of treasury stock.

158) When the operating activities section of the statement of cash flows is reported using the direct method:

A) Net income is adjusted for changes in noncurrent assets and noncurrent liabilities.

B) Operating cash receipts minus operating cash payments equals net cash provided (used by) operating activities.

C) Footnotes to the financial statements disclose the difference between net income and the cash provided or used by financing activities.

D) The income statement is prepared under the cash basis of accounting.

E) Noncash investing and financing activities is included in the statement of cash flows.

159) All of the following statements related to reporting cash flows from investing and financing activities are true except:

A) Reporting of financing activities is the same under the direct method and indirect method.

B) Changes in noncurrent liability accounts and equity accounts are analyzed to determine cash flows from financing activities

C) Changes in noncurrent asset accounts, current notes receivable, and current investments are analyzed to determine cash flows from investing activities.

D) The direct method applies accrual accounting while the indirect method applies cash basis accounting.

E) Reporting of investing activities is the same under the direct method and indirect method.

160) All of the following statements related to preparation of the statement of cash flows are true except:

A) A company may report cash flows from operating activities using either the direct or indirect method.

B) Interest expense may be reported under operating or financing based on which one results in better cash flows.

C) Cash dividends paid to shareholders are classified as a financing activity.

D) Purchase of an intangible asset is classified as an investing activity.

E) Repaying the principal of notes payable is classified as a financing activity.

161) Ford Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Ford Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

A) $32,000.

B) $68,000.

C) $38,000.

D) $40,000.

E) $36,000.

162) Green Company reports depreciation expense of $35,000 for Year 2. Also, equipment costing $140,000 was sold for a $5,000 gain in Year 2. The following selected information is available for Green Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

A) $23,000.

B) $35,000.

C) $38,000.

D) $40,000.

E) $67,000.

163) Favre Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $240,000 was sold for a $10,000 loss in Year 2. The following selected information is available for Favre Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

A) $62,000.

B) $38,000.

C) $28,000.

D) $18,000.

E) $58,000.

164) Jordan's net income for the year ended December 31, Year 2 was $185,000. Information from Jordan's comparative balance sheets is given below. Compute the cash received from the sale of its common stock during Year 2.

A) $185,000.

B) $106,000.

C) $95,000.

D) $50,000.

E) $145,000.

165) Salah's net income for the year ended December 31, Year 2 was $175,000. Information from Salah's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2.

A) $79,000.

B) $201,000.

C) $95,000.

D) $50,000.

E) $69,000.

166) Alfredo Inc. reports net income of $230,000 for the year ended December 31. It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.

A) $376,450.

B) $351,450.

C) $356,450.

D) $319,950.

E) $263,750.

167) Gregor Company reports net income of $305,000 for the year ended December 31. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, and a $100,000 decrease in notes payable. Calculate the cash provided (used) in operating activities using the indirect method.

A) $461,800.

B) $371,400.

C) $381,400.

D) $351,000.

E) $361,000.

168) Mayweather reports net income of $305,000 for the year ended December 31. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, a $75,000 increase in equipment, and a $100,000 decrease in notes payable. Calculate the net increase in cash for the year.

A) $216,400.

B) $281,400.

C) $381,400.

D) $206,400.

E) $406,400.

169) Alvarez Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

The ending balance in retained earnings is:

A) $343,000.

B) $213,000.

C) $293,000.

D) $297,500.

E) $301,000.

170) Barclays Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

The amount of cash paid for dividends was:

A) $52,000.

B) $60,000.

C) $58,000.

D) $50,000.

E) $42,000.

171) Citi Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

The amount of cash paid for dividends was:

A) $44,000.

B) $40,000.

C) $57,000.

D) $53,000.

E) $36,000.

172) If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported:

A) An increase in cash flows from operating activities

B) An increase in cash flows from investing activities

C) A decrease in cash flows from operating activities

D) A decrease in cash flows from investing activities

E) An increase in cash flows from financing activities

173) A decrease in the inventory account during the year should be reported on the indirect method statement of cash flows as:

A) An increase in cash flows from operating activities

B) An increase in cash flows from investing activities

C) A decrease in cash flows from operating activities

D) A decrease in cash flows from investing activities

E) An increase in cash flows from financing activities

174) A cash dividend payment to shareholders during the year should be reported on the statement of cash flows as:

A) An increase in cash flows from financing activities

B) An increase in cash flows from investing activities

C) A decrease in cash flows from operating activities

D) A decrease in cash flows from investing activities

E) A decrease in cash flows from financing activities

175) Northeast Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from operating activities using the indirect method:

A) $332,200.

B) $236,800.

C) $261,400.

D) $186,800.

E) $189,400.

176) Northeast Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from investing activities:

A) ($107,700).

B) $107,700.

C) ($200,000).

D) ($139,700).

E) ($207,700).

177) Northeast Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities:

A) ($168,000).

B) $200,000.

C) $168,000.

D) ($191,700).

E) $191,700.

178) A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash flows from operations of $554,000, and cash flows for plant assets of $850,000. The cash flow on total assets ratio equals:

A) 41.04%.

B) 41.97%.

C) 26.43%.

D) 17.23%.

E) 64.39%.

179) Match each of the following items with the appropriate definitions.

(A) Financing activities

(B) Investing activities

(C) Statement of cash flows

(D) Indirect method

(E) Direct method

(F) Operating activities

________ (1) A method of computing and reporting that involves adjusting net income by adding and subtracting items that that do not affect cash provided (used) by operating activities.

________ (2) A financial statement that reports the cash inflows and cash outflows for an accounting period, and classifies those cash flows as operating, investing, or financing activities.

________ (3) A method of computing and reporting the net cash provided (used) by operating activities that lists the major items of operating cash receipts, and then subtracts the major items of operating cash payments.

________ (4) Transactions that include purchasing and selling plant assets and investments in debt and equity securities.

________ (5) Transactions with a company's owners and creditors that include obtaining cash from issuing debt and repaying the amounts borrowed, and distributing cash to owners.

________ (6) Activities that involve the production or purchase of merchandise and the sale of goods or services to customers, including expenditures related to administering the business.

180) For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity.

________ (1) Received interest from investments in trading securities.

________ (2) Collected accounts receivable from customers.

________ (3) Issued bonds payable for cash.

________ (4) Paid wages to employees.

________ (5) Issued stock for cash.

________ (6) Sold equipment for cash.

________ (7) Purchased land in exchange for a note payable.

________ (8) Paid cash dividends.

________ (9) Received dividends from stock investments.

________ (10) Purchases of land for cash.

181) For each of the following items, indicate whether it would be classified as either an (O) operating activity, an (I) investing activity, a (F) financial activity, or a significant (N) noncash financing and investing activity.

________ (1) Cash sales of merchandise.

________ (2) Sale of land for cash.

________ (3) Signed a note payable in exchange for cash.

________ (4) Purchased supplies for cash.

________ (5) Paid cash to settle an account payable.

________ (6) Purchased a warehouse in exchange for shares of its stock.

________ (7) Paid interest on a note payable.

________ (8) Reissued treasury stock.

________ (9) Purchased equipment for cash.

________ (10) Purchased equipment in exchange for a 6-month note payable.

182) Explain the purpose and format of the statement of cash flows. Also describe its relevance to decision makers.

183) Define and discuss the differences between operating, investing, and financing activities.

184) Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

185) Describe the format of the statement of cash flows, including the reporting of significant noncash investing and financing activities.

186) Explain the value of separating cash flows into operating activities, investing activities, and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

187) Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.

188) What are the steps involved in the preparation of the statement of cash flows?

189) Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

190) Explain how cash flows from investing and financing activities are determined.

191) Explain the use of a spreadsheet in the preparation of the statement of cash flows.

192) Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the direct method.

193) Use the following company information to prepare a schedule of significant noncash investing and financing activities:

(a) Sold a building with a book value of $300,000 for $225,000 cash and sold land with a book value of $40,000 for $65,000 cash.

(b) Issued 15,000 shares of $10 par value common stock in exchange for equipment with a market value of $175,000.

(c) Retired a $100,000, 8% bond by issuing another $100,000, 7% bond issue.

(d) Acquired land by issuing a twenty-year, 5%, $73,000 note payable.

194) Based on the following information provided about a company's operations, calculate its cost of goods purchased and its cash paid for merchandise.

195) Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the indirect method.

Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows:

196) Use the following income statement and information about selected current assets and current liabilities for Kimberline Industries to calculate the net cash provided or used by operating activities using the indirect method.

Increases and decreases of current asset and current liability accounts, all of which relate to operating activities, are as follows:

197) Based on the following income statement and balance sheet for Bankowski Corporation, determine the cash flows from operating activities using the indirect method.

198) Rowan, Inc.'s, income statement is shown below. Based on this income statement and the other information provided, calculate the net cash provided by operations using the indirect method.

Additional information:

199) The following information is available for the Aarons Corporation:

Additional information:

(1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired.

(2) Old equipment with an original cost of $37,550 was sold for $2,100 cash.

(3) New equipment was purchased for $67,550 cash.

(4) Cash dividends of $33,600 were paid.

(5) Additional shares of stock were issued for cash.

Prepare a complete statement of cash flows for Year 2 using the indirect method.

200) The following information is available for the Brookstone Company:

Additional information:

(1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired.

(2) Old machinery with an original cost of $45,060 was sold for $2,520 cash.

(3) New machinery was purchased for $81,060 cash.

(4) Cash dividends of $40,320 were paid.

(5) Additional shares of stock were issued for cash.

Prepare a complete statement of cash flows for Year 2 using the indirect method.

201) Use the following company information to calculate net cash provided or used by investing activities:

(a) Equipment with a book value of $175,000 and an original cost of $300,000 was sold at a loss of $17,000.

(b) Paid $62,000 cash for a new truck.

(c) Sold land costing $32,000 for $36,000 cash, realizing a $4,000 gain.

(d) Purchased treasury stock for $61,000 cash.

(e) Long-term investments in stock are sold for $41,000 cash, realizing a gain of $3,500.

202) Use the following information to calculate the net cash provided or used by financing activities for the Hulu Corporation:

(a) Net income, $10,000

(b) Sold common stock for $40,000 cash

(c) Paid cash dividend of $13,000

(d) Paid bond payable, $28,000

(e) Purchased equipment for $12,000 cash

203) Based on the information provided below for Krackle Corp., complete the following worksheet to be used to prepare the statement of cash flows using the indirect method.

(a) Net income for the year was $30,000.

(b) Dividends of $10,000 were declared and paid.

(c) Krackle's only noncash expense was depreciation which totaled $50,000.

(d) The company purchased plant assets for $70,000.

(e) Notes payable in the amount of $40,000 were issued during the year for cash.

204) The following selected account balances are taken from a merchandising company's records:

(a) Calculate the cash payments made during Year 2 for merchandise. Assume all of the company's accounts payable balances result from merchandise purchases.

(b) Calculate the cash receipts from customer sales during Year 2.

(c) Calculate the cash payments for salaries during Year 2.

205) Use the following calendar-year information to prepare Adam Company's statement of cash flows using the direct method.

206) For each of the following separate cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

207) For each of the following separate cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

208) Use the following information about the calendar-year cash flows of Park Company to prepare a statement of cash flows (direct method) and a schedule of noncash investing and financing activities.

209) For each of the following independent cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

210) Use the information provided below to calculate the cash paid for interest for the period.

211) Use the information provided to calculate the cash paid for insurance for the period

212) Use the information provided to calculate the missing cash received for interest for the period.

213) Use the information provided to calculate the missing cash paid for merchandise for the period.

214) Tate Company's current year income statement and changes in selected balance sheet accounts are given below. Calculate the company's net cash provided or used by operating activities using the direct method.

The company also experienced the following during the current year:

215) Based on the information in the following income statement and balance sheet for Monterey Corporation, determine the cash flows from operating activities using the direct method.

216) A company reported net income of $132,000, operating cash flows of $87,000, total cash flows of $112,000, and average total assets of $1,053,000. Calculate its cash flow on total assets ratio.

217) Netflix Co. reported net income of $213.4 million, net cash provided by operating activities of $151.3 million, total cash flows of $187.7 million, and average total assets of $2,314.8 million at the end of the year. Calculate the cash flow on total assets ratio.

218) Sega Co. reported net cash provided by operating activities of $142.7 million and average total assets of $1,762.5 million at the end of the year. Calculate the cash flow on total assets ratio.

219) Victoria reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year. Net cash flows from operations were $2,204 million. Calculate the cash flow on total assets ratio.

220) A company reported operating cash flows in Year 1 of $33,100 and $26,220 in Year 2. Its average total assets in Year 1 were $262,000 and $313,000 in Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

221) A corporation reported average total assets in Year 1 of $397,350 and $440,800 in Year 2. Its net operating cash flow for Year 1 was $35,667 and $35,790 for Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

222) A company reported average total assets of $501,000 in Year 1 and $611,000 in Year 2. Its net operating cash flow in Year 1 was $41,500 and $55,250 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.

223) A company reported net income of $318,000, operating cash flows of $218,000, total cash flows of $184,000, and average total assets of $898,000. Calculate its cash flow on total assets ratio.

224) Use the following income statement and information about changes in noncash current assets and liabilities to (1) prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method and (2) compute the company's cash flow on total assets ratio for the year assuming that average total assets are $525,250.

Changes in current asset and current liability accounts for the year that relate to operations follow.

225) Use the following financial statements and additional information to (1) prepare a statement of cash flows for the year ended December 31, Year 2 using the indirect method, and (2) compute the company's cash flow on total assets ratio for Year 2.

Additional Information

a. A $20,000 note payable is retired at its carrying value in exchange for cash.

b. The only changes affecting retained earnings are net income and cash dividends paid.

c. New equipment is acquired for $120,000 cash.

d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700.

e. Prepaid expenses relate to Other Expenses on the income statement.

f. All purchases and sales of merchandise inventory are on credit.

226) Use the following financial statements and additional information to (1) prepare a complete statement of cash flows for the year ended December 31, Year 2. The cash provided or used by operating activities should be reported using the direct method, and (2) compute the company's cash flow on total assets ratio for Year 2.

Additional Information

a. A $20,000 note payable is retired at its carrying value in exchange for cash.

b. The only changes affecting retained earnings are net income and cash dividends paid.

c. New equipment is acquired for $120,000 cash.

d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700.

e. Prepaid expenses relate to Other Expenses on the income statement.

f. All purchases and sales of merchandise inventory are on credit.

227) The following transactions and events occurred during the year. Assuming that this company uses the indirect method to report cash provided by operating activities, indicate where each item would appear on its statement of cash flows by placing an x in the appropriate column.

Statement of Cash Flows (Indirect Method)

228) A main purpose of the statement of cash flows is to report all the major cash ________ and cash ________.

229) Investments that are readily convertible to a known amount of cash and are sufficiently close to their maturity so that the market value is unaffected by interest rate changes are ________.

230) ________ activities include the cash effects of transactions and events that determine net income.

231) ________ activities generally include those transactions and events that affect long-term assets.

232) ________ activities include those transactions that affect long-term liabilities and equity.

233) Noncash financing and investing activities are disclosed in a ________ or in a separate ________.

234) The statement of cash flows is divided into three sections called the ________, ________, and ________ sections.

235) Probably the most important section of the statement of cash flows in analyzing the financial performance of a company's ongoing business is the ________ section.

236) The cash flow on total assets ratio is computed by dividing ________ by ________.

237) Information to prepare the statement of cash flows usually comes from three sources: (1) ________, (2) ________, and (3) ________.

238) All cash transactions eventually affect noncash ________ accounts.

239) When preparing the operating section of the statement of cash flows using the indirect method, noncash expenses are ________ net income.

240) The reporting of investing and financing activities is ________ under the direct and indirect methods of preparing the statement of cash flows.

241) The use of a spreadsheet for analysis is especially useful when preparing the statement of cash flows using the ________ method.

242) Computing operating cash flows by adjusting accrual-based net income is done when the ________ method is used.